Annual Report - Marico - 2009-2010

MARICO LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To The Members

Your Board of Directors ('Board') is pleased to present the Twenty Second
Annual Report of your Company, Marico Limited (Your Company), for the year
ended March 31, 2010 ('the year under review', 'the year' or 'FY10').



In line with the requirements of the Listing Agreement with the Bombay
Stock Exchange and National Stock Exchange, your Company has been reporting
consolidated results-taking into account the results of its subsidiaries.
This Discussion therefore covers the financial results and other
developments during FY10 in respect of Marico Consolidated comprising-
Domestic Consumer Products Business under Marico Limited in India,
International Consumer Products Business comprising exports from Marico
Limited and operations of its overseas subsidiaries and the Solutions
Business of Kaya in India and overseas. The consolidated entity has been

referred to as 'Marico' or 'Group' or' Your Group' in this discussion.

FINANCIAL RESULTS-AN OVERVIEW
Rs. Crore
Year ended March 31,
2010 2009
Consolidated Summary Financials for the Group

Sales and Services 2660.8 2388.4
Profit before Tax 297.9 229.6
Profit after Tax 231.7 188.7
Marco Limited Financials
Sales and Services 2024.3 1917.5
Profit before Tax 292.6 171.0
Less: Provision for Tax 57.5 28.9
Profit After Tax 235.0 142.1
Add: Surplus brought forward 233.1 151.9
Profit available for Appropriation 468.1 294.0
Appropriations:
Distribution to shareholders 4021 39.89
Tax on dividend 6.83 6.78
47.04 46.67
Transfer to General Reserve 23.5 14.2
Debenture Redemption Reserve 15.0 -
Surplus carried forward 382.6 233.1
Total 468.1 294.0

DISTRIBUTION TO EQUITY SHAREHOLDERS

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

Marico has identified acquisitions as one of its avenues to pursue growth.
Since April 2005, the Group has consummated 8 acquisitions including two
each in India, Bangladesh and Egypt and one each in South Africa and
Malaysia. As part of its growth agenda, Marico would continue to explore
new acquisition opportunities. These would call for additional funding.

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

Your Company's distribution to equity shareholders during FY 10 comprised
the following:

First interim dividend of 30% on the equity base of Rs. 60.92 Crore

Second interim dividend of 36% on the equity base of Rs. 60.93 Crore

The total equity dividend for FYI 0 at 66.0% is thus at par with the
dividend paid during FYO9. The total dividend (including dividend tax) was
Ps. 47 crore (about 20 % of the group PAT).

MANAGEMENT DISCUSSION AND ANALYSIS

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

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

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

REVIEW OF OPERATIONS

Marico achieved a strong growth of 11% in revenue over the previous year
and registered a topline of Rs. 2661 crore during FY 10. Almost the entire
growth was organic growth, with volume led growth of 14% while the
remaining came from price increases and sales mix. All its businesses,
those of consumer products in India, international business and Kaya skin
solutions contributed to the overall growth of the group.

The top line increase was accompanied by a bottom-line growth of 23%, after
considering the impact of extra-ordinary/exceptional items. Profit After
Tax (PAT) including exceptional/extra-ordinary items during the year was at
Rs. 232 crore as against Rs.189 crore in FY09. The financials for FYI 0
include certain exceptional items of Rs 9.79 crores (Rs 4.05 crore on
account of foreign currency translation reserves consequent to sale of
membership interest in Sundari LLC and Rs 5.73 crore on account of closure
of Kaya Life clinics in India and Gulf) while the financials of FY 09
include certain exceptional items (loss on sale of membership interest in
Sundari LLC). Had it not been for these items, the PAT for FYI 0 would have
been Rs 242 crore, a growth of 30% over FY09 (exceptional items excluded
from the comparable figure in the previous year).

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

04 FY 10 was on a Y-o-Y basis:

The 38th consecutive Quarter of growth in Turnover and

* The 42nd consecutive Quarter of growth in Profits

The company has demonstrated steady growth on both the top line and bottom
line. Over the last 5 years, they have grown at a Compounded Annual Growth
Rate of 21% and 27% respectively.

Consumer Products Business: India

Parachute, Marico's flagship brand, continued to expand its franchise
during the year. Parachute coconut oil in rigid packs, the focus part of
its porffolio, grew by over 10% in volume as compared to FY09. Similarly
Nihar in rigid packs grew at about 9% in volume terms. Marico offers its
consumers a basket of value added hair oils for their pre-wash and post
wash hair conditioning, nourishment and grooming needs (key brands being
Parachute Advansed coconut hair oil, Parachute Jasmine non sticky coconut
hair oil, Nihar Naturals perfumed coconut hair oil, Hair & Care nourishing
non sticky hair oil, Hair & Care Almond Gold and Shanti Badam Amla hair
oil). During the year, all the aforesaid hair oils brands recorded healthy
growth and the porffolio as a whole grew by about 16% in valume over FY09.

Further, Marico has been constantly investing in a healthy pipeline of new
products. During the year your company launched new prototypes. These
included Saffola Arise-lower Glycemic Index (GI) rice, Parachute Advansed
Ayurvedic Hot Oil, Parachute Advansed Ayurvedic Cooling Oil and Nihar
Cooling Oil.

Intemational FMCG Business

From a single digit share in FY05, about 23% of the group's turnover is now
contributed by Marico's International FMCG business. Its key geographical
presence is in Bangladesh, MENA (Middle East and North Africa) and South
Africa.

In January 2010, Marico established an entry into the South East Asian
region through the acquisition of the hair styling brand Code 10 in
Malaysia.

During FY10, Your Group's international business crossed the Rs 600 crore
mark in turnover, a growth of 36% over FY09. Much of this growth was
derived from consumer franchise expansion-about 21%, accompanied by price
led growth of 9%. An additional 6% growth was on account of favourable
foreign exchange rates.

Keys

Kaya is the first organized player in the segment of cosmetic dermatology
and now enjoys a large first mover advantage in the segment in India.
During FY10, Kaye. opened its first clinic in Dhaka, Bangladesh. It now
offers its technology led cosmetic dermatological services through 101
clinics: 87 in India across 27 cities and 13 in the Middle East in addition
to the most recent one in Dhaka. Kaya also introduced many new products
during the year, details whereof are given in the Annexure to this Report.

Kaya's offering are in the nature of discretionary spends. Apart from the
impact of the overall economic downturn, the Kaya skin business in India
faced two adverse developments during the first half of FY10. The outbreak
of swine flu, though temporary, led to a drop in customer appointments
particularly in cities such as Pune and Bangalore where the incidence of
the outbreak was more acute. The introduction of service tax in the Union
Budget in an already unfavorable ambience made growth more challenging.
While there was some improvement in the macro environment in the latter
part of the year, Kaya continued to experience a decline in same clinic
revenue (revenue from clinics that have been in existence for over a year)
in India. In addition to the above, opening of 31 new clinics in last two
years which in normal course would have required 3-4 years to achieve
profitability as well as provision of a significant one time costs
resulting from strategic decisions to close down Kaya Life centers (details
whereof are given below) and 7 Kaya Skin Clinics by June 30, 2010 resulted
in net worth of Kaya Limited turning negative as on March 31, 2010.

Kaya had launched the Kaya Life prototype to offer customers holistic
weight Management solutions and had opened 5 'Kaya Life' centres in Mumbai
and 1 centre in the Middle East during the past 3 years. While clients had
been experiencing effective results on both weight loss and inch loss, the
prototype had less than expected progress in building a sustainable
business model. Hence, the Management took a strategic decision of closing
down the centres in March, 2010. Consequently, the Group has made an
aggregate provision of Rs. 5.74 Crore for the year ended March 31, 2010
towards impairment of assets and other related estimated liabilities.

Kaya is a fairly young business- only 7 years since its inception. The
business has been able to ramp up its presence to 87 clinics in India
across 27 cities and 13 clinics in the Middle East and a large customer
base with significant long term growth potential. We have already
experienced, in a few accounting periods, profitability at both clinic
level and regional level. We therefore believe that the losses during FY10
are not reflective of future trends and the Kaya business model continues
to be robust and offers significant long term growth opportunities.
Further, the operations of Kaya are expected to improve significantly due
to positive changes in economic environment, maturity of new clinics,
renewed focus on reducing the time to scale up revenues in new clinics,
improve capacity utilizations in existing ones and add to Kaya's range of
service and product offerings and anticipated savings resulting from
restructuring of operations.

OTHER CORPORATE DEVELOPMENTS

1P0-Marico Bangladesh Limited

Marico Bangladesh Limited (MBL), a wholly owned Subsidiary of Marico
Limited, received approval of the Bangladesh Securities & Exchange
Commission (SEC) for its proposal to make an Initial Public Offer (IPO) in
Bangladesh. Accordingly, MBL issued a total of 3,150,000 ordinary shares
(about 10% of MBL's expanded equity) of the face value of Take 10 each at a
price of Taka 90 per share. MBL's shares are listed on the Dhaka Stock
Exchange and the Chittagong Stock Exchange. The proceeds of the IPO,
aggregating to Taka 283.5 million are being utilized to strengthen MBL's
financials to enable continued growth.

Acquisition of Brand 'Code 10'

Marico entered the Malaysian hair styling market through the acquisition of
the brand Code 10 and related IPR from Colgate-Palmolive Company through
Marico Malaysia Sdn Bhd, a wholly owned subsidiary of Marico Middle East
FZE. The Code 10 range comprises hair creams and hair gels. Marico
estimates the Malaysian hair styling market to be about RM 150 million in
size. Code 10 is the number 3 player and enjoys a double digit market
share.

Divestment of Sundari LLC

Your Company concluded divestment of its stake in Sundari 11C (Sundari) on
June 8, 2009 upon completion of necessary compliances under FEMA
regulations. Sundari ceased to be subsidiary of the Company from the said
date. Accordingly, the financial statements of Sundari have been
consolidated with that of Marico Limted for the period from April 1, 2009
to June 8, 2009. The net effect of the divestment of Rs. 4.05 crore is
charged to the Profit and Loss account and reflected as an Exceptional
Item.

Marico Employee Stock Option Scheme 2007

In pursuance of shareholders' approval obtained on November 24,2006, your
Company formulated and implemented an Employee Stock Options Scheme (the
Scheme) for grant of Employee Stock Options (ESOS) to certain employees of
the Company and its subsidiaries. The Corporate Governance Committee
('Committee') of the Board of Directors of Your Company is entrusted with
the responsibility of administering the Scheme and in pursuance thereof,
the Committee has granted 1,13,76,300 stock options (as at March 31, 2010)
comprising about 1.86% of the current paid up equity capital of the
Company. Additional information on ESOS as required by Securities and
Exchange Board of India (Employees Stock Option Scheme and Employees Stock
Purchase Scheme) Guidelines, 1999 is annexed and forms part of this report.

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

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

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

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

In terms of the approval granted by the Central Government for the
financial year FY 10; copies of the Balance Sheet, Profit and Loss Account,
Report of the Board of Directors end the Report of the Auditors of the
Subsidiary Companies have not been attached to the Balance Sheet of the
Company. However, the statement required under section 212 of the Companies
Act, 1956 is attached. The Company will make these documents/details
available upon request by any member of the Company interested in obtaining
the same and same would also be made available on its website. The
Consolidated Financial Statements prepared by the Company pursuant to
Accounting Standard AS-21 as prescribed by the Companies (Accounting
Standards) Rules, 2006, include financial information of its subsidiaries.

PUBLIC DEPOSITS

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

DIRECTORS' RESPONSIBILITY STATEMENT

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

In preparation of the Annual Accounts of your Company, the Accounting
Standards, as prescribed by the Companies (Accounting Standards) Rules,
2006, from time to time have been followed. However, attention is drawn
specifically to note 24 of Schedule R to the Stand-alone Financial
Statements and note 22 of Schedule R to the Consolidated Financial
Statements in this regard.

Appropriate accounting policies have been selected and applied
consistently, and reasonable and prudent judgment and estimates have been
made so as to ensure that the accounts give a true and fair view of the
state of affairs of your Company as at March 31, 2010 and the profits of
your Company for the year ended March 31, 2010.

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

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

The qualification of the Auditors in their Report to the Members in
connection with provision made by the Company towards contingencies on
account of possible excise obligations on manufacture of pure coconut oil
(CNO) is self-explanatory. Adequate explanations have been provided in the
relevant notes to the accounts. Hence no additional explanation is
considered necessary.

CORPORATE GOVERNANCE

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

GROUP

Pursuant to intimation from Promoters of your Company, the names of
Promoters and companies comprising 'Group' as defined in the Monopolies and
Restrictive Trade Practices Act, 1969, have been disclosed in the Annual
Report of your Company for the purpose of Regulation 3(1)(e) of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

DIRECTORS

Directors retiring by rotation

Mr. Rajeev Bakshi and Mr. Rajen Mariwala, Directors of the Company, retire
by rotation as per Section 256 of the Companies Act, 1956 and being
eligible offer themselves for re-appointment.

Changes in the Board of Directors

Mr. Bipin Shah and Mr. Jacob Kurian resigned from the Board of Directors of
the Company with effect from close of business hours on January 28, 2010.
The Board of Directors has accepted their resignation and would like to
place on record their sincere appreciation of the valuable services
rendered by Mr. Bipin Shah and Mr. Jacob Kurian.

ADDITIONAL STATUTORY INFORMATION

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

AUDITORS

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

Aneja Associates, a Chartered Accountant Firm, has been associated with
your Company as its internal auditor. They have been partnering your
Company in the area of strengthening the internal control systems through
internal audits. Your Company has reappointed Aneja Associates as its
internal auditor for the year 2010-11.

ACKNOWLEDGEMENT

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

On behalf of the Board of Directors

Place: Mumbai HARSH MARIWALA
Date : April 28, 2010 Chairman and Managing Director

ANNEXURE TO THE DIRECTORS' REPORT

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

A. Conservation of Energy

* Marico continued to emphasize on the conservation and optimal utilization
of energy in every manufacturing unit of the Company. The energy
conservation measures implemented during FY 10 are listed below:

* Survey to assess Green Quotient' (GQ) of all members was conducted during
year across all locations

* Installed Material sensor with timer set to optimize the CC overflow bit
conveyor running at Kanjikode plant

* Reduction of 10HP in the cooling tower pumps by using energy efficient
pumps at Jalgaon Plant

* Standby pump of Cooling Tower replaced with energy efficient pump to
avoid high power usage during the breakdown of other running pump at
Jalgaon plant.

* Timer installed on Slurry vessel stirrer & caustic circulation pump for
auto ON/OFF for intermittent operations.

* Elimination of running of one Cooling Fan of 10 HP at Jalgaon Plant by
running one cooling tower for Refinery and VAM.

* Lights in the RM unloading area to be kept OFF during night across
locations.

* Elimination, of 3 HP pump for slurry pumping from slurry vessel to
bleacher vessel at Jalgaon plant.

* Water collected from Roof water harvesting and used in processes at
Jalgaon & Goa Plant results in Bore well water power savings.

* Installation of 300KVAR capacitor bank & APFC to maintain power factor at
unity, it also helps in minimizing energy losses.

* Installed Material sensor on carton sealers to ensure they ran only when
cartons are present at Kanjikode plant.

* Integration of two conveyors of filling line into one thus, eliminating
the need for a 2 HP motor at Kanjikode plant

* inclined chute provided to eliminate the Copra Feed belt conveyor.

* Replacement of street lights with CFL with Timer at Goa Plant

Marfco Jalgaon has won the '10th CII National Award for Excellence in
Energy Management'. It hasalso been acknowledged as an 'Energy Efficient
Unit'. Marico continued its journey towards effective utilization of
energy. Significant reduction in power consumption has been achieved and
rationalization efforts will continue.

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

B. Technology Absorption

1. Research and Development (R & D)

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

R & D's main thrust during the year was to integrate the consumer delight
and competitive differentiation in the design of the products. The designed
products were based on the latent consumer needs and had the intended
efficacy (product claims) which was proven through the robust data. The
work included creation of niches in the current products as well as
creation of new products with consumer perceivable differentiation. Some of
the initiatives undertaken were:

* Basic research programs to understand physiology of hair and skin

* Develop new products based on the principles of Ayurveda.

* Development of functional food formats

* Consumer in sighting for product evaluation and design.

* Collaborate with external partners-Academic institutes, research centres
and suppliers-for development of new technologies.

* Clinical and consumer testing for to substantiate the claims made on the
products

* Creation of patentable technologies

* Green and sustainable packaging options

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

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

A few domestic launches include:

* Parachute Advansed Ayurvedic Hot Oil
* Parachute Advansed Ayurvedic Cooling Oil
* Parachute Ayurvedic Body Oil
* Saffola Arise rice
* Mediker Oil-Improve defficacy
* Parachute Sandalwood Soap.
* Parachute Advansed Starz Chocolate Shampoo

A lot of work has been directed towards the optimization of formulations
and also packaging options to deliver the enhanced primary features. These
were done without changing the benefit and aesthetics delivery. This has
resulted in good amount of savings.

Major emphasis was also placed on gearing up the organization to face the
dynamic, rapidly changing regulatory environment. The experts from Marico
served on many committees which were enacting the new food and cosmetic
laws. This was initiated to ensure that Marico has freedom to operate in
the categories of the interest without any compromise on regulatory laws.

New products were launched under the Kaya business to provide effective
solutions in skin care.

These include:

* Whitening Moisturiser SPF 20
* Revitalising Face wash
* Skin Relief After Shave Gel
* Intense Hydration Body Lotion
* Daily Use Body Lotion
* Hydra Cleanse Makeup Remover

Indigenisation of the existing products was undertaken. These included
glycolic and salicylic peels which are currently used in the clinics.

In the International business, various product and pack developments were
undertaken during FY10 to strengthen business.

Indigenous technologies were developed for manufacturing many of the
existing products locally. The packaging cost saving efforts delivered
excellent results in different countries.

Marico's R & D has been granted 10 patents so far and 20 are under process.

3. Future Plan of Action:

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

4. Expenditure on R & D:
(Rs. Crore)
2009-10 2008-09

a) Capital 0.1 0.3
b) Recurring 7.5 5.7
Total 1.8 6.0
c) Total R & D expenditure as % to Sales & Services 0.4 0.3
d) Total R & D expenditure as % to PBT 2.6 3.4

II. Technology absorption, adaptation and innovation

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

Various technologies were adopted in formulations, processes and packaging
towards providing better sensorials, performance, cost optimization, shelf
appeal and usage convenience. E.g.: Hot Oil as a new concept giving
completely different sensorials, Cooling oil with nourishment, Saffola
Arise, new concept in functional foods.

2. Imported technology (imported during the last 5 years reckoned from the
beginning of this financial year):

Not Applicable

C. Foreign Exchange Earnings and Outgo

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

On behalf of the Board of Directors

Place: Mumbai HARSH MARIWALA
Date : April 28, 2010 Chairman and Managing Director

Disclosure pursuant to the provisions of the Securities and Exchange Board
of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 Marico Employees Stock Option Scheme 2007 (ESOS 2007).

a) Options granted (as 11,376,300 options aggregating to about 1.86% of
at March 31, 2010) the paid-up equity capital of the Company
(options, net of lapsed/forfeited as at March
31, 2010:

7,816,800 options aggregating to about 1.28% of
the paid-up capital of the Company)

b) The pricing formula The Exercise Price of the options shall be lower
of the following:

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

Or

ii) The closing price for the last session on
National Stock Exchange (NSE) prior to the date
on which the Corporate Governance Committee,
grants the specific number of options to the
employees.
c) Options vested (as
at March 31, 2010) 615,000

c) Options exercised (as
at March 31, 2010) 325,700

e) The total number of 325,700
shares arising as a
result of exercising
of option

Options lapsed 3,233,800

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

h) Money realised by
exercise of options Rs. 18,267,874

Total number of options 7,816,800
in force

Employee wise details
of options granted to
(as at March 31, 2010)

Senior Managerial A summary' of options granted to senior
Personnel managerial personnel are as under:

No. of employees covered-85 (Eighty Five)

No. of options granted to such personnel-
7,816,800 (Seventy Eight Lac Sixteen Thousand
and Eight Hundred Only)

Only summary given due to sensitive nature
of information
i) Any other employee
who receives a -N.A.-
grant in any one year
of options amounting
to 5% or more of option
granted during the year

iii) Identified employees -N.A.-
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.

k) Diluted Earnings per
Share (EPS) pursuant Rs. 3.84
to issue of shares on
exercise of Options
calculated in accordance
with the Accounting
Standard (AS) 20'
Earnings per Share

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

i) Difference between Rs. 3.91 Crores
the employee compensation
cost so computed at (i)
above and the employee
compensation cost that
shall have been
recognised if it
had used the fair
value of the Options.

iii) The impact of Had the Company considered 'fair value' method
this difference on the then the additional employee compensation cost
profits and on EPS of would be Rs. 3.91 Crores the Profit Before Tax
the Company would be lower by the same amount and Earning
Per Share by Re. 0.06

m) Weighted-average Weighted average Exercise Price : Rs. 62.15
exercise price and Weighted average Fair Value of Option: Rs. 23.35
weighted average fair
values of options
(to be disclosed
separately for options
whose exercise price
either equals or
exceeds or is less
than the market
price of the stock)

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

i. Risk-free
interest rate As per Annexure I

ii) Expected life
of options As per Annexure I

ii) Expected volatility As per Annexure I

iv) Expected dividends As per Annexure I

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

Annexure I
21-Apr-09 19-Jun-09 28-Jan-10
Vesting Vesting Vesting Vesting Vesting Vesting
1 2 1 2 1 2
Risk free
Interest Rate (%) 5.72 5.78 6.18 6.18 6.61 7.27

Expected life of 3.53 3.69 3.69 3.69 3.51 5.51
Options (years)

Expected 38.87 38.22 38.35 38.35 35.94 35.94
Volatility (%)

Expected 1.39 1.39 1.39 1.39 1.2 1.2
Dividends (%)

Closing Price as 64.05 64.05 71.9 71.9 98.55 98.55
on Date of
Grant (Rs.)

ENCLOSURE 'A'

Power & Fuel Consumption
For the year
ended March 31
2010 2009
Note: The numbers given below relate to the own
manufacturing facilities of the Company.

1. Electricity

a. Purchased units (Kwh) 7,538,935 8,621,052
Amount (Rs. Crore) 3.14 3.47
Average Rate (Rs./Unit) 4.17 4.02

b. Own Generation

i. Through Diesel Generator (Kwh) 3,168,345 2,800,842
Amount (Rs. Crore) 3.10 2.83
Average Rate (Rs./Unit) 9.78 10.09

ii. Through Steam Generator (Kwh) - -
Amount (Rs. Crore) - -
Average Rate (Rs./Unit) - -
2. Coal - -

3. Furnace oil
Quantity (KL) 627 641
Amount (Rs. Crore) 1.72 1.98
Average Rate (Rs./KL) 27,493.24 30,975.27

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

L.D.O./H.S.D.
Quantity (KL) 138 242
Amount (Rs. Crore) 0.43 0.74
Average Rate (Rs./KL) 37,008.42 30,463.34
5. Baggase Consumption
Quantity (MT) 14,139 12,953
Amount (Rs. Crore) 3.48 1.77
Average Rate (Rs./MT) 2,462.18 1,366.48

Consumption per unit of
production of edible oils Unit

Electricity Kwh 117 119
Coal MT - -
Furnace oil KL 0.01 0.01
L.D.O./H.S.D. KL - -
Baggase KG 0.38 0.36

Consumption per unit of
production of hair oils
& other formulations Unit

Electricity Kwh 38 50
Coal MT - -
Furnace oil KL - -
L.D.O./H.S.D. KL - -

MANAGEMENT DISCUSSION AND ANALYSIS

In line with the requirements of the Listing Agreement with the Bombay
Stock Exchange and National Stock Exchange, your company has been reporting
consolidated results taking into account the results of its subsidiaries.
This discussion therefore covers the financial results and other
developments during April '09-March '10 in respect of Marico Consolidated
comprising Domestic Consumer Products Business under Marico Limited
(Marico) in India, International Consumer Products Business comprising
exports from Marico and the operations of its overseas subsidiaries and the
skin care & hair care solutions business and weight management business of
Kaya in India and overseas. The Consolidated entity has been referred to as
'Marico' or 'Group' or 'Your Group' in this discussion.

Some of the statements in this discussion describing projections,
estimates, expectations or outlook may be forward looking. Actual results
may however differ materially from those stated on the account of various
factors such as changes in government regulations, tax regimes, economic
developments within India and the countries within which the Group conducts

its business, exchange rate and interest rate movements, impact of
competing products and their pricing, product demand and supply
constraints.

INDUSTRY STRUCTURE AND DEVELOPMENT

Despite the global economic slowdown experienced over the last year,
India's Fast Moving Consumer Goods (FMCG) sector has continued to show
robust growth. It is poised to reach a turnover of about USD 43 billion by
2013 and USD 74 billion by 2018. The implementation of Goods and Services
Tax (GST) and opening of Foreign Direct Investment (FDI) are expected to
fuel the growth further and raise the industry size to USD 47 billion by
2013 and USD 95 billion by 2018 (Source: IBEF, FICCI-Technopak Report). The
FMCG segment includes products like soaps, detergents, oral care, hair care
and skin care products.

India's FMCG market can be divided into two segments-urban and rural. The
urban segment is characterized by high penetration levels and high spending
propensity of the urban resident. The rural economy is largely agrarian-
directly or indirectly dependent on agriculture as a means of livelihood
with relatively lower levels of penetration and a large unorganized sector.
In the recent past the government has focused upon development in the rural
sector. This includes investments in development of infrastructure and
schemes for job creation (such as NREGA). This is resulting in a rise in
disposable incomes levels in the rural economy and consequently in demand
for FMCGs. The demand is increasing by 18% in the rural areas and by 1% in
urban areas. (Source: AC Nielsen, May 2010).

As socio-economic changes sweep across India, the country is witnessing an
expansion of existing markets and the creation of many new ones. Over 300
million people are expected to move up from the category of rural poor to
rural lower middle class between 2005 and 2025 and rural consumption levels
are expected to rise to the current levels in urban India by 2017. (Source:
IBEF). This provides the FMCG companies with opportunities for growing
their respective franchises.

With the impact of sustained economic growth of the last two decades,
consumption has moved from 'roti, kapda and makaan' to other non-basic
needs like mobile phones, personal transport, jewellery & watches, personal
care products and others. Modernization has led to changing aspirations
where the need to be considered good looking, well-groomed and stylish has
taken on newfound importance. There is a change in the mindset of Indians
from being savers to spenders with an inclination towards 'living for
today', There is a trend towards increasing spends on personal care
products cosmetics and toiletries. There is also a rising trend of usage of
indulgence products. Marketers are beginning to focus on providing an
experience rather than merely offering a product. Changing lifestyles have
had an impact on health including the area of heart health. In the recent
past, the awareness level about conditions related to heart health has
increased significantly. FMCG companies have begun to tap the opportunity
of serving needs related to these shifts in lifestyles. The FMCG industry
is expected to continue to innovate in order to meet these evolving
consumer needs.

Though there has been a growth in modern retail format stores in India, a
significant share of business is still generated through the 'mom and pop'
store (kirana) format. With access to the rural economy gradually improving
with investments in physical infrastructure, it is likely that it shall
continue to be the chief point of interface of the FMCG companies with the
retail consumer. Organized retail comprises about 8-10% of FMCG business
but is nevertheless expected to expand its share over the next few years.
There has been a rise in 'private' labels and these could provide tough
competition particularly to players that are not differentiated and
relatively weaker brands. Consumers are steadily shifting from low price to
a price-plus platform. They are seeking greater balance between price with
quality, convenience, consistency, innovation and shopping experience. The
quality conscious consumer is willing to pay premiums for effective
solutions, improved services and a superior experience. The focus of
marketers is to provide consumers with a holistic solution for their needs
in the form of a consolidated offering of various products and services.

India has a large young population with many of them entering the working
age. Income in the hands of younger consumers with a higher propensity to
spend is providing buoyancy to the economy while opening up new categories
in the FMCG space. With more women joining India's workforce, FMCG
marketers are finding opportunities to introduce products in the
convenience and health foods segments. Spending on personal care products
is also becoming far more acceptable and guilt free.

India Inc. is looking to grow inorganically. It is important to go global
not only to create multiple growth engines but also to create reverse
learning for the home market. Also, the emerging economies in Asia and
Africa have low-to-medium penetrations in some of the FMCG categories. This
provides considerable headroom for growth in the mid-term. Favourable
macros, changing attitudes of the consumers and progressive policies of the
governments also make these markets attractive destinations. Typically,
gestation periods tend to be longer as one needs to go up the learning
curve in a new market. Some of them also offer inorganic entry
possibilities that can create access to mainstream distribution,
manufacturing and talent. This can speed up one's learning curve as long as
there is a strategic fit with the target.

RISKS & CONCERNS

Input Costs

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

The past 2-3 years have witnessed wide fluctuations in the price of
commodities. Crude Oil touched a record high of USD 140 per barrel before
crashing to below USD 50 per barrel. Similar volatility was experienced in
other commodities. The overall level of uncertainty in the environment has
gone up.

Input costs comprise nearly 600/of the production costs in the FMCG sector.
Inflationary tendencies in the economy directly impact the input costs and
could create a strain on the operating margins of the FMCG companies.
Brands with greater equity may find it easier to adjust prices in line with
fluctuating commodity prices and input costs.

Pricing Power

The equity of a brand generally allows the organization to pass on the
impact of any increase in cost structure to the consumers. However
considering the uncertainty in the environment and rising competitive
pressures some impact might have to be absorbed by the organizations.

Discretionary Spending/Down Trading

In situations of economic duress, items which are in the nature of
discretionary spending are the first to be curtailed. This is relevant for
the lifestyle solutions offered by companies. In an extended recession,
down trading from branded products to non-branded ones could also occur and
affect the financial performance of the company.

Competition

The FMCG environment in India and overseas is competition intensive and
companies need to focus on branding, product development, distribution and
innovation to ensure their survival. Product innovations help to gain
market share while advertising and sales promotions create visibility for
the product. Such expenditures carry the inherent risk of failure. Counter
campaigning by competitors would also reduce the efficacy of promotions.

Product Innovation and New Product Launches

The success rate for new product launches in the FMCG sector is low. New
products may not be accepted by the consumer or may fail to achieve the
targeted sales volume or value. Cost overruns and cannibalization of sales
in existing products cannot be ruled out. Marico has adopted the
prototyping approach for new product introductions which helps maintain a
healthy pipeline while limiting downside risks.

Currency Risk

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

Funding Costs

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

Acquisitions

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

FMCG Market in Bangladesh

Bangladesh has a demographic profile very similar to that of India. A
population in excess of 150 million and a developing economy provide the
perfect consumer base for the FMCG sector to flourish. Political
instability may however be a cause of concern for companies operating in
Bangladesh.

FMCG Markets in Middle East

The market offers a curious mix of local and expatriate population who are
not averse to the idea of indulgence. This provides FMCG companies
opportunities to offer branded solutions tailored to the needs of the
consumer in the region. After a period characterized by high crude oil
prices and a construction boom, the Middle East witnessed a financial
crisis and there has been an adjustment in the overall economic growth. The
impact on the FMCG companies is however likely to be less severe.

FMCG Markets in Egypt

The Egyptian economy has embraced liberalization in the recent past,
thereby opening its doors to foreign direct investment and paving the path
to economic growth. A steadily growing population, concentrated on the
banks of the River Nile, and a developing economy provide a good base for
FMCG companies. The rate of GDP growth in the medium term is expected to be
around 6-7% and that can have a favourable impact on FMCG consumption.

FMCG Markets in South Africa

The South African economy is a productive and industrialized economy that
exhibits many characteristics associated with developing countries,
including a division of labour between formal and informal sectors, and an
uneven distribution of wealth and income. Economic measures such as Black
Economic Empowerment (BEE) adopted by the government to ensure growth and
equitable distribution of wealth have been very effective. Rising income
levels, especially among the middle socio-economic segments is likely to
result in increased growth opportunities for FM CG markets.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

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

* Establishment and review of business plans

* Identification of key risks and opportunities

* Policies on operational and strategic risk management

* Clear and well-defined organization structure and limits of financial
authority

* Continuous identification of areas requiring strengthening of internal
controls

* Operating procedures to ensure effectiveness of business processes

* System for monitoring compliance with statutory regulations

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

* A robust management information system

* A robust internal audit and review system

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

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

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

HUMAN RESOURCE/INDUSTRIAL RELATIONS

Marico is a professionally managed organization that has a flat hierarchy,
which empowers people and fosters a culture of innovation. The organization
believes that great people deliver great results and lays emphasis on
hiring right and retaining key talent. The company maintains a strong
business linkage to all Human Resource processes and initiatives.

Marico recruits its talent from the country's premier technical and
business schools or from amongst those with the country's premier
professional qualifications. Marico looks at talent, not just from a short-
term perspective, but also from a long-term perspective-where people can be
groomed for different roles. The organization believes in providing
challenge and early responsibility at work which serves to keep team
members enthused and motivated.

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

The organization has created a favorable work environment that motivates
performance. Marico has a process of performance enhancement through
deployment of MBR (Management By Results) to create an environment of
challenge and stretch. It is also linked to a variable element of
performance-based compensation.

The organization believes in investing in people to develop and expand
their capability. Personal development plans focus on how each individual's
strengths can be best leveraged to deliver to his or her full potential.
External training programmes and cross-functional exposure often provide
the extra edge. In line with our philosophy of valuing internal talent
first, a structured internal job posting mechanism, MINTOS (Manco Internal
Talent Opportunity Scheme) is in place. This is an internal forum for
members to benefit from opportunities within the organization.

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

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

Specific initiatives are under way to standardize Marico HR practices
across International locations-Middle East, Bangladesh, Egypt and South
Africa.

The 'Popcorn with Harsh' sessions continued last year as well. It is based
on the concept of 'Learning through Sharing', where members have an
opportunity to directly interact with Chairman & Managing Director, Harsh
Mahwala. The sessions seek to leverage Marico leaders as mentors and
coaches to Mariconians at large.

At Marico, the overall well-being of its members is considered important.
The Member Well-being Program looks holistically at physical, emotional and
financial aspects of an employee's well-being. The various initiatives run
during the year included, Member Assistance Program in association with 1
tot help.net, a counseling service run by a team of qualified and
experienced counselors; Physical well-being program that provided
personalized diet, lifestyle and physical training by a panel of health
experts; Financial well-being through customized financial planning
programs.

Employee relations throughout the year were supportive of business
performance. As on March 31, 2010, the employee strength of Marico Limited
was. 981 and that of the entire group was 2592.

CORPORATE SOCIAL RESPONSIBILITY

In today's world, Corporate Social Responsibility (CSR) is not just a term
but a phenomenon that defines the relationship which the company enjoys
with each of its stakeholders. It is an expression of being a responsible
citizen and a voluntary act by a business, over and above legal & statutory
requirements.

Corporate Social Responsibility is intrinsically related to sustainable
development of the company by ensuring socio-economic development of the
society.

Marico believes in promoting conscious capitalism, gives prominence to CSR
and acknowledges that it is an important step towards fulfilling its
purpose. Through various initiatives and activities undertaken by Marico,
across all its locations, it contributes towards a better society for our
future generations to live in.

Marico has identified key areas where it could make a difference. These
include initiatives in key areas such as Women Empowerment,

-Education & Training, Donations and Medical Help. In each of these areas,
the company implements initiatives that are beneficial to the society.

Marico has been promoting the usage of Coconut Climbing Machines among
farmers to improve their productivity and to ensure the safety of farmers.

The program encourages and trains unemployed youths in the use of tree
climbing machines for coconut harvesting. Tree climbing machines are also
distributed free of cost in association with the Coconut Development Board
and an Accident Insurance of Rupees One Lac by Marico.

Marico's copra collection centers encourage farmers to send in their
queries with regard to coconut plantation and cultivation, which are
answered by professors from the Tamil Nadu University. In addition,
Marico's 14 member team visits around 200 farmers every month for field
surveys and addresses preliminary queries on coconut farming.

Marico's coconut sourcing team at Coimbatore has taken up the
responsibility to manage the grants given by the Coconut Development Board
towards distribution of agricultural inputs like pesticides and seeds to
farmers. Around 2600 farmer families benefit from this initiative. Marico
also provides a subsidy to these farmers to buy one drier which helps in
conversion of coconut to copra.

Women Empowerment

Marico has initiated project 'Sanjog', which is aimed at creating
employment for women. These women perform door-to-door sales of Marico
products in the villages of Bangladesh. In addition, an association of the
members' spouses, conducted a seminar on cancer and its causes.

Education & Training

Marico's factories and depots are present in rural areas, where there is
ample opportunity for the company to give back to society by empowering the
younger generation. Keeping this in mind, Marico has donated books and
study material at various local government schools and to the children of
local vegetable and newspaper vendors. It has also sponsored scholarships
to meritorious students in rural areas, summer camps for the local school
children, coaching camps for the talented children as well as workshops on
safety for all.

Medical Help

Marico gives utmost importance to health; not only that of its members and
consumers but that of the public in general. In line with the philosophy,
Marico organized blood donation camps at many locations across the country.
The company also sponsored pulse polio programs in various rural locations
and donated artificial limbs to the physically disabled.

Marico has implemented a Payroll Giving Program for its members through
Give India, a non-profit organization dedicated to raising funds for good
NGOs. Payroll Giving is a system where members can donate a small part of
their salary, every month, to a cause of their choice. This is purely
voluntary, and members can join the program for as little as Rs.50 per
month. Give India ensures that every donor gets feedback on how his or her
money has been utilized. Marico donates Rs.200 on the member's behalf which
gets added to the contribution the member makes every month.

Considering the increased number of road accidents, Marico has contributed
to reflectors for bullock carts, reflective overcoats and umbrellas for
traffic police. In addition to this, Marico has contributed to Flood Relief
in North Karnataka & Andhra Pradesh, as both areas were severely affected
by torrential rains and floods. It also contributed to the fund for flood
victims hit by cyclone SIDR in Bangladesh.

Marico, as a part of its CSR activities, also participated in distribution
of basic amenities like fans, stationery to Anganwadi girl schools, wheel
chairs to old age homes and also built water tanks for orphanages and local
schools at various locations.

MARICO INNOVATION FOUNDATION

Innovation is a crucial way to leapfrog to the centre stage of global
business leadership. Based on this cornerstone, in 2003, Marico instituted
its CSR initiative-Marico innovation foundation, to provide a framework to
leverage innovation for quantum growth. The overall approach of the
foundation is to be a catalyst and it concentrates on creation of
knowledge, through cutting-edge research, knowledge dissemination &
recognition, through its 'Innovation for India Awards'.

One of its popular researches resulted in a bestseller publication-'11
mission biographies-Making Breakthrough Innovation Happen: 11 Indians who
pulled off the impossible'. This publication is a culmination of a six-year
joint discovery effort, to identify genuine breakthrough innovations, from
within India and then uncover cutting-edge insights into what these
innovators did differently to make the impossible happen. Other knowledge
building initiatives of the foundation include alliances between leading

Indian Business

Schools and Indian organizations, for a 2-month elective 'live' course on
Applied Innovation.

Through the knowledge dissemination mechanism, the foundation is able to
propagate its findings through large-scale mass platforms across India. In
addition, its Innovation Exchange in association with IIM, Ahmedabad & the
Department of Science and Technology, GOI is a portal that brings together,
on a single platform, the entire Innovation ecosystem including
researchers, innovators, entrepreneurs and academia across industry, along
with investors and mentors.

To recognize and applaud outstanding leadership with innovative focus in
various sectors, the Marico Innovation Foundation institutionalized
Innovation for India Awards in 2006. These awards acknowledge and foster
leadership, with innovative focus, in various Business & Social sectors.
The intent of the awards is to reward projects and businesses that make a
real difference to India and community at large. Based on the criteria of
uniqueness, impact & scalability, 'India's Best Innovations' are declared
biennially. From 2010, a new category Public Governance was introduced, to
recognize the Central or State government or any wing of the government,
including public-private partnership, for outstanding innovations:

Behind the significant work of the Foundation, sits an eminent Governing
Council that constantly steers the Foundation. Dr. R.A. Mashelkar, chairs
the Governing Board, while other visionaries like Anu Aga (Chairperson,
Thermax), Sam Balsara (CEO, Madison), Ashwin Dani (Vice Chairman, Asian
Paints), Ranjan Kapur (Country Manager, WPP), Prof. Prasad Kaipa (Executive
Director, ISB), Dr. Sujata Ramadorai (Professor, TIFR), Harsh Mariwala
(Chairman & Managing Director, Marico), K.V. Mariwala (Ex-Director,
Marico), Rajiv Narang (Chairman & Managing Director, Erehwon Innovation
Consulting) and Dorab Sopariwala (Consultant), form a part of the Governing
Council.

(To know more or connect with innovators, visit
www.maricoinnovationfoundation.org)

MARICO GROWTH STORY

Marico achieved a turnover of Rs.2661 crore during FY10, a growth of 11%
over. FY09. The volume growth underlying this revenue growth was healthy at
14%. The value growth was lower owing to deflation in some of the company's
key input materials, part of which the company chose to pass on to the
consumer in order to expand its consumer franchise.

Profit After Tax (PAT) for FY10 was Rs. 232 crore, a growth of 230/over
FY09. These results include the following items that are not strictly
comparable with FY09:

A provision of Rs.29.4 crore towards excise duty on dispatches of coconut
oil in packs up to 200ml, made by the company on conservative principles.

* One time loss of Rs.4 crore arising out of divestment of equity interest
in Sundari LLC.

* A provision for Rs.5.7 crore made in respect of the withdrawal of the
Kaya Life prototype by Kaya Limited.

(If these items were to be ignored, the PAT for the year would have been
higher at Rs. 264 crore, 42% higher than in FY 09.)

Manco has kept up its track record of quarterly growth. Q4 FY10 is in Y-o-Y
terms, the:

* 38th consecutive quarter of growth in turnover

* 42nd consecutive quarter of growth in profits

Over the past 5 years, the top line and bottom line have grown at 21% and
27% respectively.

FEW BRAND STORIES

Parachute & Nihar

Parachute, Marico's flagship brand, continued to expand its franchise
during the year. Parachute coconut oil in rigid packs, the focal part of
its portfolio, grew by over 10% in volume as compared to FY09. Similarly
Nihar in rigid packs grew at about 9%'in volume terms.

The year experienced a decline in copra (dried coconut kernel the raw
material input for coconut oil) prices, after a year of high prices in
FY09. Average copra prices during FY10 were lower than in FY09 by 20%. This
decline resulted in Parachute's premium over loose coconut oils expanding
significantly and had an impact on the rate of conversion from loose oil to
packed oil. Lower prices also attracted more local players in the category.
Softening of rural demand in the FMCG sector during the second half of the
year especially in the basic high penetration categories due to high food
inflation added to the pressure. As the company had begun observing a slow
down in the 'recruiter packs', it took pricing action to pass on part of
the value to consumers of rigid packs - the more profitable part of its
coconut oil franchise. It reduced the retail price of Parachute's 50ml pack
from Rs.12 to Rs.10 in November '09. In addition it initiated a reduction
in the price of its 100ml pack from Rs.21 to Rs.20 in January '10. The
company also increased the price of the 200ml pack from Rs.39 to Rs.40 as
it believes that the brand's equity has the ability to sustain these higher
price points.

The focal part of Parachute's portfolio is the rigid packs-the ubiquitous
blue coconut oil bottle. The non-focus component, predominantly flexi
(pouch) packs with lower margins than rigids, comprises about 25% of
Parachute sales in volume terms. Being more sensitive to the premium over
loose oil, this non-core part of the portfolio experienced a marginal
decline in volume over FY09. Consequently the volume growth for Parachute
Coconut oil as a whole was a little over 7%. In Nihar, where the component
of non-core flexi packs is higher than in Parachute, the volume growth as a
whole was marginal.

Parachute's volume share in the 12 months ended Febraury '10 was 42.9%.
Together with Nihar and Oil of Malabar, Marico's share in the branded
coconut oil segment in India was 53.3%.

During the year, the Central Board of Excise & Customs (CBEC) issued
instructions vide a circular wherein it has classified coconut oil packed
in container size up to 200ml as hair oil, which is chargeable to excise
duty with effect from the date of the circular that is June 3, 2009. The
company has filed writ petitions with the High Courts and believes it has a
strong legal case on merits. The company continues to clear all coconut oil
from its factories without payment of excise duty. The matter is currently
sub-judice and it could take some time for it to resolve completely.
Pending such outcome, as a matter of abundant caution, the company has
decided to make a provision for the excise duty on packs up to 200ml, which
the excise department has sought to classify as hair oil to the extent of
75% of the duty payable in the unlikely event that the decision goes
against the company. The provision for the year is Rs.29.4 crore. During
the first three quarters, the company had adopted an even more conservative
approach of providing 100% of the excise duty amount. In the management's
judgment a provision of 75% of the amount is conservative enough.
Consequently, during 04 FY10, the provision on account of this excise duty
amount is Rs.1.15 crore.

Saffola

Marico's second flagship brand, Saffola, is positioned strongly on the
'good for the heart' platform and rides the trend of increasing concern
around health and heart health in India. With the increasing awareness
about health and a healthy lifestyle, Saffola has been able to steadily
increase the number of households in which it is used. During FY10, Saffola
refined oils recorded a strong volume growth of 16% over FY09.

FY10 saw a decline in the edible oil table following the sharp upward
movement during the first part of FY09. Input prices for Saffola and
particularly that of Safflower oil remained lower than those in the
previous year by about 22%. The brand passed on a part of this to consumers
using a strategic mix of promotions and price reductions across select
packs during the year to keep the premium over other branded refined edible
oils at sustainable levels. This was supported by a media campaign and
other marketing efforts. Higher volumes are expected to increase the
customer base of Saffola as the brand has a high retention rate. Households
buying Saffola have steadily increased with the number of households
estimated to have gone up by over 12% during FY10. The Saffola refined oil
franchise continues to hold its market leadership position in the super
premium ROCP (Refined Oil in Consumer Packs) segment.

In the longer term, Saffola would like to establish itself as a leading
healthy lifestyle brand. It has commenced its journey in the functional
foods space and plans to have a basket of offerings that provides healthy
food options throughout the day to individuals conscious about heart
health. During 04 FY09, Saffola Arise, rice that keeps you feeling light
after eating, yet keeps you full for longer, was launched across Saffola's
key markets at an invitational price and has been supported by insightful
advertising. The initial performance has been in line with expectations.
The packaged rice market in India is about Rs.400 crore and is growing at a
high rate (over 20%), especially in Modern Trade, a channel in which
Saffola Arise is doing well. With its health positioning, the company hopes
to create a sizable niche for itself over the next two to three years.

Hair Oils

Marico offers its consumers a basket of value added hair oils for their
pre-wash and post wash hair conditioning, nourishment and grooming needs.
Its key brands participating in this Rs. 2600 crore market are Parachute
Advansed coconut hair oil, Parachute Jasmine non-sticky coconut hair oil,
Nihar Naturals perfumed coconut hair oil, Hair & Care nourishing non-sticky
hair oil, Hair & Care Almond Gold (enriched with almond proteins) and
Shanti Badam Amla hair oil (enriched with almond and amla (gooseberry)
extracts). With rising incomes there has been an opportunity to serve
consumers looking for value added options to their hair oiling needs.

During the year, Marico's hair oils brands recorded healthy growth and the
portfolio as a whole grew by about 16% over FY09. Marico's hair oils
franchise had a volume market share of 21% during the 12 months ended Feb
2010. Over the last few months however, it has been gaining share reaching
about 23rd in Feb 2010. This has been achieved through packaging and
communication restaging in some of the brands and penetrative pricing
action in others. With the objective of generating trails and expanding its
base, Shanti Badam Amla, which comprises a relatively small part of
Marico's hair oils portfolio, ran an aggressive price off during Q4 FY10.
This has provided some traction to the brand and it is hoped that most of
the consumers who try the new offering would remain with the brand. Marico
backed its porffolio of hair oils with continued media support and consumer
offers.

Parachute Advansed Hot Oil, a new product that was launched during FY10,
received an encouraging response from consumers. Parachute Therapie a
coconut oil based hair vitalizer that heals damaged roots and controls hair
fall was relaunched in October 2009 in a 100ml pack at a price point below
Rs.100. The response is in line with expectations.

The company plans to increase its participation in the hair oils category
by entering the cooling oils segment. It is currently prototyping two
differentiated cooling oil variants-Nihar Naturals Coconut Cooling Oil in
Bihar and Parachute Advansed Coconut Cooling Oil in Andhra Pradesh.

In order to build capacity for the future and to take advantage of fiscal
benefits provided by the government for making manufacturing investments in
certain designated territories, the company commissioned a new plant for
hair oils and value added personal care products at Paonta Sahib in
Himachal Pradesh. The unit is designed to optimize quality, cost and
flexibility and is environmentally friendly. It entailed a capital
expenditure of Rs.23 crore and is expected to take care of the company's
growth aspirations in this segment for the next few years.

Other Prototypes & New Launches

Marico, being an FMCG company, has to create a healthy pipeline of new
products so that they become the growth engines for the future. In order to
identify scalable marketing and product propositions, Marico follows a
prototyping approach to test the products before launching in a low-cost
fail-fast model.

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

During the year, the company has continued the process of prototyping and
launching.

Parachute Advansed Hot Oil was launched during the year and achieved good
performance on the back of an improved proposition & communication mix.
Parachute Advansed Cooling Oil was prototyped in the state of Andhra
Pradesh in June 2009. With a new campaign involving Tollywood superstars
Nagarjuna and Bhumika Chawla and with an improved mix, the initiative is
expected to meet action standards this season. Saffola Arise was launched
in January 2010. The initial response has been positive and the company is
now planning to increase the relevance beyond the early adopters in strong
rice markets.

International FMCG Business

From a single digit share in FY05, about 23% of the group's turnover is now
contributed by Marico's International FMCG business. Its key geographical
presence is in Bangladesh, MENA (Middle East and North Africa) and South-
Africa. In January 2010, Marico established an entry into the South East
Asian region through the acquisition of the hair styling brand Code 10 in
Malaysia. During FY10, the company's international business crossed the
Rs.600 crore mark in turnover, a growth of 36% over FY09. Much of this
growth was derived from consumer franchise expansion (about 21%),
accompanied by price led growth of 9%. An additional 6% growth was on
account of favourable foreign exchange rates.

In Bangladesh, Parachute continues to focus its efforts on increasing the
size of the market through driving conversions from loose oil to packed
oil. Its market leadership position has been strengthened further and it
now commands a volume share of about 75%. Parachute has achieved the status
of second most trusted brand in the country (Bangladesh Brand Forum 2009),
a testimony to its brand equity. Riding upon the extensive distribution
network created by Parachute in Bangladesh, Hair Code hair dye has been
able to establish itself as the second largest hair dye brand in the
country. A strong 360 degree media campaign with presence on N, print and
outdoor media as well in-salon activations and in-store visibility has
helped in this achievement. The company now plans to extend a few more
products from its India portfolio into the Bangladesh market over the next
few quarters.

In the Middle East, both Parachute Cream and Parachute Gold hair oil
experienced healthy growths as compared to the corresponding quarter in the
previous year registering improvement in market shares. In the GCC (Gulf
Cooperation Council) countries, Parachute cream enjoys a leadership market
share of about 27%, while the Parachute hair oil franchise has improved its
share to 28%.

Marico's business in Egypt comprising the hair cream and hair gel brands
Fiancee and Hair Code achieved a growth of 19% during FY10. Most of the
issues faced as part of the distribution transition in FY09 have been
resolved and the business is back on track. Several promotional campaigns,
including digital and viral marketing initiatives have helped improve the
salience of the brands with the market share now standing at 57%. The
company is experiencing some challenges in fighting counterfeiting
especially in the sachet packs. This is being tackled through packaging
innovations to contain the problem.

During Q4 FY10, Marico launched Parachute Gold hair oil in Egypt and the
initial response has been encouraging. Marico also made inroads into the
neighboring geographies in the MENA region launching its products in
Morocco and Sudan. In addition, the new plant that was set up to
exclusively manufacture the Parachute range of products for supplies to the
MENA region has stabilized and is now fully operational.

Despite a difficult macro economic situation in South Africa, impacted by
the global downturn, Marico's business in ethnic hair care and health care
through its portfolio of brands Caivil, Black Chic and Hercules performed
well. All the brands registered healthy growths and Marico improved its
market share in ethnic hair care by about 100 basis points. Caivil scalp
protector, which was launched during Q3 FY10, had a good start and is
generating trials as desired. Hercules' Healthy Body Healthy Mind campaign
following up on the flavoured castor oil launch has been received well.

Marico entered the Malaysian hair cream and hair gels market (sized at RM
150 million in consumer prices) through the acquisition of Code 10 from
Colgate Palmolive in January 2010. Code 10 is the number 3 player behind
Brylcreem and Gatsby and has a share of about 10%. As part of the
understanding Marico was supported by Colgate-Palmolive Malaysia for
distribution of the Code 10 range in the immediate term. Marico has now
identified a distribution partner and is in the process of moving to
handling its distribution independently. The integration is progressing as
per plan. Marico expects that this acquisition will serve as a stepping
stone to Marico's designs for the South East Asian region.

Over the year FY10, Marico's International FMCG began the process of taking
some of its brands to other geographies. The Egyptian brand Hair Code for
instance was launched in Bangladesh as a hair dye. Similarly, the company
has now launched Hair Code Gel in select GCC markets and Parachute Therapie
has been introduced in the Middle East in Q4 FY10.

The operating margins of the business have been steadily improving over the
years. The company has also taken structural initiatives to improve its
margins in the International FMCG business. The new factory commissioned in
Egypt in FY09 has gradually begun taking over the hair cream servicing
needs of the Middle East region. Similarly backward integration initiatives
in Bangladesh have helped to improve the cost structure. It is expected
that the International business will catch up with the current company
average margins over the next three years or so.

Kaya Skin Clinic

Kaya is the first organized player in the segment of cosmetic dermatology
and now enjoys a large first mover advantage in the segment in India.
During Q4 FY10, Kaya opened its first clinic in Dhaka, Bangladesh. It now
offers its technology led cosmetic dermatological services through 101
clinics: 87 in India across 27 cities and 13 in the Middle East in addition
to the most recent one in Dhaka.

The company had ended FY09 with revenue of Rs.116 crore. Even though there
was some deceleration of the rate of growth, the business in India achieved
same store growth rates of around 11% during the second half of FY09. The
company thus continued with its growth plans and opened 10 new clinics in
Q1 FY10. Kaya also launched its 'designer skin' advertising campaign and it
was expected that the revenue growth would sustain.

However, as FY10 unfolded, greater clarity on consumer trends emerged.
Kaya's offering are in the nature of discretionary spends. Apart from the
impact of the overall economic downturn, the Kaya skin business in India
faced two adverse developments during the first half of FY10. The outbreak
of swine flu, though temporary, led to a drop in customer appointments
particularly in cities such as Pune and Bangalore where the incidence of
the outbreak was more acute. The introduction of service tax in the Union
Budget in an already unfavorable ambience made growth more challenging.

While there has been some improvement in the macro environment in the
latter part of the year, Kaye continues to experience a decline in same
clinic revenue (revenue from clinics that have been in existence for over a
year) in India. Kaya's performance in the Middle East however, despite the
turbulence in Dubai, has been good with the clinics registering a same
clinic growth of 17%. Consequently, the same clinic growth for Kaya Skin as
a whole was a negative 5%.

Kaya Skin business achieved a revenue of Rs.182 crore, a growth of 15%
(including revenue from new clinic additions) and incurred a loss of
Rs.12.25 crore.

The company has identified declining customer retention and high skin
practitioner attrition as two of the issues being faced by Kaya skin
business in India. It has begun to put measures in place to improve upon
these. Kaya Everyday Radiance, a new service launched in 03 FY10 seeks to
attract customers on a more repetitive basis. Other packages to increase
the life time value of a customer to Kaya are being initiated. These will
include the introduction of more products in the Kaya portfolio. Today
products constitute only about 13% of revenues for Kaya. Providing training
on a larger suite of services to bring variety into the skin practitioner's
routine and also making the clinic leadership directly responsible for
retaining team members is expected to bring down skin practitioner
attrition levels over time.

During 04 FY10, the management also reviewed all its existing clinic
operations and decided to close down/relocate 7 skin clinics which did not
hold long term potential, by June 2010. In the process, the company has
estimated a closure cost of Rs.2.1 crore. This has been provided for in
FY10 accounts of Kaya.

The company's overall experience with Kaya Skin Care business has been
encouraging. This is a fairly young business-only 7 years since its
inception. We have already experienced, in a few accounting periods,
profitability at both clinic level and regional level. Marico's belief in
the Kaya business model is therefore intact, especially as it perceives the
long term opportunity in skin care solutions to be significant. The company
would of course aim to perfect the offering and overcome the challenges
that the Indian business is currently facing. During FY11, while Kaya plans
to add 3-5 clinics in the Middle East it is unlikely to open any new
clinics in India. The company expects Kaya Skin Clinic to achieve its
targeted ROCE over the next 3 to 4 year period.

COST STRUCTURE FOR MARICO GROUP

% to Sales & Services (net of excise) FY10 FY09
Material Cost (Raw+Packaging) 47.4 53.5
Advertising & Sales Promotion (ASP) 13.2 10.2
Personnel Costs 7.2 6.9
Other Expenses 18.1 16.7
PBDIT Margins 14.1 12.7
Gross Margins (PBDIT before ASP) 27.3 22.9

Notes:

The year witnessed a decline in some key input prices. Copra, the input for
coconut oil, which accounts for about 40% of the company's raw material
cost, was 2006 lower than in FY09. Similarly, market prices of safflower
oil, comprising about 13% of the company's raw material cost, were about
22% lower than in the previous year.

Part of the higher gross margins were ploughed back to make higher
investments in ASP across the three businesses to support new product
introductions such as Saffola Arise, & Parachute Advansed Cooling Oil in
India and Hair Code Dye in Bangladesh and in brand building efforts on
established brands such as Saffola & Parachute Advansed in India and
Parachute Hair Cream in the Middle East.

Other expenses as a % of sales were higher primarily due to provisions made
for excise on coconut oil pack size upto 200ml, higher rental expenses due
to expansion of Kaya clinics and higher storage costs.

CAPITAL UTILIZATION FOR MARICO GROUP

Over the years, Marico has maintained a healthy Return on Capital Employed
(ROCS). Given below is a snapshot of various capital efficiency ratios for
Marico:

Ratio FY10 FY09

Return on Capital Employed 34.3% 37.4%
Return on Net Worth 41.8% 49.1%
Working Capital Ratios)
* Debtors Turnover (Days) 18 16
* Inventory Turnover (Days) 54 46
* Net Working Capital Turnover (Days) 58 45
Debt: Equity 0.67 0.88
Finance Costs to Turnover (%) 1.0 1.5

* Turnover Ratios calculated on the basis of average balances

1. The debtors turnover has increased partly on account of the
international business constituting a larger share of turnover. The market
norms from debtors in the international business are higher than in India.
Inventory days have increased primarily due to strategic build up
particularly in safflower and copra.

2. As of March 31, 2010 the Marico Group had a Net Debt of Rs.251 crore
(Gross Rs.446 crore). Of the Gross Debt about Rs.186 crore is denominated
in US Dollars (USD). About Rs.147 crore of the USD debt is repayable within
a year. About Rs.229 crore debt denominated in Indian Rupees is payable
within a year. The average cost of the debt is 5.0%. The company may roll
over some of the loans when they fall due during the year. Marico has
adequate cash flows to maintain a healthy debt service coverage.

3. The Company adopts a conservative policy for hedging its foreign
currency exposures using a mix of forwards, plain vanilla options and
hedging on a net basis. Foreign currency trade loans and imports are hedged
immediately on contracting the same.

SHARE HOLDER VALUE

Pay out distribution of profit to share holders

Over the past 5 years, the company had made acquisitions and financed the
same through issue of fresh equity, borrowings from banks and internal cash
generation. Marico has been focused on deploying its resources in avenues
which will result in maximization of share holder value. Continuing with
this policy, the Board of Directors of the Company has decided to follow a
conservative dividend policy, as compared to the past, unless the company
is unable to deploy the funds in attractive growth opportunities. The broad
direction is to maintain the absolute amount of dividend as paid out in the
previous year. On a growing profit base, the pay out ratio would be lower.
However, if the Company does not find any suitable avenue to deploy funds
in near term it will repay the debt on the balance sheet and relook at the
dividend payout ratios.

Dividend Declared

At its meetings held in October 2009 and April 2010, the Board of Directors
had declared interim dividends of 30% and 36% respectively. With this the
cumulative dividend declared is 66%. Consequently, on a higher profit base,
the dividend payout ratio is lower at 20% (inclusive of dividend
distribution tax).

OTHER DEVELOPMENTS

Listing of Marico Bangladesh Limited

Marico Bangladesh Limited (MBL), a wholly owned subsidiary of Marico
Limited (ML) was listed with the Dhaka Stock Exchange and Chittagong Stock
Exchange in the month of September 2009. MBL issued ordinary shares
equivalent of 10% of its total equity thereby raising Taka 270 million. One
equity share of Taka 10 was issued at a premium of Taka 80 per share. The
proceeds of the IPO strengthened the financial position of MBL to enable
continued growth. This IPO was the 'first' in the following aspects:

* The first time that an overseas subsidiary of Marico went public

* The first time that a Bangladeshi subsidiary of an Indian Company got
listed in Bangladesh

Bangladesh has been an important part of Marico's global strategy. Over the
past nine years, the Group has consistently invested in Bangladesh. The
'Think Global, Act Local' approach has helped Bangladesh to record a CAGR
of 71% in turnover in the past 3 years. The IPO was a further step towards
localizing the Marico business in Bangladesh, through local ownership.

Capital markets in Bangladesh are poised for growth. The Marico Group looks
forward to being part of the Bangladesh growth story.

Withdrawal of Kays Life Prototype

Marico had launched the Kaya Life prototype to offer consumers holistic
weight management solutions. The prototype had reached a capacity of 5
centres, all in the city of Mumbai. While the clients had been experiencing
effective results on the weight loss and inch loss, the prototype had less
than expected progress in building a sustainable business model, despite
the passage of a reasonably long period of time. Marico has therefore
decided to withdraw the Kaye Life Prototype from the market. The net cost
of the Kaye Life prototype during FY10 is estimated to be about Rs.5.7
crore. This has been provided for in the books of account of Kaya and
disclosed separately as an exceptional item.

The prototype withdrawal has already been set in motion. This will help
Marico to reallocate the company's financial resources and management
bandwidth to initiatives expected to have better potential, such as Kaya
Skin Clinics or Marico's consumer products businesses in India and
overseas.

OUTLOOK

* Sustained volume and value growth in consumer products (India &
international).

* Consolidation in Kaya India and building scale in Kaya Middle East.

* Sustained performance in group margins

* Continued investments for the future

The consumer products business of the company expects to sustain overall
volume growth and to improve value growth. Though there may be some
increase in input costs from the low levels experienced in FY10, the
company expects to be able pass these on to the consumer and maintain its
unit margin in the same band, given the strength of its brands. At the same
time, in the medium term the company would like to focus on growing its
brand franchise rather than increasing margins unduly. With the rural
markets growing faster than urban ones, the company is planning to focus on
rural markets in order to drive deeper penetration for its existing
products and also to create a basket of products more amenable to these
markets. In coconut oils in India the company expects to grow through
holding the price point on low unit packs (Rs.10 and below). In hair oils
in India, Marico will focus on share gain through effective communications
and introduction of differentiated and innovative products. Saffola is
riding a trend in healthy living being adopted by the Indian consumer. The
brand expects to continue to expand its franchise in the premium refined
edible oil niche. It will also extend its good for heart equity to
functional foods, the first of which, Saffola Arise (rice) has now been
rolled out. The company will continue to prototype new product ideas to
create new engines of growth for the future. Given the current size of
Marico's consumer product business, the company will focus on new product
initiatives with a potential more commensurate with its size.

In the International consumer products business, Marico will focus on
growing the categories where it has dominant share-such as in coconut oil
in Bangladesh and creams and gels in Egypt. In the Middle East and South
Africa it would work on increasing share in key categories. The company has
also commenced the process of expanding its distribution to neighboring
countries from its hubs in the Middle East, Egypt and South Africa. This is
expected to widen Marico's playing arena in West Asia and Africa in the
medium to long term. The acquisition of Code 10 in Malaysia has marked
Marico's entry into the South East Asian region. Over time, this is
expected to grow into a new pillar for growth for Marico's international
business. Marico expects that its international business can clock a
business growth of about 20% per annum over the next few years. It will
also focus on improving its margins gradually.

Over the past few quarters Kaya Skin Clinic has experienced a slow down in
India, as discussed earlier in this note. In the short-term therefore, the
company plans to work on improving its revenue streams from the existing
clinics in India. It will continue to drive new clinic growth through
expansion in the Middle East. It has taken Kaya longer to achieve
profitability than the company had earlier anticipated. The longer term
attractiveness of the business however remains intact and Kaya expects to
deliver the targeted ROCE over the next 3 to 4 years.

On behalf of the Board of Directors

Harsh Mariwala
Chairman & Managing Director
Place: Mumbai
Date : June 22, 2010.