Contents PERFORMANCE REPORT 2006-7 Forward looking statement In this Annual Report we have disclosed forward-looking information to enable investors to comprehend our prospects and take informed investment decisions. This report and other statements that we 10 periodically make contain forward-looking Yesterday’s statements that set out anticipated results wisdom, based on the management’s plans and tomorrow’s assumptions. We have tried wherever products possible to identify such statements by using words such as ‘anticipate’, Why does a nation of 1.1 billion ‘estimate’, ‘expects’, ‘projects’, ‘intends’, Cover story 30 consumers trust Emami? ‘plans’, ‘believes’, and words of similar substance in connection with any India’s FMCG success Wealth at discussion of future performance. story and Emami 18 the bottom of 26 Readers should bear in mind that we the pyramid cannot guarantee that these forward- looking statements will be realised, although we believe we have been prudent in our assumptions. The achievement of 12 results is subject to risks, uncertainties and The fame game: why brands estimates taken as assumptions. Should need celebrities known or unknown risks or uncertainties materialise, or should underlying Enhancing returns, Indian realty sector: assumptions prove inaccurate, actual 40 creating wealth 42 Gaining visibility results could vary materially from those anticipated, estimated or projected. 28 Emami and its global footprint 05 Inauguration of the new corporate office Also Opinions. Appreciation 02 Emami as a Group 46 10 Years at a glance 49 Corporate Governance 50 Directors’ Report 60 Auditors’ Report 67 Balance Sheet 70 Profit and Loss Account 71 Schedules 72 Cash Flow Statement 85 Balance Sheet Abstract 86 Consolidated Accounts 87 Statement pursuant to section 212 and Subsidiary Accounts 98 Our perspective 06 PERFORMANCE REPORT 2006-7 Publisher’s note Letters to the editor This performance report of Emami Limited is intended primarily for To, the scrip, my Emami holding is now worth circulation among the Company’s The R&D Head, Emami Limited Rs. 20,000. shareowners. This document also Dear Sir, When I have a management as dynamic as intends to address the information Why do people always talk about the yours working for me, why sell? needs of other stakeholders, challenge of street pollution? Is the challenge associates, industry analysts, fund Regards, addressed by a housewife in the kitchen any managers and the media. less? Anurag Gupta, Emami Limited is the flagship outfit of I spend nine hours in the kitchen – every Kolkata the Kolkata-headquartered Emami single day. The humidity, the heat, the Group. Promoted by Mr. R.S. Agarwal occasional burns and bruises take a toll on and Mr. R.S. Goenka, around 30 years Emami Limited the skin. back, with a meagre capital of Dear Sir, Rs. 20,000 has now grown to over Across time, the lustre on my skin dulled. My grateful greetings to Emami. Rs. 500 cr in revenues in 2006-7. Cuts affected the smoothness of my palms. I am a college student from a very poor Until I discovered Boroplus. Emami Limited is not just a beauty care family. My father was unable to company. It is one of India’s most Your product very well cures bear my cost of education. visible and popular health and personal cuts and burns on the But Emami offered me an care companies. What makes Emami one hand and protects opportunity to open a special is that it has blended age-old my skin on the other. Small Village Shop in ayurvedic concepts with modern Even Susheela, my my residence and laboratory practices. neighbour, also sell commented Emami’s product portfolio comprises products to the other day over 20 products marketed across 59 households in about how countries. Its popular brands like my village. I was suddenly Boroplus, Navratna, Mentho Plus, Over the last looking younger! Fast Relief, Sona Chandi and Fair & one-and-a- half years I have been associated Handsome are established names in Sincerely, the consumer market. The Company’s with Emami and earning manufacturing locations in Kolkata, Mrs. Rita Manchanda, an amount of Rs. 800 to Pondicherry and Guwahati are safety Chhattisgarh Rs.1000 per month, which helps and consistency enhancing cGMP and me pursue my education and also meet ISO 9001:2000 compliant. some family expenses. Once I complete my To education and get a job, my mother will take Emami’s wide and deep pan-Indian Mr. S.K. Goenka over the shop for extra earnings. distribution network comprises The Managing Director approximately 2600 distributors and 4 Thanks to Emami. May God bless it. Emami Limited lac retail outlets and all the big retail chains. Dear Sir, Gautam Das, West Bengal The Company is listed on the BSE, These days I read in the papers of how NSE and the Calcutta Stock investors who invest in public issue inevitably erode their capital as the stock, post-listing, Exchange and enjoys a market Dear Sir, capitalisation of Rs. 1300 cr. declines. I am a student of Class V at Delhi Public I have a slightly different story to tell. I School, Ranchi. I used to run away from invested in the Emami public issue in 2005, chyawanprash everyday but mummy would paying Rs. 70 per share. The share had eventually catch me and force it down my appreciated to Rs. 200 towards the close of throat. But last month something interesting March 2007. happened. An uncle from Emami came to Considering that I had invested Rs. 7,000 in our school with the new chocolate-flavoured 2 The year 2006-7 in a snapshot Highlights turnover during the year under review Financials Operations (Note: Since Emami’s financial results for • R&D continued to deliver innovative and the financial year 2006-7 also include the effective products Sona Chandi Chyawanprash and invited us performance of the amalgamating company, to try it. It tasted yum. When I went home I J.B. Marketing and Finance Limited, they • Aggressive marketing through celebrity told mummy about it. Now we have are not comparable with previous year’s endorsements continued. Initiatives taken reversed our roles – I chase her for my figures. Hence, for comparison and better to extend ‘Boroplus’ to a global brand Chocoprash! understanding, previous year’s figures are platform also consolidated to derive growth numbers Sunidhi Chowhan, • SAP implemented; led to a better control in this performance report) Ranchi across all functions and locations in India • 26% growth in net sales to Rs. 516 cr • Project ‘Kaya kalp’; implemented in 24 • 40% growth in exports to Rs. 56 cr To depots, resulted in a decline in direct sales • 33% growth in PAT to Rs. 66 cr The Joint Chairman staff and increase in the distributors’ field • 28% increase in EBIDTA to Rs. 68 cr Emami Limited staff • 22 basis point increase in EBIDTA margin • Institutional sales extended to Border Dear Sir, to 13.2% Security Force (BSF), Central Reserve We have been servicing Emami Group Police Force (CRPF) and Indian Naval since last seven years and I must say that it Brands Canteen Service (INCS) has been a real pleasure working with you • Navratna Oil continued to be the market for one good reason: You value • Around 80% of production was sourced leader with an increased market share of relationships. While you are conscious from excise exempt zones 55.2% about costs, you have always been • More automated processes led to transparent and faster on decision making. • Boroplus Antiseptic Cream maintained its enhanced efficiency number one status with an increased We find Emami Group to be a very • Units at all locations were cGMP and ISO market share of 69.7% aggressive, diversified and governance- 9001:2000 compliant friendly dynamic business house of Eastern • Fast Relief and Menthoplus Balm India. continued to grow aggressively • Sona Chandi grew reasonably well I wish Emami all the very best in its despite having the stagnant category endeavour to excel. growth Yours faithfully, • Fair and Handsome fairness cream, Ajay Saraf, launched in 2005, grew aggressively Senior General Manager and Country Head • New products launched in 2005-6 and Major Clients Group 2006-7 contributed 17% of domestic ICICI Bank Ltd. Continued on page 5 3 Twacha ka suraksha kawach Bruised. Healed. Boroplus Antiseptic Cream An antiseptic cream to prevent dryness and during Durga Puja and with Kolkata TV for a protect the skin from cuts, burns, scratches, Kishore Kumar retrospective called Guru ke nappy rash, insect bites and itchiness. janai pranam Brand ambassadors Brand performance, 2006-7 • Amitabh Bachchan • Retained its market leader position with • 69.7% market share in a total market size of Kareena Kapoor Rs. 165.0 cr • Rituparna Sengupta • Growth of 12.6% as against growth of 6.9% for the category (as per ACN 2006-7 Brand competitor report) • Boroline • The largest selling antiseptic cream in India Brand extensions as well as in Ukraine, Russia and Nepal • Boroplus Prickly Heat Powder • Introduced packaging changes in line with • changing consumer preferences Boroplus Antiseptic Light Cream • • Tied up with Bengali TV channel STAR Boroplus Body Lotion Ananda for the Shardotsav programme 4 Corporate • Initiation of Total Productive Board room information Maintenance (TPM) practices • Equity share capital of Emami Performance Report • The plant at Kolkata got Hazard increased from 611.5 lac to 621.45 lac For the year ended March 31, 2007 Analysis and Critical Control Points shares of Rs. 2 each consequent to Released on June 29, 2007 (HACCP) certification. the merger of J.B. Marketing and Chairman Finance Limited Corporate • Dividend increased from 100% to Shri R.S. Agarwal • Listing on National Stock Exchange 200% (Rs. 2 to Rs.