3 May 2017 4QFY17 Results Update | Sector: Consumer

Marico BSE SENSEX S&P CNX CMP: INR319 TP: INR335 (+5%) Downgrade to Neutral 29,921 9,314 Bloomberg MRCO IN Equity Shares (m) 1,290.2 M.Cap.(INRb)/(USDb) 411.4 / 6.2

52-Week Range (INR) 325 / 235 1, 6, 12 Rel. Per (%) 7/10/2 Avg Val, INRm/ Vol m 348 Free float (%) 40.3

Financials & Valuations (INR b)

Y/E Mar 2017 2018E 2019E Net Sales 59.2 67.5 78.1 EBITDA 11.4 12.4 14.9 PAT 8.1 9.0 10.9 EPS (INR) 6.3 6.9 8.4 Gr. (%) 12.1 10.5 21.1 BV/Sh (INR) 18.0 21.1 23.0 RoE (%) 36.7 35.5 38.1RoCE (%) 31.5 30.3 32.7P/E (x) 50.8 45.9 37.9 P/BV (x) 17.7 15.1 13.9

Estimate change TP change Rating change

Remarkable volume growth, despite weak operating environment Strong volume growth: Marico’s (MRCO) consolidated net sales rose 2.2% YoY

(est. of +4.4%) to INR13.2b. Domestic volumes increased 10% YoY (est. of +7%),despite 8% growth in the base quarter. Domestic revenues grew 6% YoY, whilereported international revenues declined 8% (-5% CC). Parachute sales grew11% with 15% volume growth (est. of +11%), Saffola sales grew 3% with 6%volume growth (est. of mid-single-digit increase), and Value Added Hair Oilssales grew 9% with 10% volume growth (est. of mid-single-digit increase).

Consolidated gross margin contracted 180bp YoY (est. of -300bp) to 51.6%.EBITDA came in 17.7% ahead of expectations, mainly led by lower-than-expected contraction in gross margin (despite a huge increase in materialcosts) and a sharp cut in A&P (-410bp YoY). EBITDA increased 20.1% YoY (est.of +2.1% YoY) to INR2.5b, with the margin expanding 290bp YoY (est. of -30bp)to 19.2%. Adj. PAT increased 25.5% YoY (est. of +6.2%) to INR1.7b.

FY17 performance: Consolidated sales declined 1.6% YoY to INR59.2b. EBITDAmargin was up 200bp YoY to 19.3%. Adj. PAT rose 12.1% YoY to INR8.1b,registering the sixth consecutive year of double-digit growth. Inventory daysrose to 67 from 58 due to an increase in costs of copra and other materials.

Downgrade to Neutral: Strength of the business model has beendemonstrated again through double-digit volume growth. We remain positiveon the longer-term earnings growth prospects. MRCO’s investment indistribution technology is far ahead of peers, which should serve them in goodstead over the long term. After our upgrade to Buy in December, the stock hasappreciated ~25%, and at 37.9x FY19E EPS, valuations are no longer attractivefrom a one-year investment viewpoint. We thus downgrade to Neutral with atarget price of INR335 (40x FY19EPS, 10% premium to three-year average).

Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Krishnan Sambamoorthy (Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428 Vishal Punmiya (Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261

Marico

3 May 2017 2

Key quarterly charts

Exhibit 1: Overall volumes grew by 6%YoY in 4QFY17; 4% in FY17 Marico India 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

Segment growth (%) Volume Value Volume Value Volume Value Volume Value Volume Value

Parachute Rigid 6.0 (5.0) 7.0 (12.0) (6.0) (19.0) (1.0) (12.0) 15.0 11.0 Saffola (Refined Edible Oil) 13.0 14.0 11.0 11.0 8.0 10.0 6.0 7.0 6.0 3.0 Value added hair oils 11.0 12.0 9.0 9.0 11.0 11.0 (12.0) (13.0) 10.0 9.0 Domestic Business 8.4 4.0 8.0 (1.0) 3.0 (3.0) (4.0) (9.0) 10.0 6.0

Source: Company, MOSL

Exhibit 2: Domestic volumes grew by 10% in 4QFY17

Source: MOSL, Company

Exhibit 3: Parachute rigid volumes grew by 15%

Source: MOSL, Company

Exhibit 4: Saffola volume growth stood at 6%

Source: MOSL, Company

Exhibit 5: VAHO volumes grew by 10%

Source: MOSL, Company

Exhibit 6: Segmental Details

4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

Sales (INR m) Domestic 9,490 14,037 11,041 11,944 9,775 13,874 10,758 10,811 10,352 International 2,770 3,463 3,495 3,359 3,146 3,669 3,670 3,354 2,869 Total 12,260 17,500 14,536 15,303 12,920 17,543 14,428

14,165 13,222

EBIT Domestic 1,600 2,955 1,932 2,610 2,134 3,411 2,147 2,521 2,509 International 370 583 528 636 326 701 581 489 217 Total 1,970 3,539 2,450 3,247 2,461 4,112 2,728 3,010 3,010 EBIT margins Domestic EBIT margins 16.9% 21.1% 17.5% 21.9% 21.8% 24.6% 20.0% 23.3% 24.2% International EBIT margins 13.4% 16.8% 15.1% 18.9% 10.4% 19.1% 15.8% 14.6% 7.5% Total 16.1% 20.2% 16.9% 21.2% 19.0% 23.4% 18.9% 21.2% 20.6%

Source: Company, MOSL

8.0 10.0

4.0 3.0 6.0 6.5

8.0 5.0

3.0 6.0 5.5

10.5 8.4 8.0

3.0

(4.0)

10.0

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Jun-

16

Sep-

16

Dec-

16

Mar

-17

Domestic volume growth (%)

5.0 4.0 1.0 2.0

10.0 6.0 7.0 8.0

5.0 8.0

11.0

4.0 6.0 7.0

(6.0)

(1.0)

15.0

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Jun-

16

Sep-

16

Dec-

16

Mar

-17

Parachute volume growth (%)

5.0

10.0 7.0

9.0 11.0 10.0 9.0

3.0

(1.0)

4.0 4.0

17.0

13.0 11.0

8.0 6.0 6.0

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Jun-

16

Sep-

16

Dec-

16

Mar

-17

Saffola volume growth (%)24.0

16.0 15.0 8.0 5.0

11.0 13.0 10.0 5.0

14.0 8.0

21.0

11.0 9.0 11.0

(12.0)

10.0

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Jun-

16

Sep-

16

Dec-

16

Mar

-17

VAHO volume growth (%)

Marico

3 May 2017 3

Exhibit 7: Launched Saffola Aura in 4QFY17- a blend of Olive and Flaxseed oil.

Source: Company, MOSL

Revenue miss; but volumes, EBITDA and PAT better than expected Marico posted 2.2% growth in consol. net sales (est. 4.4% growth) to INR13.2b.

Domestic volume growth was 10% (est. 7%) while overall volume growth was 6%. Domestic revenues grew 6% while reported international revenues declined by 8% (5% decline on constant currency) affected by MENA region sales decline.

Consol. gross margin declined by 180bp YoY (est. decline of 300bp) to 51.6%. Copra costs were up 46% YoY for the quarter. Rice Bran oil was up 20% and Liquid Paraffin (LP) was up 27% during the quarter as compared to Q4FY16. HDPE (a key ingredient in packaging material) price was up 5% compared to Q4FY16.

Consol. A&P expenses surprisingly declined 410bp YoY (management has called this out as an aberration and attributed to environmental uncertainty and deferral of new product launches to 1HFY18) and by 31.4% on an absolute basis YoY. For full year the drop in A&P was only marginal at 40bp YoY to 11.1%. There was a decrease in other expenditure by 60bp YoY and staff costs increased by 10bp YoY. EBITDA margin expanded 290bp YoY (est. 30bp decline) to 19.2% and EBITDA increased 20.1% YoY (est.2.1% YoY increase) to INR2.5b. EBITDA was 17.7% ahead of expectations mainly led by lower than expected decline in gross margins (despite huge increase in material costs) and extremely sharp cut in A&P.

Adj. PAT increased 25.5% YoY (est. 6.2% increase) to INR1.7b. PAT was 18.2% ahead of our expectation.

Domestic Performance: Volumes increase 10% with 6% sales growth Domestic volume growth was 10% (est 7%) while overall volume growth was

6%. Domestic sales were up 6% YoY. Segmental growth: Parachute sales grew 11% with 15% volume growth (ahead

of expectation of around 11%), Saffola sales grew 3% with volume growth of 6% (est. mid-single digit volume growth), and Value Added Hair Oils (VAHO) sales grew 9% with 10% volume growth (est. mid-single digit growth). Strong growth in Saffola and VAHO volumes was witnessed despite 10% and 15% volume growth in base quarter 4QFY16. There was a 4% price decrease YoY in Parachute

Marico

3 May 2017 4

while realization in VAHO was down 1% YoY and Saffola realization was down 3% YoY. The Youth brands portfolio declined 6% in value terms owing to high base.

Marico’s rural sales grew 4% YoY (partly affected by demonetization) while urban sales grew 9% YoY in 4QFY17. Sales in modern trade (10% of domestic turnover) grew 17% YoY for the quarter while Sales of CSD and institutional sales (7% of domestic turnover) were down 13% YoY due to stock correction.

Margins: Standalone gross margins declined 250bp YoY and yet EBITDA margins were up 350bp YoY to 20.6% due to lower ad spends (down sharply by 450bp YoY) and 160bp decline in other expenses. Staff costs increased slightly by 10bp YoY. Management has stated that 4QFY17 ad spends were an aberration due to postponement of new launches to 1HFY18 and that A&P to sales will be back to 11-12% levels in FY18.

Parachute Coconut oil (rigid packs): Parachute rigid posted extremely strong volume growth of 15% with value growth of 11%. In 3QFY17 the volumes had declined due to demonetization as trade inventory went down. In 4QFY17 raw material prices shot up by 25% sequentially and the company delayed its decision to take product prices up, eventually taking 8% price increase in March 2017. Liquidity situation also improved in the quarter. Delay in price increases allowed the company an advantage over peers to correct the inventory of Parachute upwards across the channels improve offtake and garner market share gains. Guidance for volume growth in this segment going forward stands at 5-7%. Copra costs are expected to increase further and company also expects to take judicious price increases to balance volume growth and profitability.

Value-added hair oils (VAHO) reported very strong growth of 10% growth on volumes and 9% on sales despite a high base of 11% volume growth in the base quarter. Growth continues to be higher than category growth. Volume market leadership was increased by 150 bp YoY to 33% (12 month ended March 2017) while value share increased 100 bp YoY to 26% over the same period. Nihar Shanti Amla gained 200 bps YoY market share to 39% in FY17 with an exit share of 40% indicating strong growth trajectory. Management reiterated the focus on premiumization to drive growth. Scale benefits will lead to operating leverage and thus improving margins despite competitive pricing. The company also stated intention of becoming the volume market leader in the Amla Hair Oil Category in FY18.

Saffola posted 3% value growth led by 6% volume growth. Saffola’s market share has increased by 283bp to 66% on 12 months ended March’17. Saffola Oats value market share stood 27% (69% value market share in flavored oats market on MAT basis). During the quarter, the company launched Saffola Aura (blend of olive oil and flaxseed oil) in the super premium edibles oils space and Saffola Multigrain Flakes in the breakfast cereal space bringing the benefits of five grains in a breakfast bowl compared to single grain flakes available in the market.

Youth portfolio declined 6% in value sales due to continued demonetization impact on category growth but has gained market share in all its segments and management has stated that the near term growth plan looks promising. Set Wet Gels (40% of the youth portfolio) grew market share by 391bp YoY to 58%.

Marico

3 May 2017 5

Set Wet deodorant also grew market share to 3.3% in FY17 (FY16-2.6%) in the deodorants market.

For the domestic business, the management has guided for 8-10% volume growth and EBITDA margins of around 20%.

International Business: Decline due to pressure on the MENA business International sales registered a 4.6% constant currency decline (5% volume

decline). Bangladesh (44% of International business) revenues grew 5% in 4QFY17 with

7% volume growth. Parachute Coconut Oil reported 4% constant currency growth with volume growth of 7% and maintained 86% market share. The company has taken price increase of 10% towards the end of FY17 and has guided for single digit constant currency growth in FY18. VAHO sales in Bangladesh grew 16% in constant currency terms with strong growth in the flagship ‘Beliphool’ brand. This segment too witnessed a price increase (of 8%) in 4QFY17). Non coconut oil portfolio in Bangladesh is 23% of sales now compared to 10% five years ago. Management has guided for 30-40% share of this business in sales from Bangladesh in the next two to three years.

South East Asia - majorly Vietnam (28% of International business) sales grew by 11% in constant currency terms. The X-Men brand maintained market leadership in the male shampoos market and also attained leadership in the men’s aerosol category. The food business also grew at a healthy pace. The company is continuing to scale up presence in Myanmar which had sales of USD7m in FY17.

Middle East and North Africa (15% of International business) declined sharply by 46% YoY (constant currency) as the company chose to correct distributor inventory. Middle East constant currency sales declined by just 41% on constant currency basis while Egypt business reported 55% constant currency decline Egyptian Pound has depreciated 52% against the INR in the past 12 months Management is cautiously optimistic about this region in the near term and positive about the medium term outlook

South Africa (7% of International business) grew by 6% (constant currency) despite tough macro conditions.

For the international business, the management has guided for 12-15% constant currency revenue growth and operating margins of 16-17% in the near to medium term.

On an overall basis, the guidance is for 8-10% volume growth and 12-15% sales growth over the medium term with operating margins likely to be the 17%-18% band.

Marico

3 May 2017 6

Con-call highlights Additional information on 4QFY17 Adspend cuts in 4QFY17 were in foods, deodorants and body lotion. Saffola- There was no price reduction some mix effect led to slight realization

decline YoY (higher sales of Activ versus Gold). International business MENA is only 3.1% of consolidated sales so limited impact going forward. Middle East business recovering. Egypt will grow only after H1FY18 after

anniversarization of steep currency depreciation. GST GST- there will be pipeline reduction before implementation but there will be no

demand issues unlike demonetization. GST may provide some tailwinds from 2HFY18 itself. There will be no delay in new launches as GST, unlike demonetization, will not

affect consumption. Ecommerce and new categories Marico has a dedicated Ecommerce team and early results are extremely

promising. Hair fall, male grooming and premium foods will be key categories for E-

Commerce a channel which is also useful for cross pollination current international brands. Online sales can be 10% plus of these categories. Digital marketing sales are already over 10% of overall adspend.

Right to win in Saffola Multi Grain Flakes launched in 4QFY17- Existing Cornflakes have high glycaemic index and Chocos are not healthy so the entry into multigrain flakes.

Saffola Aura launched in 4QFY17- There was a huge overlap of Saffola Consumers who were also olive oil customers and hence the launch.

Olive oil- INR8b market growing at 25% CAGR in the past 3 years heavy metro and modern trade skew.

Beardo stake investment is insignificant. Innovation Innovation will be in three buckets- a) Premiumization of core, b) bottom of

pyramid and c) new categories (mainly in super premium edible oil, male grooming and foods).

Growth and guidance Oats category was flat in 2HFY17. Family and kids consumption will be big

drivers for the long term. Saffola umbrella brand- Confident of 10% volume growth especially with Aura

oil coming in as well. Parachute- some pockets in TN and Maharashtra have high growth potential. Parachute- there is usually 150-200 bp gain in market share in inflationary

environment and a loss of 50-100 bp in deflationary period so the ongoing inflation is good news.

Marico

3 May 2017 7

Management will be able to guide on further price increase on Parachute only in August.

There will be gross margin impact YoY in FY18 as the focus is more on growing volumes between 8-10%. A&P will also rise to support new launches.

Amla Hair oil- aiming to grow 2-3% market share every year, currently 40%. Focusing on large packs in UP and Bihar to drive higher growth.

VAHO- lower unit packs being prototyped in a few markets. Focus is more on INR5-INR 10 rigid packs rather than sachets. Sachets of INR 1 lead to realization issues and margin volatility.

Valuation & view Strength of the business model has been demonstrated again through double

digit volume growth. We remain extremely positive on longer term earnings growth prospects. Marico’s repeatedly stated commitment to longer term volume growth is also heartening and we believe exactly the right strategy for an emerging markets company.

Marico’s investment in technology for distribution is far ahead of peers, particularly in the rural channel and will serve them in very good stead over the long term. Extensive plans for mining data being made available by technology will further widen the gap versus peers. We expect Marico to be a rural behemoth in the coming years given that the technological edge makes them a lot more leaner and nimble compared to peers and as conversion from unbranded to branded and unorganized to organized has been Marico’s strength and GST will only speed up the process more.

Marico‘s track record on earnings growth is also far superior to most FMCG players especially considering the high volatility of its raw materials. Disclosure and corporate governance levels are best of breed.

However, after our upgrade to BUY in December, the stock has however appreciated by around 25% and valuations are no longer attractive from a one year investment view point at 37.9x FY19 EPS. We downgrade to Neutral with a target price of INR335 (40x FY19EPS, 10% premium to 3 year average).

Exhibit 8: Marico P/E (x)

Source: Company, MOSL

Exhibit 9: Marico P/E premium vs. Sensex

Source: Company, MOSL

44.2 45.1

27.0

10.5 5.0

13.0

21.0

29.0

37.0

45.0

53.0

Apr-

07

Jul-0

8

Oct

-09

Jan-

11

Apr-

12

Jul-1

3

Oct

-14

Jan-

16

Apr-

17

PE (x) Peak(x) Avg(x) Min(x)136.2

57.0

-60-30

0306090

120150

Apr-

07

Jul-0

8

Oct

-09

Jan-

11

Apr-

12

Jul-1

3

Oct

-14

Jan-

16

Apr-

17

Marico PE Relative to Sensex PE (%)LPA (%)

Marico

3 May 2017 8

Exhibit 10: Valuation Matrix of coverage universe Company Reco Price Mkt Cap EPS Growth YoY (%) P/E (x) EV/EBITDA (x) RoE (%) Div.

(INR) (USD M) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY17 Consumer Asian Paints Neutral 1,116 16.7 9.5 10.2 18.0 54.4 49.4 41.9 34.7 32.0 27.2 32.8 1.0 Britannia Buy 3,574 6.7 3.0 15.5 22.0 49.5 42.9 35.1 36.5 31.3 24.7 43.1 0.7 Colgate Buy 1,034 4.4 -4.4 18.9 22.7 47.7 40.1 32.7 28.8 24.0 19.8 54.9 1.5 Dabur Neutral 276 7.8 1.9 6.7 18.3 38.0 35.7 30.2 31.4 30.0 25.1 28.4 0.9 Emami Buy 1,071 3.7 -2.9 22.0 20.6 43.8 35.9 29.8 31.3 27.2 22.9 33.8 1.0 Godrej

Neutral 1,806 9.4 11.9 15.6 15.9 48.6 42.1 36.3 34.2 29.9 26.1 22.5 0.7

GSK

Neutral 5,136 3.4 -1.7 12.5 10.3 33.4 29.7 26.9 22.3 19.4 17.3 24.6 1.1 HUL Neutral 934 31.3 1.1 11.7 15.4 48.5 43.4 37.6 33.5 30.3 26.3 67.6 2.0 ITC Buy 277 52.4 8.6 11.6 18.1 33.1 29.7 25.1 22.4 19.9 16.6 28.4 1.9 Jyothy Labs Neutral 376 1.1 94.5 12.8 16.5 47.2 41.9 35.9 27.5 25.2 22.4 16.4 1.1 Marico Neutral 319 6.4 12.1 10.5 21.1 50.8 45.9 37.9 35.3 32.0 26.6 36.7 1.0 Nestle Neutral 6,705 10.1 -1.6 18.0 17.3 56.8 48.2 41.0 34.9 29.2 24.8 39.0 0.9 Page

Buy 7,368 3.7 12.1 15.0 18.6 50.6 43.9 37.1 32.8 28.1 23.3 29.0 0.9

Parag Milk Buy 14,714 2.6 12.9 29.5 27.3 62.5 48.2 37.9 39.8 30.6 24.2 41.3 0.7 Pidilite Inds. Neutral 237 0.3 -87.9 756.4 79.4 292.5 34.2 19.0 27.3 14.9 10.2 1.3 0.0 P&G Hygiene Neutral 730 5.7 12.5 10.1 12.3 44.0 39.9 35.6 29.0 25.6 22.4 27.9 0.7 United Brew. Buy 778 3.2 -5.4 34.3 28.2 72.9 54.3 42.3 29.9 26.5 20.9 12.6 0.1 United

Neutral 1,935 4.4 71.2 47.2 39.1 67.6 45.9 33.0 32.7 26.2 20.3 20.8 0.0

Retail Jubilant

Neutral 1,057 1.1 -17.6 76.4 34.0 85.7 48.6 36.3 26.8 18.2 13.9 10.1 0.2

Titan

Neutral 484 6.7 17.1 10.8 13.5 51.4 46.4 40.9 37.1 32.9 28.3 21.5 0.6

Note: For Nestle FY16 means CY15 Source: Company, MOSL

Marico

3 May 2017 9

Financials and Valuations

Income Statement

(INR Million) Y/E March 2013 2014 2015 2016 2017 2018E 2019E Net Sales 45,843 46,762 57,203 60,148 59,180 67,520 78,124 Change (%) 15.5 2.0 22.3 7.0 -1.6 14.1 15.7 COGS 22,414 24,088 31,356 30,777 28,491 32,914 37,613 Gross Profit 23,429 22,674 25,847 29,371 30,690 34,607 40,511

Margin (%) 51.1 48.5 45.2 48.8 51.9 51.3 51.9 Operating Expenses 17,290 15,301 17,274 18,954 19,276 22,172 25,595 EBITDA 6,140 7,374 8,574 10,417 11,414 12,435 14,917 Change (%) 29.8 20.1 16.3 21.5 9.6 8.9 20.0 Margin (%) 13.4 15.8 15.0 17.3 19.3 18.4 19.1 Depreciation 866 769 843 949 903 1,124 1,244 Int. and Fin. Charges 580 345 230 206 166 220 246 Other Income - Recurring 494 685 716 1,030 1,152 1,373 1,666 Profit before Taxes 5,187 6,946 8,217 10,292 11,497 12,464 15,093 Change (%) 29.0 33.9 18.3 25.3 11.7 8.4 21.1 Margin (%) 11.3 14.9 14.4 17.1 19.4 18.5 19.3 Current Tax (excl MAT Ent) 1,186 1,793 2,383 3,054 3,377 3,490 4,226 Tax Rate (%) 28.2 27.4 28.8 29.7 29.4 28.0 28.0 Minority Interest -98 -187 -114 -5 -10 -10 -10 Profit after Taxes 3,627 4,854 5,735 7,233 8,110 8,964 10,857 Change (%) 15.0 35.3 16.0 23.8 12.1 10.5 21.1 Margin (%) 7.9 10.4 10.0 12.0 13.7 13.3 13.9 Reported PAT 3,959 4,854 5,735 7,233 8,110 8,964 10,857

Balance Sheet

(INR Million) Y/E March 2013 2014 2015 2016 2017 2018E 2019E Share Capital 1,290 1,290 1,290 1,290 1,291 1,291 1,291 Reserves 18,526 12,317 16,958 19,678 21,966 25,974 28,375 Net Worth 19,815 13,606 18,248 20,968 23,257 27,264 29,666 Loans 8,719 6,798 4,279 3,317 4,667 5,117 5,567 Capital Employed 28,885 20,762 22,664 24,428 27,923 32,381 35,232

Gross Fixed Assets 8,091 8,614 8,807 9,267 10,707 11,707 12,957 Intangibles 8,918 1,020 1,034 1,060 1,020 1,020 1,020 Less: Accum. Depn. -4,261 -3,301 -3,973 -4,868 -5,771 -6,895 -8,138 Net Fixed Assets 12,748 6,333 5,868 5,458 5,957 5,833 5,839 Capital WIP 1,477 44 30 367 116 116 116 Goodwill 3,955 2,543 4,892 4,980 4,795 4,795 4,795 Investments 1,516 3,105 2,838 4,164 5,919 7,103 8,524 Current 1,515 3,105 2,838 4,164 5,919 7,103 8,524 Non-current 1 0 0 0 0 0 0 Curr. Assets, L&A 17,377 17,624 17,625 19,261 21,866 26,176 30,052 Inventory 8,627 7,962 9,947 9,258 12,534 10,653 14,314 Account Receivables 1,966 2,232 1,768 2,524 2,470 3,093 3,578 Cash and Bank Balance 2,668 4,064 2,049 3,097 2,273 7,162 6,088 Others 4,117 3,366 3,861 4,382 4,589 5,269 6,072

Curr. Liab. and Prov. 8,129 8,791 8,511 9,804 10,518 11,604 13,947 Current Liabilities 6,919 7,934 7,471 8,642 9,087 10,071 12,198 Provisions 1,210 857 1,040 1,162 1,431 1,533 1,749 Net Current Assets 9,247 8,833 9,115 9,458 11,348 14,573 16,106 Deferred Tax Liability -58 -96 -79 1 -211 -38 -147 Application of Funds 28,885 20,762 22,664 24,428 27,923 32,381 35,232 E: MOSL Estimates

Marico

3 May 2017 10

Financials and Valuations

Ratios

Y/E March 2013 2014 2015 2016 2017 2018E 2019E Basic (INR)

EPS 2.8 3.8 4.4 5.6 6.3 6.9 8.4 Cash EPS 3.7 4.4 5.1 6.3 7.0 7.7 9.3 BV/Share 15.4 10.5 14.1 16.3 18.0 21.1 23.0 DPS 0.3 2.0 1.2 3.4 3.0 3.2 5.5 Payout % 8.9 53.1 28.1 60.2 47.7 46.1 65.4

Valuation (x)

P/E 113.4 84.8 71.8 56.9 50.8 45.9 37.9 Cash P/E 85.3 73.2 62.6 50.3 45.7 41.3 34.5 EV/Sales 9.1 8.8 7.2 6.8 6.9 6.0 5.2 EV/EBITDA 67.7 55.7 47.9 39.1 35.8 32.4 27.0 P/BV 20.8 30.2 22.6 19.6 17.7 15.1 13.9 Dividend Yield (%) 0.1 0.6 0.4 1.1 0.9 1.0 1.7

Return Ratios (%)

RoE 23.2 29.0 36.0 36.9 36.7 35.5 38.1 RoCE 17.1 21.3 27.7 31.4 31.5 30.3 32.7 RoIC 19.9 26.1 35.2 38.6 40.8 43.3 51.1 Working Capital Ratios

Debtor (Days) 16 17 11 15 15 17 17 Asset Turnover (x) 1.6 2.3 2.5 2.5 2.1 2.1 2.2

Leverage Ratio

Debt/Equity (x) 0.4 0.5 0.2 0.2 0.2 0.2 0.2

Cash Flow Statement

(INR Million) Y/E March 2013 2014 2015 2016 2017 2018E 2019E OP/(loss) before Tax 5,187 6,946 8,217 10,292 11,497 12,464 15,093 Int./Div. Received -494 -685 -716 -1,030 -1,152 -1,373 -1,666 Depreciation 866 769 843 949 903 1,124 1,244 Interest Paid 580 345 230 206 166 220 246 Direct Taxes Paid -1,186 -1,793 -2,383 -3,054 -3,377 -3,490 -4,226 (Incr)/Decr in WC -527 1,811 -2,296 705 -2,715 1,665 -2,607 CF from Operations 4,427 7,391 3,895 8,068 5,322 10,610 8,084

(Incr)/Decr in FA -9,436 8,807 -193 -822 -1,150 -1,000 -1,250 Free Cash Flow -5,009 16,199 3,702 7,246 4,172 9,610 6,834 (Pur)/Sale of Investments 1,440 -1,589 267 -1,326 -1,755 -1,184 -1,421 CF from Invest. -7,996 7,218 74 -2,148 -2,905 -2,184 -2,671

(Incr)/Decr in Debt 871 -1,921 -2,519 -963 1,350 450 450 Dividend Paid -385 -2,673 -1,745 -5,025 -4,530 -4,832 -8,304 Others 4,429 -8,619 -1,720 1,115 -61 845 1,367 CF from Fin. Activity 4,915 -13,213 -5,984 -4,872 -3,241 -3,537 -6,487

Incr/Decr of Cash 1,346 1,397 -2,015 1,048 -824 4,890 -1,074 Add: Opening Balance 1,321 2,668 4,064 2,049 3,097 2,273 7,162 Closing Balance 2,667 4,064 2,049 3,097 2,273 7,162 6,088 E: MOSL Estimates

Marico

3 May 2017 11

Corporate profile Exhibit 1: Sensex rebased

Source: MOSL/Bloomberg

Exhibit 2: Shareholding pattern (%)

Mar-17 Dec-16 Mar-16

Promoter 59.7 59.7 59.7

DII 4.2 4.1 3.3

FII 29.1 28.7 29.3

Others 7.0 7.5 7.8

Note: FII Includes depository receipts Source: Capitaline

Exhibit 3: Top holders Holder Name % Holding

First State Investments Icvc- Stewart Investors Asia Pacific Leaders Fund 4.6

Arisaig Partners (Asia) Pte Ltd. A/C Arisaig India Fund Limited 2.2

Cartica Capital Ltd 1.9

Life Insurance Corporation Of India 1.9

Prazim Trading and Investment Co. Pvt. Ltd. 1.3

Source: Capitaline Exhibit 4: Top management

Name Designation

Harsh Mariwala Chairman

Saugata Gupta Managing Director & CEO

Surender Sharma Company Secretary

Source: Capitaline

Exhibit 5: Directors Name Name

Harsh Mariwala B S Nagesh*

Saugata Gupta Hema Ravichandar*

Rajen Mariwala Nikhil Khattau*

Anand Kripalu* Rajeev Bakshi*

Atul C Choksey*

*Independent

Exhibit 6: Auditors Name Type

Ashwin Solanki & Associates Cost Auditor

Ernst & Young LLP Internal

Price Waterhouse Statutory

Source: Capitaline

Exhibit 7: MOSL forecast v/s consensus EPS

(INR) MOSL

forecast Consensus

forecast Variation

(%)

FY17 6.3 6.3 0.8

FY18 6.9 7.2 -4.4

FY19 8.4 8.4 0.4

Source: Bloomberg

Company description Marico Limited is one of India's leading consumer products companies operating in the beauty and wellness space. Currently present in 25 countries across emerging markets of Asia and Africa, Marico has nurtured multiple brands in the categories of hair care, skin care, health foods, male grooming, and fabric care. Marico's India business markets household brands such as Parachute Advansed, Saffola, Hair & Care, Nihar, Mediker, Revive, Manjal, Setwet, Zatak and Livon among others that add value to the life of 1 in every 3 Indians.

Marico

3 May 2017 12

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Disclosure of Interest Statement MARICO Analyst ownership of the stock No Served as an officer, director or employee - No

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