REPORT OF BOARD OF DIRECTORS

UNILEVER SUSTAINABLE LIVING PLAN (USLP)

The Company’s vision is to accelerate growth in the business, while reducing environmental footprint and increasing positive social impact. This vision has been codified in the USLP launched in 2010, which is your Company’s blueprint for achieving sustainable growth. By spurring innovation, strengthening the supply chain, lowering costs, reducing risks and building trust, sustainability is creating value for your Company as well as the society.

Your Company has made good progress on the three USLP big goals to be achieved globally: to help more than a billion people improve their health and well-being, to halve the environmental footprint of our products and to source 100% of our agricultural raw materials sustainably and enhance the livelihoods of people across our value chain.

Detailed information on the progress of your Company’s USLP initiatives and CSR activities are available in the Annual Report on CSR and Business Responsibility Report which is appended as an Annexure to this Report.

FINANCIAL REVIEW (STANDALONE)

Results (Rs. crores)

Division Wise Turnover (Rs. crores)

*Others include service income from operations, relevant to the respective businesses.

Summarised Profit and Loss Account (Rs. crores)

Key Financial Ratios

There is no significant change (i.e. change of 25% or more as compared to the immediately previous financial year) in the key financial ratios.

Detailed explanation of ratios

(i) Return on Net Worth

Return on Net Worth (RONW) is a measure of profitability of a Company expressed in percentage. It is calculated by dividing total comprehensive income for the year by average capital employed during the year.

(ii) Return on Capital Employed

Return on Capital Employed (ROCE) is a financial ratio that measures a Company’s profitability and the efficiency with which its capital is used. In other words, the ratio measures how well a Company is generating profits from its capital. It is calculated by dividing profit before exceptional items and tax by average capital employed during the year.

(iii) Basic EPS

Earnings Per Share (EPS) is the portion of a Company’s profit allocated to each share. It serves as an indicator of a Company’s profitability. It is calculated by dividing Profit for the year by Weighted average number of shares outstanding during the year.

(iv) Debtors Turnover

The above ratio is used to quantify a Company’s effectiveness in collecting its receivables or money owed by customers. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. It is calculated by dividing turnover by average trade receivables.

(v) Inventory Turnover

Inventory Turnover is the number of times a Company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory.

(vi) Interest Coverage Ratio

The Interest Coverage Ratio measures how many times a Company can cover its current interest payment with its available earnings. It is calculated by dividing PBIT by finance cost.

(vii) Current Ratio

The Current Ratio is a liquidity ratio that measures a Company’s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.

(viii) Debt Equity Ratio

The ratio is used to evaluate a Company’s financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds. It is calculated by dividing a Company’s total liabilities by its shareholder’s equity.

(ix) Operating Profit Margin (%)

Operating Profit Margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing the EBIT by turnover.

(x) Net Profit Margin (%)

The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing the profit for the year by turnover.

Other Financial Disclosures

There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which this financial statement relates on the date of this report.

Capital Expenditure during the year was at Rs. 728 crores (Rs. 853 crores in the previous year).

During the year, your Company did not accept any public deposits under Chapter V of Companies Act, 2013.

Your Company manages cash and cash flow processes assiduously, involving all parts of the business. There was a net cash surplus of Rs. 3,688 crores (2017-18: Rs. 3,373 crores), as on 31st March, 2019. The Company’s low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company’s imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, are in line with the requirements of Ind AS 21. The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014 are monllonod belo w:

Cost Audit

In terms of the Section 148 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, the cost audit is applicable for following businesses such as Liquid Detergents and Powders, Petroleum Jelly Products, Tea, Milk Powder, Insecticides, Machinery and Mechanical Appliances Drugs and Pharmaceuticals. The accounts and records for the above applicable businesses are made and maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.

Dividend

Your Directors are pleased to recommend a Final Dividend of Rs. 13/- per equity share of face value of Rs. 1/- each for the year ended 31st March, 2019. The Interim Dividend of Rs. 9/- per equity share was paid on 1st November, 2018.

The Final Dividend, subject to the approval of Members at the Annual General Meeting on Saturday, 29th June, 2019 will be paid on or after 4th July, 2019 to the Members whose names appear in the Register of Members, as on the Book Closure dates, i.e. from Saturday, 22nd June, 2019, to Saturday, 29th June, 2019 (both days inclusive). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs. 22/- per equity share and will absorb Rs. 5,719 crores, including Dividend Distribution Tax of Rs. 957 crores.

Unpaid / Unclaimed Dividend

In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 / Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs. 5.95 crores of unpaid / unclaimed dividends were transferred during the year to the Investor Education and Protection Fund.

Mergers and Acquisitions

During the year, your Company entered into an agreement with Vijaykant Dairy and Food Products Limited (VDFPL) and its group companies, acquiring its Ice cream and frozen desserts business consisting of its flagship brand ‘Adityaa Milk’ and front-end distribution network across geographies. The proposed acquisition was in line with the Company’s strategic intent to strengthen its position in the rapidly growing Ice cream and frozen desserts market in India.

During the year, the Board of Directors of your Company approved a Scheme of Amalgamation between the Company and GlaxoSmithKline Consumer Healthcare Limited (GSK CH India) to acquire the business of GSK CH India, subject to obtaining requisite approvals from statutory authorities and shareholders. The proposed transaction is an all equity merger, under which on the Scheme becoming effective, 4.39 shares of the Company will be allotted for every share of GSK CH India.

The acquisition is in line with your Company’s strategy to build a sustainable and profitable Foods & Refreshment business in India by leveraging the mega trend of health and wellness. GSK CH India is the market leader in the Health Food Drinks (HFD) category, with iconic brands such as Horlicks and Boost, and a product portfolio supported by strong nutritional claims.

The Competition Commission of India has vide its order dated 18th February, 2019, accorded its approval for the amalgamation of GSK CH India with the Company. The Company has obtained No Objection Letters dated 15th February, 2019 from BSE Limited and National Stock Exchange of India Limited for the proposed Scheme of Amalgamation. The Company had filed the Scheme with the National Company Law Tribunal (NCLT) for its sanction and the same is pending. The Mumbai Bench of National Company Law Tribunal vide its order dated 2nd May, 2019, has directed the Company to convene meeting of Equity Shareholders and Unsecured creditors on 29th June, 2019.

Scheme of Arrangement

The Members of the Company, had, at the Court Convened Meeting held on 30th June, 2016, approved the Scheme of Arrangement for transfer of the balance of Rs. 2,187 crores standing to the credit of the General Reserves to the Profit and Loss Account. The Company had accordingly filed the petition for sanction of the Scheme of Arrangement with the Hon’ble High Court of Mumbai [jurisdiction later changed to National Company Law Tribunal (NCLT)]. The Hon’ble National Company Law Tribunal, Mumbai Bench, vide its order dated 30th August, 2018, has sanctioned the aforesaid Scheme of Arrangement. With Scheme becoming effective, the balance of Rs. 2,187 crores standing to the credit of the General Reserves has been transferred to the Profit and Loss Account.

Particulars of Loan, Guarantee or Investments

Details of loans, guarantee or investments made by your Company under Section 186 of the Companies Act, 2013, during the financial year 2018-19 are appended as an Annexure to this report.

GOVERNANCE, COMPLIANCE AND BUSINESS INTEGRITY

The Legal function of the Company continues to be a valued business partner that provides solutions to protect your Company and enable it to win in the volatile, uncertain, complex and ambiguous environment. Through its focus on creating ‘value with values’, the function provides strategic business partnership in the areas including product claims, mergers and acquisitions, legislative changes, combating unfair competition, business integrity and governance.

As the markets continue to be disrupted with newer technologies and ever-evolving consumer preferences, the need to have a framework around data security and privacy is paramount. Your Company continues to ensure it has an appropriate framework and safeguards for data privacy of its stakeholders with enhanced legal and security standards. The legal function of your Company continues to embrace newer technologies to make the function future ready to support the growth agenda of the business.

Your Company is of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow. The menace of counterfeiting is also seen in the channels of the future like e-commerce. Your Company continued to engage with various stakeholders including e-commerce Channel Partners, Industry Bodies and Regulators to curb the menace of counterfeiting on the e-commerce platforms.

One of the key activities undertaken by your Company in this direction is propagating intellectual property awareness, particularly among school students. Your Company believes it is important to educate students on intellectual property and build awareness and understanding of the subject so that students start respecting intellectual property rights from a young age.

The Legal function of your Company works with leading industry associations, national and regional regulators and key opinion formers to develop a progressive regulatory environment in the best interest of all stakeholders.

Business Integrity

Our principles and values apply to all our employees through our Code and Code Policies. Our employees undertake mandatory annual training on these Policies via online training modules and an annual business integrity pledge. Our Business Integrity guidelines include clear processes for managing Code breaches.

During the year, we closed 147 incidents across all areas of our Code and Code Policies, with 97 confirmed breaches. During the year, we terminated the employment of 11 employees on account of such breaches. The Code and Code Policies reflect our commitment to fight corruption in all its forms. We are committed to eradicating any practices or behaviours through our zero-toleravce policy.

Our Responsible Sourcing Policy and Responsible Business Partner Policy help to give us visibility of our third parties to ensure their business principles are consistent with our own.

Corporate Governance

Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.

The extract of annual return in Form MGT-9 as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Annual Report and also available on the website of the Company at https://www.hul. co.in/investor-relations/annual-reports/hul-annual-report-related-documents.ytml.

Prevention of Sexual Harassment at Workplace

As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (‘POSH Act’) and Rules made thereunder, your Company has constituted Internal Committees (IC). While maintaining the highest governance norms, the Company has appointed external independent persons who worked in this area and have the requisite experience in handling such matters, as Chairpersons of each of the Committees. During the year, four complaints with allegations of sexual harassment were received by the Company and they were investigated and resolved as per the provisions of the POSH Act. To build awareness in this area, the Company has been conducting induction / refresher programmes in the organisation on a continuous basis. Your Company has also engaged with Government Authority and made suggestions to make POSH Act more enabling and easier to administer so that matters under this Act can be dealt with more efficiently.

Update on Kodaikanal Soil Remediation

Your Company had informed the Members that soil remediation trials had been concluded. Pursuant to which the authorities permitted the Company to commence full scale soil remediation work on the premises of the former factory of your Company as per the approved up-scaling plan. In the meantime, the soil remediation up-scaling plan and the Site-Specific Target Level specified by the authorities was challenged before the National Green Tribunal. The National Green Tribunal dismissed the petition that was filed and ordered that the remediation be carried out as per the approved upscaling plan. The decision of the National Green Tribunal was challenged before the Supreme Court of India; the Supreme Court of India dismissed the petition and has allowed the soil remediation to go ahead. The Company is taking steps to commence full-scale soil remediation at the factory site at the earliest after obtaining the requisite local approvals.

Related Party Transactions

In line with the requirements of the Companies Act, 2013 and amendment to the Listing Regulations, your Company has formulated a revised Policy on Related Party Transactions which is also available on the Company’s website at https://www.hul. co.in/Images/policy-on-materiality-of-rpt-and-dealing-with-rpt tcm1255-537139 1 en.pdf. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arm’s Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013, and Listing Regulations.

All Related Party Transactions entered during the year were in Ordinary Course of the Business and at Arm’s Length basis. No Material Related Party Transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statement, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013, in Form AOC-2 is not applicable.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year, the Board of Directors appointed Mr. Leo Puri as an Additional Director with effect from 12th October, 2018, to hold office up to the date of the forthcoming Annual General Meeting. Being eligible, Mr. Leo Puri has offered himself to be appointed as the Independent Director of your Company.

During the year, Mr. Sanjiv Mehta, Chairman and Managing Director of the Company was elevated as President, South Asia and Member of Unilever Leadership Executive effective from 1st May, 2019.

In terms of the requirements of the Companies Act, 2013, the Independent Directors of the Company were appointed for a period of five years on 30th June, 2014. Such term of appointment of the Independent Directors shall come to an end on 29th June, 2019. In view of the same, the Board of Directors have basis the recommendation of the Nomination and Remuneration Committee proposed to re-appoint Mr. Aditya Narayan, Mr. O. P. Bhatt, Dr. Sanjiv Misra and Ms. Kalpana Morparia as the Independent Directors of the Company for a second term. A resolution proposing re-appointment of Independent Directors of the Company for the second term pursuant to Section 149(6) of the Companies Act, 2013 forms part of the Notice of Annual General Meeting. Dr. Sanjiv Misra and Ms. Kalpana Morparia shall attain age of 75 years during the proposed second term. A resolution proposing their continuation of term on attaining age of 75 years during their second term pursuant to Section 149(6) of the Companies Act, 2013 forms part of the Notice of Annual General Meeting.

Mr. S. Ramadorai, Independent Director of the Company, did not offer his candidature for re-appointment by shareholders in the forthcoming Annual General Meeting. Consequently, he will resign from the position of an Independent Director with effect from 30th June, 2019 after serving of about 17 years in the Company. The Board places on record its deep sense of gratitude and appreciation for Mr. Ramadorai’s immense contribution, strategic guidance provided during his tenure as an Independent Director and as the Chairperson of the Nomination and Remuneration Committee of the Company.

The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013. Mr. Sanjiv Mehta, Chairman and Managing Director have been appointed for a term of five years in accordance with the relevant provisions of Companies Act, 2013, and is not eligible to retire by rotation.

The details of training and familiarisation programme and Annual Board Evaluation process for Directors have been provided under the Corporate Governance Report. The policy on Director’s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for key managerial personnel and other employees, forms part of the Corporate Governance Report of this Annual Report.

MANAGEMENT COMMITTEE

The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by the Managing Director and has Functional / Business Heads as its members. During the year, Ms. Geetu Verma, Executive Director, Foods and a Member of Management Committee was appointed as Global Vice President-Nutrition & Natural Platforms, Unilever. In view of the integration of the Foods and Refreshments categories Mr. Sudhir Sitapati, Executive Director, Refreshments was re-designated as an Executive Director, Foods & Refreshment.

The Board of Directors based on the recommendation of the Nomination and Remuneration Committee held on 3rd May, 2019 appointed Ms. Anuradha Razdan as Executive Director, Human Resource in place of Mr. B. P. Biddappa and Dr. Vibhav Sanzgiri was appointed as Executive Director, Research and Development effective 1st June, 2019.

AUDITORS

M/s. BSR & Co. LLP, Chartered Accountants were appointed as Statutory Auditors of your Company at the Annual General Meeting held on 30th June, 2014, for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the firm of Statutory Auditors can be re-appointed for a further period of five years.

A resolution proposing re-appointment of M/s. BSR & Co. LLP as the Statutory Auditors of the Company pursuant to Section 139 of the Companies Act, 2013 forms part of the Notice of Annual General Meeting.

The Report given by the Auditors on the financial statement of the Company is part of this Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

M/s. RA & Co., Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors have appointed M/s. RA & Co., Cost Accountants as Cost Auditors for the financial year 2019-20.

STAKEHOLDER ENGAGEMENT

Our multi-stakeholder model aims to respect the interests of and be responsive towards all stakeholders.

Stakeholder engagement and partnership is essential to grow your Company’s business and to reach the ambitious targets set out in the USLP. The CoBP, which is the statement of values and represents the standard of conduct for everyone associated with your Company, and the Code Policies guide how we interact with the partners, suppliers, customers, employees, shareholders, government, Non-Governmental Organisations (NGOs), trade associations and industry bodies. Through the underlined standards set in CoBP and Code policies, your Company is committed to transparency, honesty, integrity and openness in all its engagements with the various stakeholders.

OUTLOOK

From a medium to long-term perspective, FMCG markets continue to offer sizeable headroom for growth by increasing consumption and penetration. Secular trends of young population, growing affluence, rising urbanisation and burgeoning digital connectivity will increase awareness, drive premiumisation and enhance spending patterns of consumers.

India continues to be one of the fastest growing economies in the world and this is expected to continue in the financial year 2019-20. The demand trends in the markets is stable and the government initiatives such as increases to Minimum Support Price (MSP), provision of health insurance, direct income distribution etc. will lend further impetus to the rural economy. Inclusive GDP growth will augur well for the overall economy. Commodity inflation, potential disruptions due to global events and a below normal monsoon this year are possible headwinds which the business will need to navigate with caution.

Your Company, with its brands, talent and investment in digital capabilities, is well placed to leverage the FMCG opportunity. Your Company’s strategy to lead premiumisation, market development, build channels of the future whilst keeping the sustainable living plan at its core, will enable it to create long-term value for all stakeholders.

Your Company will continue to focus on being Purpose-led and Future fit.

RESPONSIBILITY STATEMENT

The Directors confirm that:

- In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for lhal period;

- They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- They have prepared the annual accounts on ongoing concern basis;

- They have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and

- They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

APPRECIATIONS AND ACKNOWLEDGMENTS

Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain an industry leader.

Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products, and introduction of new products.

The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, distributors, retailers, business partners and others associated with it as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Company’s endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.

Your Directors also take this opportunity to thank all Shareholders, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support.

On behalf of the Board

Sanjiv Mehta

Chairman and

Managing Director

Mumbai, 3rd May, 2019 (DIN: 06699923)