Annual Report Fro Dabur India Limited

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Report on Corporate Governance Directors’ Report 06 Auditors’ Report 13 Financial Statements 17 Consolidated Financial Statements 18 Statements as per US GAAP 25 31

Dear Shareholders,

Mr V C Burman Dr Anand Burman Mr Pradip Burman Mr Amit Burman Mr P D Narang Mr Sunil Duggal HH Maharaja Gaj Singh Mr R C Bhargava Mr P N Vijay Mr Stuart Edward Purdy Dr S Narayan Chairman Vice Chairman Director Director Director Director Director Director Director Director Director


oday India is at the forefront of global economic activity and investments on account of its strong economic growth and stellar corporate performance. The GDP in India has grown at 8.5 per cent, 7.2 per cent and 8.1 per cent in the last three years. The consensus among analysts is that India has gone beyond the point of inflexion and is poised for a period of sustained high growth. However, the FMCG industry had not kept pace with this overall economic growth. The period 20002004 saw low rates of growth in demand for FMCG products leading to intense competition between companies and severe pricing pressures. It has often been postulated that a few consecutive years of sustained high growth is necessary for overall economic prosperity to translate into benefits for the FMCG sector. In 2005-06, on the back of 3 consecutive years of strong economic growth, the fortunes of the FMCG industry as a whole have started to look much better. The FMCG sector will continue to gain from the fact that domestic consumption is growing both on the urban as well as the rural front. Successful businesses of the future will have to reach out to the vast semi-urban and rural markets in India. The low levels of FMCG market penetration in rural and semi-urban India coupled with improved economic conditions provide considerable scope of growth in these areas. Your company with its product mix and sales and distribution network is well positioned to leverage its strengths and consistently deliver high quality products at affordable prices in these markets. In addition the consumer spends in urban areas are increasing with rising affluence, changing lifestyles and a seeming up-gradation to premium / higher end products. Your company has a good portfolio of brands and products catering to this market as well. In 2005-06, your Company has successfully leveraged the revival in the FMCG sector and combined it with laudable improvements in costs, productivity, efficiency and supply chain management to deliver superior growth in revenues and even more so in profits.

Some key achievements areConsolidated net sales from operations increased by 23.6 per cent from Rs.1,537 crore in 2004-05 to Rs.1,900 crore in 2005-06. I Consolidated profits after tax (PAT) after accounting for minority interests and exceptional items grew by 37.5 per cent from Rs.155.8 crore to Rs.214.2 crore. I Return on capital employed (ROCE) increased from 31.5 per cent to 39 per cent. I Return on net worth (RONW) increased from 43.5 per cent to 46.1 per cent. I Fully diluted earnings per share (EPS-diluted) rose from Rs.2.71 to Rs.3.71. I

I would like to touch upon some of the key developments that occurred during the year 2005-06. As you know, we had acquired the Balsara business in the current year. Integration is the key to any successful acquisition. I am delighted to inform you that due to the focussed efforts of your Company and the Balsara team, the integration was successfully completed within the first six months of acquisition. Balsara's home care and oral care products have been well positioned in the overall Dabur portfolio and have demonstrated good potential for growth. Also we have turned a loss making business into a profit making one. Operational integration completed, the process of merging the three Balsara entities with Dabur is underway and will further contribute to shareholders' value....
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