EMAMI LTD 37TH AGM CHAIRMAN'S SPEECH

37^th Annual General Meeting

Held at Kolkata through

Video Conferencing & OAVM

18^th September, 2020

It gives me immense pleasure to welcome you all, to the 37th Annual General Meeting of the Company. This year is different from our earlier AGM editions, as we hold this AGM virtually to meet you over video conferencing.   

The world is passing through a very different and difficult environment in our living memory. These are unprecedented challenging times, which tests the true character of mankindand the organisations, andI am confidentthat we all will emerge victoriousin the face of it.   When we finally emerge out of this crisis, the world will be a very different placewith new normal having taken over, than what we knew as normal in all these past years. We are witnessing many of those changes already– be it in our livesor in our businesses.      

The health and well-being of our employees as well as our business partners, have been of primary concern to us, and we took measures to address all the safety concerns. Your Company issued guidelineswell before the announcement of lockdown, by the Government of India, for strictly implementing ‘Work from Home’ policy, across the organisationwith minimum & only necessary attendance of employees at office premises.  Further, we navigated the fast changing and difficult environment with agility to ensurethat critical functions and systems were kept running, to ensure continuity of business and serving our consumers under changed circumstances. The entire extended family of Emami rose upto the occasion, to meet the challenges as one big team, to keep both the morale highand business on track.

Your Company also suspended operations at its officesand various manufacturing units temporarilyto ensure safety of its employees.  Production thereafter commenced, in a phased manner during lockdownfrom the 2nd week of April, strictly adhering to Government’s advisoryfor industrial operations with limited manpower, to ensuresocial distancing as the need of the hour.   We are happy to inform youthat all our units are back to their normal production& capacity utilization is also at normal levels.

Your Company’s offices have also resumed with limited attendancefrom the first week of June, adhering to the Centraland State Government guidelines. Your Company’s Human Resource Department also ensured that the mental fatiguethat employees might have experienced, during the lockdown with lack of normal social interaction was kept at bay as much as possible, by constantly engaging with themon various learning opportunities to promote self-growth and conduct various mental and physical wellness programs. 

This year, as I have already mentioned earlier, we have published our first Integrated Annual Reportdetailing about our strategic approach and sustainable effortscreating value for all our stakeholders.   The report is in detailand I am sure you would have enjoyed browsing through it.

The year under review faced initial obstacleslike weak rural demand, liquidity concerns, food inflationand sluggish consumption sentiment. Erratic climatic conditions likedelayed winterand its extension affected the performance of both the winterand summer portfolios.  Amidst this, the world was struck by the onslaught of the COVID-19 pandemicat the end of financial yearcreating a health scare, affecting the consumer spending, and thus resulting in a major economic uncertainty.

In face of a challenging environment, your Company continued to strengthen its sectorial position through strategic brand investments, timely innovation, targeted distribution and technology enhancement. We are deeply committed to drive these efforts with resilience, and agilityin response to all macroeconomic challenges.

We believethat more sustainable companies are thosethat remain competitive across market cycles. We are ramping up our innovation pipeline, deepening our distributionacross both traditional and new age trade channelsand finding new and exciting waysto delight our consumers with differentiated quality, and affordable products. Through adoption of advanced technology and digital transformation across verticals, your Company is becoming more future-ready. We are confident that with this approach towards prevailing challenges, we will deliver a stronger performance in 2020-21.

Your Company introduced innovative brand extensions during the year, strengthening their relevance across the seasons. Following the outbreak of COVID 19, there has been a profound shift in consumer behaviour– globally. The Indian market is no different.  All of a sudden, there is a growing demand for hygieneand immunity-boosting products. Online purchase is experiencing an all-time high. 

Understanding the consumer pulse at the right time, your Company leveraged its keen consumer insight and fast tracked the launch of its hygiene rangeunder the BoroPlus brand andvarious immunity-building products like AYUSH Kwath Powderand single herbs rangeunder the Zandu brand.

Implementing sales-force automationand scaling up of modern trade and e-commerce presence with initiatives like making channel specific SKUs alsohelped in strengthening significant consumer engagement. Our revenues in these new age channels grew by 16% in FY20and increased their contribution to domestic business from 7.5% to 9.0%.  Your Company took every right step in the post COVID world, to ensurebrand Emami stayed relevant for consumerswho would want to feel good about themselvesand stay healthy, naturally. 

You would be happy to notethat the Company’s Power Brands through successfuland continuous innovations strengthened their market sharewhile still having significant scope of penetration, which could drive Emami’s growth in a sustainable way, in the coming years.  Many of our Power Brands, continued bagging ranks in the prestigious ET Brand Equity Surveyreiterating their level of consumer trust.

This success of the Power Brands’ strategy, coupled with stringent cost optimization initiatives, enabled your Company, to close the year with a resilient performance in face oftough business environment.

While in FY20, our revenues at Rs. 2655 cr marginally declined by 1% due to a 17% decline in Q4FY20, tight cost control measures however, helped your Company to improve its gross margins by 130 bps at 67% and deliver 2% growth in cash profits.

Over the years, Emami consistently focused on revenue rejuvenation, with the objective to derive a sizable proportion of revenues, from new product launches. During the financial year under review, the Company studied the consumer need-gapand thus offered many exciting innovationslike Navratna Ayurvedic Garam Tel, Zandu Cough Syrup in sachet, Kesh King Oil pack with comb applicator, HE Magic Duo and so on.   While introduction of Navratna Ayurvedic Garam Tel helped your Company, to target lapsers in winters, to offer solutions for winter specific issues like headache, numbness& lethargy,new communication for ZanduPancharishta highlighting its digestion improvement properties, starring Amitabh Bachchan, helped in sustaining growth of the brand from Q3FY20.

Besides, your Company also overhauled its international business in key geographies through successful integration of its Creme 21 acquisition and consolidating key markets generating 16% Y-o-Y global revenue growth. Emami extended its presence in more than 60 countries, through proprietary manufacturing units in India and Bangladeshand a contract manufacturing unit in Sri Lanka You will be happy to knowthat Emami 7 Oils in One, emerged as a more visible international brand, increasing its share in the global business by registering 42% Y-o-Y global revenue growth.

The Company launched a new range of BoroPlus products in Russia, engaged local celebrities for endorsementand embarked on direct distribution through a locally formed subsidiary, therebyeliminating one level of distribution chain as part of its business realignment.  With the onset of the COVID-19 pandemic, the Company’s international exposure got impacted butwe are optimistic that it would regenerate handsome revenue in the coming days.

In the year under reviewwith an aim to enhance shareholder value, your Board approveda Rs 192 crore-buyback offer at a price not exceeding Rs 300 per share. However, we concluded with purchase of 94.2 lac shares at average price of around Rs. 204/-against the current price of around Rs 375-380/- per share.  This share buyback will strengthen our business position and enhance the shareholder value across the future.

Apart from business, your Company also made significant contributions to the societythrough its various CSR initiatives in the sphere of education, skill development, healthcare, water and sanitation and women empowerment.

At Emami, we believethat responsible citizenship is about extending corporate prosperity to community welfare. Emami CSR’s community-based approach has been built around ‘Learning from the Community’, ‘Planning with the Community’ and ‘Working for the Community, resulting in a positive difference across thousands of lives.  Initiatives likePadho India Padho, Badhte Kadam, Swasthya, Padhenge Hum PadhaneKeLiye and Sukanya are being taken up in a systematic way to deliver long term sustainable benefits to the society.

During the nationwide Covid-19 pandemic lockdown, Emami’s CSR wing conducted various commendable initiatives for the benefit of the society. Your Company had put together a team of volunteers to provide relief to people, especially the elderlyduring the initial phase of the lockdown, with emergency supplies.    An innovative Telehealth service was also initiated in West Bengal, by using mobile and communication technologies, for zero contact prevention, diagnosis and treatment of various diseases.

Having said that, I would like to inform you that in the first quarter of the new financial year, your Company has reported consolidated revenues of Rs. 481 croresregistering sales degrowth of 26%.   As you are perhaps aware that your Company’s off-takeswere severely impacted in Aprildue to the nation-wide lockdownbut sales started gradually improving from May onwards, with June recording a high single digit growth.

However, despite such overall decline in revenues due to pandemic, profits at Rs. 40 cr grew by 1%. Our margins also improved substantially due to stringent cost control measures and benign raw material prices.   

Your Company has responded well to the consumers’ current preference for health & hygiene segmentincluding immunity boosting products and  introduced many such new products in this categorywhich performed very well during the quarter.

Our Health & Hygiene portfolio comprising range of products under Zandu,BoroPlus&Menthoplus contributed 43% to the domestic sales and grew by 29% during the quarter.  The discretionary & seasonal products viz. 7 Oils, Kesh King, Navratnaetc are also on the recovery track after their set back in April due to the impact of the pandemic. 

The Company also introduced hygiene range for its International Business, which too was well received.

Further, as the lockdowns and social distancing norms impacted the traditional channels of distribution, especially in April and May, the e-Commerce channel doubled its revenues during the quarter in Domestic Business. This also resulted in your Company introducingmany e-Commerce specific products in the immunity boosting category under the Zandu umbrella.  In this context, I am also happy to share with you that we have retained the growth momentum achieved in Juneand have started off Q2FY21on a very positive note. 

We are working relentlessly to reduce costs across every expense headunder the project named “War on Waste (WOW)”and expect to contribute around Rs.80 Cr – 100 Cr annually through this initiative.     We

are now upbeat on your Company’s proposed entry into a completely new segment in the home hygiene category very soon, where we were not present earlier.

I would also like to take this opportunity to repose my faith in the second-generation promoters, who have well ingrained themselves in the Company’s operations to charter the future growth of the organization. With their deep understanding of the values, business strategy, cultureand heritage of Emami, they bring innovative solutions and competencethat will lead your Company to greater heights.

Before I conclude, I would like to mention that we are grateful to all our stakeholders for their unstinted supportand expect to continue enhancing value in the long term, as we stay strongly rooted in the traditional values of Ayurveda backed by the power of Modern Science.