Good for you.

Zydus Wellness ltd. AnnuAl report 2016-17

Safe Harbour Statement

In this Annual Report we have disclosed forward-looking information [within the meaning of various laws] to enable investors to
comprehend our prospects and take informed investment decisions. This report and other statements – written and oral - that
we periodically make, contain forward-looking statements that set out anticipated results based on the Management’s plans and
assumptions. We have tried wherever possible to identify such statements by using words such as ‘anticipate’, ‘estimate’, ‘expects’,
‘projects’, ‘intends’, ‘plans’, ‘believes’ and words of similar substance in connection with any discussion of future performance.

We cannot guarantee that these forward-looking statements will be realized, although we believe we have been prudent in
assumptions. The achievement of results is subject to risks, uncertainties and even inaccurate assumptions. Should known or unknown
risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from those
anticipated, estimated or projected. Readers should bear this in mind.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events
or otherwise.
Contents
Good for You 02 Notice 19

Chairman’s Message 14 Directors’ Report and Relevant Annexures 28

Marketing Awards and accreditations 16 Business Responsibility Report 48

Our competitive advantages 17 Corporate Governance Report 55

Our brands

Sugar Free Nutralite Everyuth

Launched in 1988. More than a Nutralite offers a range of Everyuth Naturals is a pioneer
brand, Sugar Free is synonymous premium table spreads which of skincare range of products
to the sugar substitute category. are cholesterol-free, not specially meant for the face.
It is being offered to the containing any trans fats. Everyuth brand has very strong
consumers as a smarter choice. Nutralite enables homemaker “naturals” equity in the minds of
A market leader through its two to make variety of dishes consumers enabling it to enjoy
variants ‘Sugar Free Gold’ and without needing to worry about strong leadership in Scrub and
‘Sugar Free Natura’. Sugar Free health. The premium range Peel Off segments. It has recently
is a safe and ideal low calorie is fortified with Omega 3 and revamped the Face Wash range
sugar substitute. To further drive Vitamin A, D & E. They are now with relaunch of Tulsi-Turmeric
the market and address diverse available in multiple flavours. Face Wash.
consumers needs, now Sugar
Free is also offering a natural
sweet substitute through its
range of Sugar Free Green which
is made from Stevia.

Sugar Free in Everyuth Scrubs: Everyuth Face Wash

hourglass Pioneers in India in sachets
shape pack

Sugar Free Diet Sugar: Everyuth Peel-offs: Everyuth

Spoonful equivalent Pioneers in India Hydrogel Scrubs

Sugar Free Sweet Nutralite in Everyuth Golden

Drops : Sweetness in microwave-safe tubs Glow Peel-off
liquid format Later fortified with O3

Sugar Free Green: Nutralite - New

100% Natural flavoured variants

Better User Experience + Superior Benefits + Accessibility and Convenience

Annual Report 2016-17 | 03

Good
Growing the

for
You! product basket

At Zydus Wellness, as a consumer-centric

brand, we keep enlarging the product
basket in line with emerging consumer
needs and evolving lifestyles.
In 2016-17, we strengthened our offerings through
the following introductions:

Stevia in all major cities across the country.

two new flavours (Garlic Oregano and Pudina

Coriander).

Nutralite umbrella for our institutional customers.

(Everyuth) with superior efficacy leading to an

At Zydus Wellness, a continuously-rejuvenating

product basket helped broad-base revenues in FY17
through innovations. Our intent is to significantly
enhance contribution of innovations to the business
performance by 2020.

Annual Report 2016-17 | 05

 Good
A robust

for
You! launch pipeline

At Zydus Wellness, we are continuously

engaged in extending products, improving
and revamping packaging and opportunities
to serve evolving consumer needs.
The result is a consumer-driven innovation priority
that will help formulate differentiated products
in relatively competition-insulated spaces to be
progressively launched in three to five years. Our
R&D’s constant endeavor is to integrate latest
technology advancements with sharp consumer
insights. The innovation program at Zydus Wellness
is built on the pillars of consumer centricity, lower
turnaround time, global partnerships with reputed
technical institutions and nurturing internal talent.
Innovation is good for our consumers.

SUSTAINING What’s good

OUR for the
consumer is
GOODNESS good for the
PROMISE brands.

Annual Report 2016-17 | 07

 'Goodness’
Enhancing

awareness

At Zydus Wellness, we don’t just develop,

manufacture and market products. We believe
in developing nascent sectoral spaces by
educating & building awareness for our products,
and their benefits.
Over the last few years, we have been working on enhancing
awareness and educating consumers through the interplay
of diverse promotion platforms and engagements:

Sweetness Solution and also got on board

Parineeti Chopra, a health and fitness conscious
celebrity.

both Sugar Free & Nutralite brands to help build culinary

association.

our health products as ingredients, deepening the

relevance of our products in everyday consumer
lives and leveraged our robust digital platform to
enhance product awareness.

touch-points by developing the Culinary program for

Sugar Free through relevant activations that focused

The result has been sustained market leadership.

Sugar Free has further strengthened its dominant leadership
by improving market share to 94.5%. Everyuth retained its
leadership in Scrub and Peel Off segments across with
31.6% & 90.3% market shares respectively (Source : Nielsen,
MAT March 2017) .

What’s good for consumers is good for brands.

More than
INR 2000 Million
investment
in various branding Widening
and awareness the goodness
initiatives in the basket
three years ending
2016-17
Annual Report 2016-17 | 09
 22%
Improvement in
plant efficiency Strengthening
over the last two the goodness
years leading to commitment
FY17

10 | Zydus Wellness Ltd.

 Our
Streamlining

Plant operations
At Zydus Wellness, we believe that consumer
value is best enhanced through product integrity.
In turn, product integrity is enhanced through
an investment in best-in-class manufacturing
facilities; practices benchmarked with some of
the most stringent health and food standards;
practices, processes and systems.
During the last few years, the company invested in the
following productivity and quality enhancing initiatives:

SLIM Project: This Strategic Lean Integrated Management

GEMBA Technique: This discipline enhanced

shopfloor efficiency in addressing production and
productivity targets.

Kaizen: This continuous improvement agenda inspired

shop-floor members to contribute to generate nearly
300 improvement suggestions, enhancing operational
efficiency.

Quality: We recorded, displayed, monitored and resolved

quality deviations through plant-team and management-
team discussions, analysis and solutions; more than half the
quality issues were permanently resolved.

Alliance: We engaged with National Institute of

Manufacturing Competitiveness to identify manufacturing
process improvement opportunities.

The result is that we increased output and quality on one

hand while optimizing costs on the other, strengthening
our overall competitiveness. We have also been recognised
with “Best Plant” across Zydus Group for implementing best
practices of SLIM (Strategic Lean Integrated Manufacturing).

What’s good for competitiveness is good for

the business.

Annual Report 2016-17 | 11

 We increased
our direct reach by ~67% in
last three years, thus enhancing
the quality of direct distribution
which in turn will support new
product launches.

SUSTAINING OUR
GOODNESS
PROMISE

What’s good
for the
consumer is
good for the
brands.

Revamping our

Go-To-
During the last few years, the company
revamped its ‘go to market’ model through
various initiatives:

market
with best practices in FMCG industry.

our primary customers (distributors)

by consolidating and allocating a large sales
footprint to each, widened their product
basket, created a compelling proposition
around and a fair return on investment.
model
At Zydus Wellness, we have revamped our distributor increased 83% in the
go-to-market model to be able to distribute space of just three years, strengthening
products wide and deep on the one hand and their engagement and growing our trade
disperse products through the right channels partner family.
in line with evolving market needs on the Stronger distribution network improves
other hand. access of product to the consumers.

12 | Zydus Wellness Ltd.

 Vision
DNA
We Bring Wellness
To Your Life … To Build New Emergent
We Will Create New Categories With
Differentiated Product
Products That Will Nourish, Propositions.
Nurture And Energize Your Philosophy Of Building
Life. We Shall Lead The Products That Are
Way Through “Good For You”.
Innovation.

Zydus Wellness Limited. A company that creates market niches with ‘good
for customer’ products. A company enjoying market-leading brands in
the health, wellness and skincare spaces.
Background across three manufacturing 8,00,000 outlets including indirect
Zydus Wellness is an integrated facilities – one in Ahmedabad and reach. The Company’s distribution
consumer company that combines one in Sikkim (ISO 22000 and ISO capability has been facilitated by
the best of health, wellness and 14001 certified, GMP certified) a proactive investment in 23 cold
skincare spaces. The result is a that are marketed pan-India. chain warehouses and 27 ambient
basket of wellness products that We have also added one more warehouses.
enrich lives. manufacturing facility at Sikkim.
The new production unit of Zydus Brands
Group and Promoters Wellness - Sikkim, the partnership The Company’s flagship brands
Zydus Wellness, a subsidiary firm commenced its commercial Sugar Free, Everyuth and Nutralite
of Cadila Healthcare Limited production during the fourth operating in health, wellness and
is the flagship company of quarter. skin care spaces enjoys visible and
the Zydus Cadila Group. market-leading positions.
Zydus Cadila is promoted by Footprint
Mr. Pankaj Patel and family. Zydus Wellness products Listing
are marketed pan-India The Company’s shares are listed on
Locations through a robust distribution
Zydus Wellness is headquartered network comprising 1000+
in Ahmedabad (Gujarat, India). The distributors and ~1000 feet-
Company manufactures its range on-street representatives, who
of health and wellness products facilitate coverage of more than

Annual Report 2016-17 | 13

 “ At Zydus Wellness,
we are optimistic
of growing faster
even as we
grow larger.
”
Dr. Sharvil Patel
Chairman, Zydus Wellness Ltd.

Dear friends,

At Zydus Wellness, we are optimistic about stepping up the pace of growth.

Optimism

Our optimism is based on a number of positive realities. While India is one of the biggest
consumption markets for sugar in the world, the sugar substitute market is highly
under-penetrated. With growing consciousness of health & wellness, this category provides
a significant opportunity to grow over a substantial period of time. Also, with consistent
education and awareness being built about the usage and versatility of sugar substitutes,
the depth of consumption also offers significant opportunities in the future.

14 | Zydus Wellness Ltd.

 In the skin care space, we have
other business space in which we are tasting sessions for consumers relaunched clinicaly tested Tulsi-
present; either the penetration of the in metros during festivals and Turmeric face wash addressing
product within India lags the global regular grocery buying visits. In the the largest consumer segment in
average or a subsegment of that butter-substitute space, we have facial cleansing with first-of-its-kind
product accounts for a negligible ingredients combination. Similarly
share of the product penetration. with new variants which is enabling as a market leader in face scrub, our
As a sectoral leader, Zydus Wellness’ new campaign addresses the myths
responsibility is not only to address range of options for their families and barriers amongst the non-users
at home. The Institutional segment in the segment. We believe, Everyuth
it, in the process accounting for a also offers a significant opportunity with its superior formulation is best
disproportionately large share of the in the future; we have also widened equipped to grow the category it
our product basket through the operates in.
is passing through unprecedented introduction of mayonnaise
increase in discretionary incomes on for institutional customers.
the one hand and enhanced lifestyle
aspirations on the other, we believe
that the market is at the cusp of
At Zydus Wellness, we have drawn out a medium-term strategic road
unprecedented brand-led growth.
map: Organic growth through pillar brands, growing our international
The reality is that Zydus Wellness presence and addressing inorganic opportunities (within and outside
is at the right place with the right India).
products in the right segments.
Organic growth: Our team has created a three-year innovation funnel. This
Growing the market comprises the development of launch of differentiated products in each
product category of our presence. We also intend to embrace contemporary
Zydus Wellness is not merely and conventional consumer communication channels, enhancing our
waiting for the market to evolve. effectiveness.
The company has embarked on International presence:
a number of initiatives to evolve have started to establish our presence in Middle East, Africa and South East
and enlarge market spaces. In the
health products segment, where we
possess long-established products Acquisitions: We are analyzing inorganic opportunities in India and outside.
like Sugar Free and Nutralite, we We will seek brands and companies with complementary capabilities to enter
new product categories and geographies, strengthening our presence in the
obesity and diabetes-centricity to health, wellness and personal care spaces. We are well-placed to make this
mass appeal products through the happen; we have virtually no debt on our books and we possess net worth of
launch of new products/variants. INR 5572 Million as on March 31, 2017.
In the sugar-substitute space, we
have drawn out a two-pronged
Overview
strategy. One, we are focusing on
new users by introducing products
times. We have arrived at a critical Our ‘Smartness wali
aligned with customer aspirations.
mass; our brands continue to be Sweetness’ campaign
market leaders; we will create a new featured among the three
Sugar Free Green which is targeted spark in each business category; leading advertisements
at consumers with a preference
in national publications
for natural products, a trend that is In doing so, we are confident to
sustain profitable growth across the
(Source: Ipsos Research,
growing stronger Pan-India. Two,
medium-term, enhancing value for Publication - Mint).
we are building usage across a range
our stakeholders.
of culinary options through strong

Annual Report 2016-17 | 15

Awards and Accreditations
Zydus Wellness consumer and marketing work has been acknowleged by the industry through a host of awards over
the past few years.

Presentor Brand Award Category Campaign Title Type

IAMAI* Nutralite Best UGC** Campaign World’s First Healthgram Silver
Goafest- Creative Abby Nutralite Best UGC** Campaign World’s First Healthgram Bronze
*Internet and Mobile Association of India ** User generated content

Manufacturing Award
In National Award Manufacturing Competitiveness (NAMC) which was conducted by International Research Institute
of Manufacturing, our Sikkim plant was bestowed with a Silver medal with a recommendation of a special award.

Highlights, 2016-17 Shareholding pattern, 2016-17

72.08% 13.80% 7.80% 6.32%

8.6% 8.5% 5.5%
Promoter
holding,
Institutional
holding, FII holding, Other holding,
Income from March 31, March 31,
EBIDTA Net Profit March 31, 2017 March 31,
operations 2017(%) 2017(%)
growth (%) growth (%) (%) 2017(%)
growth (%)

Healthy Margins in FMCG space Market Capitalization

21.4% 23.6% 20.9% 33,965

Healthy Healthy net
21.0% Market
Healthy Healthy capitalization,
EBIDTA profit ROE (%) ROCE (%) March 31, 2017
margin (%) margin (%)
(INR Million)

Zydus Wellness: The journey Zydus Wellness: Straddling the value-chain

2017
Research & Quality Supply Marketing Sales &
2014 Development manufacturing chain initiatives Distribution
focus efficiency expansion

2009
2006
2005

1991
In-house Emphasis on Managing cold as Innovations in Revamped
1988 Sugarfree
research team quality well as non-cold communication go-to-market
Green with
Restructured Stevia and developing cost saving chain cost saving and sales strategy
and Renamed
Acquisition New future products initiatives initiatives like promotion Total reach at
Zydus
Sugar Everyuth Sugar Free of Carnation Wellness Production
Free with Skincare Natura with Nutra Facility like SLIM PRISM 8,00,000 outlets
(Subsidiary of Distribution
Aspartame Range Sucralose (CANFL) CHL) Revamp at Sikkim

16 | Zydus Wellness Ltd.

Our Competitive Advantages
Product space Brands
Differentiated product Market-leading brands
propositions Endorsed by business-
Address unmet needs
Transforming lifestyles
relevant celebrities
Growing brand
11.4 12.4
Total Income
investments (More than EBIDTA
INR 2000 Million in three from operations
growth (%) growth (%)
years ending FY17)
[8-year CAGR] [8-year CAGR]

Distribution Network Financial Strength

annually across traditional

Virtually zero-debt status
Net cash flow from
21.0 29.8
and emerging channels Net Profit Shareholders
Products available across operations INR 770 Million
by end of FY17 growth (%) fund growth (%)
8,00,000 touch-points
pan-India
[8-year CAGR] [8-year CAGR]
Robust financials to drive
Industry leading growth
distribution strength in
chemists and cosmetics
sub-channels

Shareholder value-creation

‘Good for you’ products make

‘good-for-you’ investments
Total Income from Operations* ( INR Million ) EBIDTA* ( INR Million ) Net Profit* ( INR Million )
1090
991
4626

CAGR (%) CAGR (%) CAGR (%)

11.4 12.4 21.0
1948

238
388

FY09 FY17 FY09 FY17 FY09 FY17

*FY09 financials are as per IGAAP; FY17 financials as per INDAS and hence not comparable

Annual Report 2016-17 | 17

 Shareholder funds* ( INR Million ) Market capitalisation ( INR Million ) BSE Sensex

29620
33977
5572
CAGR (%) CAGR (%) CAGR (%)
29.8 40.1 15.0

9708
2287
690

FY09 FY17 FY09 FY17 FY09 FY17

*FY09 financials are as per IGAAP; FY17 financials as per INDAS and hence not comparable

Consistent dividend payout

65% 65%
60% 60% 60%

50%
40%
33.5%
28.8% 30% 28.2% 28.4% 30.1% 28.0%
25.9%
30.2%
15%

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Dividend(%) Payout(% of NP)

Three pillars to drive future growth

Organic growth Geographic expansion Inorganic growth

Innovation pipeline SAARC, Middle East and Africa and Focus on health, wellness and skin
South East Asia care
Embrace new communication Sugar Free, a flagship brand to lead
channels with consumers new categories and new
geographies
Country specific innovations to Leveraging Balance Sheet strength
acquisition adapt to local requirements and parent support

18 | Zydus Wellness Ltd.

Directors Report

Your Directors are pleased to present Twenty Third Annual Report and the Financial Statements for the Financial Year ended on March
31, 2017.

Financial Results:
The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified
under section 133 of the Companies Act, 2013, read with Rule 7 of the [Companies Accounts] Rules, 2014. The financial statements for
the Financial Year ended on March 31, 2017 are the Company’s first Ind AS compliant annual financial statements with comparative
figures for the year ended on March 31, 2016 also under Ind AS. The date of transition is April 1, 2015.

The disclosure and effects of first time adoption of Ind AS are detailed in Note 43 of the standalone financial statements and Note 43 of
the consolidated financial statements.

The standalone and consolidated financial performance of the Company, for the Financial Year ended on March 31, 2017 are summarized
below: [INR-Lakhs]
Particulars Standalone Consolidated
For the year ended For the year ended For the year ended For the year ended
on March 31, 2017 on March 31, 2016 on March 31, 2017 on March 31, 2016
Revenue from Operations and Other Income 25,245 23,231 49,519 45,844
Profit before Finance Cost, Depreciation, 11,297 10,764 13,171 12,375
Amortisation and Impairment Expenses & Tax
[PBIDT]
Less: Finance Cost 48 6 55 14
Less: Depreciation, Amortisation and 370 355 716 681
Impairment expenses
Profit Before Tax [PBT] 10,879 10,403 12,400 11,680
Less: Tax Expenses (55) 77 1,272 1,156
Profit After Tax [PAT] 10,934 10,326 11,128 10,524
Attributable to:
Owners of the Parent 10,934 10,326 10,898 10,326
Non-Controlling Interests - - 230 198
Other Comprehensive Income / (Loss), Net of (15) (16) 21 (16)
Tax
Total Comprehensive Income 10,919 10,310 11,149 10,508
Attributable to:
Owners of the Parent 10,919 10,310 10,919 10,310

28 | Zydus Wellness Limited

IV. SHAREHOLDING PATTERN [Equity Share Capital Breakup as percentage of total Equity]
i] Category–wise share holding
No. of shares held at the beginning of the year No. of shares held at the end of the year % change
Category of Shareholders % of total % of total during the
Demat Physical Total Demat Physical Total year
shares shares
A. Promoters
1. Indian
i. Individual / HUF 179292 - 179292 0.46 179292 - 179292 0.46 -
ii. Central Govt. - - - - - - - - -
iii. State Govt.[s] - - - - - - - - -
iv. Bodies Corporate 28164395 - 28164395 72.08 28164395 - 28164395 72.08 -
Sub–Total [A][1] 28343687 - 28343687 72.54 28343687 - 28343687 72.54 -
2. Foreign -
i. NRIs–Individuals - - - - - - - - -
ii. Other–Individuals - - - - - - - - -
iii. Bodies Corporate - - - - - - - - -
iv. Banks / FI - - - - - - - - -
v. Any other - - - - - - - - -
Sub–Total [A][2] - - - - - - - - -
Total shareholding of promoters [A]
28343687 - 28343687 72.54 28343687 - 28343687 72.54 -
= [A][1] + [A][2]
B. Public Shareholding
1. Institutions
i. Mutual Funds 411298 559 411857 1.05 787965 559 788524 2.02 0.97
ii. Banks / FI 1677434 - 1677434 4.29 1532355 - 1532355 3.92 (0.37)
iii. Central Govt. - - - - - - - - -
iv. State Govt.[s] - - - - - - - - -
v. Venture Capital Fund - - - - - - - - -
vi. Insurance Companies - - - - - - - - -
vii. FIIs / FPIs 2730917 46 2730963 6.99 3070713 46 3070759 7.86 0.87
viiii. Foreign Venture Capital Funds - - - - - - - - -
ix. Others [specify] - - - - - - - - -
Sub–Total [B][1] 4819649 605 4820254 12.34 5391033 605 5391638 13.80 1.46
2. Non–Institutions
i. Bodies Corporate
a. Indian 2108944 4553 2113497 5.41 1975666 4500 1980166 5.07 (0.34)
b. Overseas - - - - - - - - -
ii. Individuals
Individual shareholders holding
a. nominal share capital up to 2238510 267482 2505992 6.41 2091805 258651 2350456 6.02 (0.39)
Rs. 2 Lakhs
Individual shareholders holding
b. nominal share capital above Rs. 696539 - 696539 1.78 696539 - 696539 1.78 -
2 Lakhs

38 | Zydus Wellness Limited

iv] Shareholding Pattern of top ten shareholders [other than Directors, Promoters and holders of GDRs and ADRs]: [continue:]
Date wise increase / decrease
Sr. Cumulative % of total
Name of the Shareholder Increase / % of total
No. Date shareholding share capital
Decrease share capital
6. Reliance Capital Trustee Co. Ltd-A/c Reliance At the beginning of the year - -
Small Cap Fund 12.08.2016 50000 0.13 50000 0.13
Changes in the holdings as per the beneficiary 19.08.2016 100109 0.25 150109 0.38
position downloaded from the Depositories. 21.10.2016 75000 0.20 225109 0.58
28.10.2016 25000 0.06 250109 0.64
11.11.2016 6661 0.02 256770 0.66
18.11.2016 3260 0.01 260030 0.67
25.11.2016 16350 0.04 276380 0.71
02.12.2016 28900 0.07 305280 0.78
27.01.2017 12800 0.03 318080 0.81
03.02.2017 8400 0.03 326480 0.84
17.02.2017 3900 0.01 330380 0.85
24.02.2017 300 - 330680 0.85
03.03.2017 13750 0.03 344430 0.88
10.03.2017 11175 0.02 355605 0.91
17.03.2017 8750 0.02 364355 0.93
24.03.2017 30775 0.08 395130 1.01
31.03.2017 13925 0.04 409055 1.05
At the end of the year 409055 1.05
7. Parag Parikh Long Term Value Fund At the beginning of the year 371395 0.95
Changes in the holdings as per the beneficiary 30.06.2016 334 - 371729 0.95
position downloaded from the Depositories. At the end of the year 371729 0.95
8. Akash Bhanshali At the beginning of the year 364000 0.93
Changes in the holdings as per the beneficiary
At the end of the year 364000 0.93
position downloaded from the Depositories.
9. General Insurance Corporation of India At the beginning of the year 288029 0.74
Changes in the holdings as per the beneficiary
At the end of the year 288029 0.74
position downloaded from the Depositories.
10. Baring India Private Equity Fund II Limited At the beginning of the year 216221 0.55
Changes in the holdings as per the beneficiary
At the end of the year 216221 0.55
position downloaded from the Depositories.

Annual Report 2016-17 | 41

VI] REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
A. Remuneration to Managing / Whole Time Director: [INR-Lakhs]
Sr. Tarun G. Arora,
Particulars of Remuneration
No. Whole Time Director
1. Gross Salary
a. Salary as per provisions contained in section 17[1] of the Income Tax Act, 1961. 219.96
b. Value of perquisites u/s 17[2] of the Income Tax Act, 1961. 0.29
c. Profits in lieu of salary under section 17[3] of Income Tax Act, 1961. -
2. Stock Option -
3. Sweat Equity -
4. Commission -
- as % of profit
- others, specify
5. Others, please specify -
Total [A] 220.25
Ceiling as per the Act 555.00

B. Remuneration to other Directors:

1. Independent Directors: [INR-Lakhs]
Name of Directors
Sr.
Particulars of Remuneration Humayun Total
No. B. M. Hegde Indira J. Parikh Kulin S. Lalbhai
Dhanrajgir
1. Fee for attending Board & Committee Meetings 8.00 2.50 7.50 0.50 18.50
2. Commission 5.00 5.00 5.00 5.00 20.00
3. Others, please specify - - - - -
Total [B] [1] 13.00 7.50 12.50 5.50 38.50

2. Non–Executive Directors: [INR-Lakhs]

Name of Directors
Sr.
Particulars of Remuneration Dr. Sharvil Ganesh Total
No.
P. Patel N. Nayak
1. Fee for attending Board & Committee Meetings 5.00 8.50 13.50
2. Commission - - -
3. Others, please specify - - -
Total [B] [2] 5.00 8.50 13.50
Total [B][1] + [B][2] 52.00

Annual Report 2016-17 | 43

Management Discussion
and Analysis – 2016-17
Overview, 2016-17 Indian’s daily needs, created aspirational brands, provided
State of the Indian economy emotional fulfillment, remained at the forefront of innovation,
provided best-in-class products at affordable prices and
As per the latest Advanced Estimate (AE) of the Central Statistics
expanded to remotest parts.
Office (CSO), growth in India’s GDP at constant market prices
(2011-12) was estimated at 7.1 per cent in 2016-17, slowing down The key ingredients of success for some of the leading brands /
from 7.9 per cent in the previous financial year. The reason was companies that have increased penetration and outperformed
a sharp slowdown in investment to 1.7 per cent (5.6 per cent in their competitors have been:
the previous year). This negated the strong 8.7 per cent growth
in private consumption (6.1 per cent in 2015-16). Strong growth
momentum was seen in other segments as well – government
consumption (20.8 per cent), exports (4.5 per cent) and imports
(2.3 per cent). Growth in India’s GVA (Gross Value Added)
The Indian FMCG Industry continues to demonstrate attractive
at constant (2011-12) basic prices for the year 2016-17 was
potential over the next decade. Various industry sources indicate
estimated to be 6.7 per cent, as compared to 7.8 per cent in 2015-
that a nominal GDP growth rate of roughly 12% over the next
16. At the sectoral level, agriculture, industry and services sectors
three years could signal an FMCG growth rate ranging from a
grew at 4.4 per cent, 5.8 per cent and 7.9 per cent respectively
low of 9% to a high of 15% depending on player action. As the
in 2016-17. The average Wholesale Price Index (WPI) Inflation
Indian FMCG industry looks to reignite consumer growth in an
rate for 12 months (April 2016 to March 2017) was 3.7 per cent
increasingly cluttered environment, the success of brands and
compared to -2.5 per cent during the corresponding period in
companies is likely to be defined by their ability to plan and
2015-16. (Source: Monthly Economic Report, Ministry of Finance,
execute brand penetration and consumption strategies over the
Govt. of India)
long term.
Remonetization impact is visible in the latest estimates
HEALTH & WELLNESS FOODS
notwithstanding statistical revisions. The short-term negative
impact of remonetization seems to be largely behind the Indian consumers consider fortified foods with incremental
country; a consumption recovery is expected on account of an nutrients like protein, fiber, vitamins, calcium and minerals to
anticipated normal monsoon and higher rural wages. However, be an important purchase consideration. In a survey by Nielsen,
2017-18 prospects also depend on a successful roll-out of GST as when asked what tips the scales in favour of certain packaged
States agreed on 1st July 17 as the roll-out date. foods, respondents picked the promise of all-natural ingredients,
high protein and high fiber content. The message in this survey
The International Monetary Fund released an update in which
for brands is to spell out auxiliary health benefits rather than
India’s growth was expected to rebound to 7.2 per cent in 2017-
merely tagging products as ‘healthy’.
18 and 7.7 per cent in 2018-19.
Consumers driving the move to fortified foods are conscious
FAST MOVING CONSUMER GOODS (FMCG) market
about brands and labels on packaged foods. The four distinctive
The fast moving consumer goods (FMCG) industry has been the traits that characterize these consumers comprise:
bellwether of Indian corporations and the Indian economy for
loyal to trusted brands; they buy only from
years. The industry remained resilient and delivered consistent
producers they trust.
business growth. It has successfully addressed almost every

Annual Report 2016-17 | 71

 read labels for nutrition content, believe health further. It was launched in table-top and culinary formats to drive
claims and follow portion guidance. the family consumption (including children) of beverages and
desserts. Sugar Free Green has immense potential and is likely to
willing to pay a premium for foods that meet their
approval. grow the sugar substitute category going forward.

monitor food intake and diet, and are willing to * “Sugar Free Green”
sacrifice taste for health.

(Source: Nielsen report ‘India acquires a taste for health and

wellness’, August 2016)

Zydus Wellness Ltd., an emerging consumer health player

Zydus Wellness is a strong and emerging player in the health

and wellness space in India. The focus for the year under review
was to revive growth on the back of volume-led initiatives in all
segments of presence. As the year progressed, the company
reported an improvement in the growth rates of all flagship
brands viz. Sugar Free, EverYuth & Nutralite. Its flagship portfolio
maintained leadership across respective categories in 2016-17.
The focus will remain to continue to recruit new users and invest
Sugar Free – India’s largest selling low calorie sweetener
in consumer education as well as continue to engage consumers
through various activations. The company also intends to
increase investments and efforts in digital space to complement
conventional touch points.

Everyuth – ‘Pure Skin, Happy Har Din’

*Range of Sugar Free products

Sugar Free maintained its leadership position in the sugar

substitute category with a market share of 94.5%, an increase
of 80 basis points over the previous year (Source: Nielsen, MAT
March 2017). Both variants of Sugar Free (Sugar Free Gold and
Sugar Free Natura) continued to lead their respective segments.

The sugar substitute category growth improved to 9.3% from

6.0% a year ago, primarily driven by various category-building
initiatives like the promotion for culinary stock keeping units with *Range of Everyuth products

Kheer Bowl and other popular touch-points like festival-linked In 2016-17, the skin cleansing category was led by improvement
consumer activations viz.Durga Puja and Christmas. in the growth rates of all segments in which the company

Another 2016-17 highlight was the launch of new Sugar Free operates.

Green towards the end of the financial year. This 100% natural In the Peel Off segment, Everyuth maintained its leadership
variant, made from Stevia, is expected to drive category growth position with market share of 90.3% (Source: Nielsen, MAT March

72 | Zydus Wellness Limited

2017). Continued support through various media activities and *Everyuth Tulsi Turmeric Face wash with new packaging
TV campaign helped drive category penetration.

*Everyuth Peel Off range

Going forward, the focus will be on a series of new product

launches backed by strong marketing investments across each
key segment, reinforcing the Everyuth franchise position ahead
of the category.

Nutralite – ‘Aap happy, apki health happy’

In the Scrub segment, Everyuth maintained its leadership
position with a market share of 31.6% (Source: Nielsen, MAT
March 2017). In 2016-17, the Scrub range was re-launched with
new packaging and campaign to build on the ‘natural’ equity and
drive category penetration.

*Everyuth scrub range

During 2016-17, Nutralite reported strong volume growth

versus subdued category growth rates over the last few years.
This growth rate was largely led by the institutional segment.
Progress was also seen in the retail segment during the last
quarter. The focus was to widen the reach with various regional
media campaigns in select cities and on- ground activations to
drive trials and strengthen Nutralite credentials. During the last
quarter of the financial year, the Nutralite premium range was
re-launched with new packaging and improved taste. Two new
flavoured variants in the premium range were also launched.

In the Face Wash segment, Everyuth reported growth revival Going forward, a multi-media campaign will further strengthen
following the re-launch of the Face Wash range with fresh, new Nutralite’s taste and health credentials while enhancing
and contemporary looking packaging. During the last quarter of awareness of new flavours.
the financial year, the ‘Tulsi Turmeric’ Face wash was re-launched More exciting new innovative products will be introduced over
with improved product and packaging. The initiative was the next few quarters.
supported by a 360-degree awareness building campaign.

Annual Report 2016-17 | 73

*Nutralite Premium range The profit before tax and exceptional items increased 6.2% y-o-y
to Rs. 1240 Mio. PBT margin before exceptional items as % of total
operating income was 26.8%.

Net profit after tax increased 5.5% y-o-y to Rs. 1090 Mio. Net profit
margin as a % of the total operating income was 23.6%.

Net worth

Go to Market - Capacity and capability building The net worth as on 31st March 2017 was Rs. 5572 Mio., higher by
16.4 % from the previous year. Retained earnings of Rs. 784 Mio.
The company strengthened the distribution system during the
(net profit less interim dividend) contributed to this rise.
last financial year. The company rolled out a program named
“EnReach 2.0” to drive the next wave of distribution expansion The Book Value per share increased to Rs. 143 as at 31st March
focused on enhancing quality of direct reach. Through this 2017 from Rs. 122 in the previous year. The return on adjusted
program, a channel-wise thrust helped strengthen brand net worth (RONW = Net Profit excluding exceptional items of
presence across the general trade, modern trade and Hotel tax / Average net worth adjusted for deferred expenses and
/ Restaurants / Caterers (HORECA) segments. The company exceptional items) stood at 21.0 % for 2016-17.
is building capacity and capability to support new initiatives Fixed Assets and Capital Expenditure
including online sales.
The gross block (including capital work in progress) at the end of
The company strengthened its learning and development 2016-17 was Rs. 1445 Mio. Capital expenditure in 2016-17 was Rs.
program ‘Passion’ for the field force, linking it with classroom 280 Mio. The new production unit of Zydus Wellness-Sikkim, the
and on-the-job training modules, strengthening field force partnership firm, commenced commercial production in Sikkim
engagement and in-market execution. during the fourth quarter.
Building international presence GST transition
To build the international business, the Company entered new On the GST front, the company is gearing up for the new tax
markets like Saudi Arabia, Qatar, Oman and Myanmar. Going regime, working closely with its business partners for a smooth
forward, the company intends to expand to at least five more transition.
countries, widening the product portfolio in existing and new
Risk identification, Risk mitigation and Internal controls
geographies.
The company’s business comprises manufacturing and marketing
Consolidated financial highlights
of consumer wellness products. Its presence in these segments
Sales & Income from operations exposes it to various risks which are explained below.
The total income from operations of the company increased 8.6% Risk of fluctuations in prices of key inputs
y-o-y to Rs. 4,625 Mio. from Rs. 4,260 Mio. in 2015-16.
Prices of the key ingredients used in the products manufactured
Profit and margins and marketed by the company remain volatile due to several
The EBITDA (Earnings before interest, tax, depreciation and market factors, including changes in government policies and
amortization) increased 8.5% to Rs. 991 Mio from Rs. 913 Mio in fluctuations in the foreign exchange rates. However, the company
2015-16. EBIDTA margin as% of the total operating income was keeps a close watch on the prices and enters into long term
21.4% in 2016-17. contracts, wherever feasible, to minimise the risk of fluctuations
in the input prices.

74 | Zydus Wellness Limited

Risk of competition and price pressure Having strong brand equity in each of the segments, the company
faces the risk of unauthorized and illegitimate use of its brand
Though the company’s products enjoy leading positions in
names, packaging designs and other intellectual properties
their respective categories, the risk of competition from existing
related to its products by other players. The company ensures
players as well as from new entrants remains high. However,
protection of its intellectual property through appropriate
the company’s strength in the market place, coupled with its
registrations and other legal means.
continuous thrust on improving quality of its products and
offering newer products in the wellness segment provide it an Risk management and Internal Control Systems
edge over competition. The company supplies its products in
The company has established a well-defined process of risk
both retail as well as institutional segments. Both segments
management, wherein the identification, analysis and assessment
have their own nuances in terms of customer expectations,
of the various risks, measuring of the probable impact of such
competition and pricing. However, the company is well focused
risks, formulation of risk mitigation strategy and implementation
on increasing its share in all segments through sound marketing
of the same takes place in a structured manner. Though the
strategy and a balanced approach.
various risks associated with the business cannot be eliminated
Risk of litigation related to quality of products, intellectual completely, all efforts are made to minimize the impact of such
properties and other litigation risks on the operations of the company. Necessary internal
control systems are also put in place by the Company on various
Being in the consumer healthcare and wellness segment, the
activities across the board to ensure that business operations are
company’s products and their manufacturing and supply chain
directed towards attaining the stated organizational objectives
processes are required to maintain high quality standards. Any
with optimum utilization of the resources. Apart from these
deviation from prescribed regulations or any variation in quality
internal control procedures, a well-defined and established
from standards laid down by regulatory authorities can lead to
system of internal audit is in operation to independently review
actions from these authorities or litigation from its customers.
and strengthen these control measures, which is carried out by a
The company also faces the risk of litigation from its competitors
reputed firm of Chartered Accountants. The Audit Committee of
or customers on claims it makes for values which its’ products
the company regularly reviews the reports of the internal auditors
offer. The company always strives to ensure the highest standard
and recommends actions for further improvement of operations
of quality for its products and processes, and continuously works
in general and financial controls in particular.
on improving quality. It also maintains a high level of accuracy in
the area of product claims.

Annual Report 2016-17 | 75

Balance Sheet as at March 31, 2017
INR-Lakhs
Particulars Note No. As at As at As at
March 31, 2017 March 31, 2016 April 1, 2015
ASSETS:
Non-Current Assets:
Property, Plant and Equipment 3 1,739 1,998 2,154
Capital Work-in-Progress 9 7 0
Goodwill 4 2,282 2,282 2,282
Other Intangible Assets 4 10 15 6
Financial Assets:
Investments 5 245 245 245
Loans 6 36 45 49
Other Financial Assets 7 3 3 3
Other Non-Current Assets 8 34 31 32
Asset for Current Tax [Net] 9 602 545 528
4,960 5,171 5,299
Current Assets:
Inventories 10 626 368 411
Financial Assets:
Investments 11 25,163 20,681 9,782
Trade Receivables 12 46 27 33
Cash and Cash Equivalents 13 1,103 724 600
Bank Balance Other Than Cash and Cash Equivalents 14 28,375 22,706 28,881
Loans 15 131 65 58
Other Current Assets 16 69 34 35
Total 60,473 49,776 45,099
EQUITY AND LIABILITIES:
Equity:
Equity Share Capital 17 3,907 3,907 3,907
Other Equity 18 51,812 43,950 39,518
55,719 47,857 43,425
Liabilities:
Non-Current Liabilities:
Financial Liabilities:
Other Financial Liabilities 19 54 42 21
Provisions 20 15 11 12
Deferred Tax Liabilities [Net] 21 68 122 160
137 175 193
Current Liabilities:
Financial Liabilities:
Borrowings 22 2,500 0 0
Trade Payables 23 1,543 1,146 960
Other Financial Liabilities 24 337 380 325
4,380 1,526 1,285
Other Current Liabilities 25 181 182 173
Provisions 26 56 36 23
4,617 1,744 1,481
Total 60,473 49,776 45,099
Significant Accounting Policies 2
Notes to the Financial Statements 1 to 44

As per our report of even date For and on behalf of the Board
For Dhirubhai Shah & Doshi
Chartered Accountants
Firm Registration Number: 102511W
Kaushik D. Shah Dr. Sharvil P. Patel
Partner Chairman
Membership Number: 016502
Place: Ahmedabad Amit B. Jain Dhaval N. Soni Tarun G. Arora
Dated: May 27, 2017 Chief Financial Officer Company Secretary Whole Time Director

82 | Zydus Wellness Limited

Statement of Profit and Loss for the year ended March 31, 2017
INR-Lakhs
Particulars Note No. Year ended Year ended
March 31, 2017 March 31, 2016
Revenue from Operations 29 22,790 20,219
Other Income 30 2,455 3,012
Total Income 25,245 23,231
EXPENSES:
Cost of Materials Consumed 31 7,161 5,860
Purchases of Stock-in-Trade 32 33 36
Changes in Inventories of Finished goods, Work-in-progress and Stock-in-Trade 33 (164) 14
Excise duty on sales 271 244
Employee Benefits Expense 34 1,990 1,803
Finance Costs 35 48 6
Depreciation, Amortisation and Impairment expenses 36 370 355
Other Expenses 37 4,657 4,510
Total Expenses 14,366 12,828
Profit before Tax 10,879 10,403
Less: Tax Expense:
Current Tax (1) 115
Deferred Tax 21 (54) (38)
(55) 77
Profit for the year 10,934 10,326
OTHER COMPREHENSIVE INCOME: 38
Items that will not be reclassified to profit or loss:
Re-measurement gains/(losses) on post employment defined benefit plans (15) (16)
Income tax effect 0 0
Other Comprehensive Income for the year, [Net of Tax] (15) (16)
Total Comprehensive Income for the year [Net of Tax] 10,919 10,310
Net profit attributable to:
Owners 10,934 10,326
Other Comprehensive Income attributable to:
Owners (15) (16)
Total Comprehensive Income attributable to:
Owners 10,919 10,310
Basic & Diluted Earning per Equity Share [EPS] [in Rupees] 39 27.99 26.43
Significant Accounting Policies 2
Notes to the Financial Statements 1 to 44

As per our report of even date For and on behalf of the Board
For Dhirubhai Shah & Doshi
Chartered Accountants
Firm Registration Number: 102511W
Kaushik D. Shah Dr. Sharvil P. Patel
Partner Chairman
Membership Number: 016502
Place: Ahmedabad Amit B. Jain Dhaval N. Soni Tarun G. Arora
Dated: May 27, 2017 Chief Financial Officer Company Secretary Whole Time Director

Annual Report 2016-17 | 83

Cash Flow Statement for the year ended March 31, 2017
INR-Lakhs
Particulars Year ended March 31, 2017 Year ended March 31, 2016
A. Cash flows from operating activities:
Profit before Tax 10,879 10,403
Adjustments for:
Depreciation, Impairment and Amortisation
expenses 370 355
Loss on sale of assets [Net] 4 0
Profit on sale of investments [Net] (55) (28)
Interest income (2,398) (2,845)
Fair value gain on financial instrument at fair value (2) (140)
through statement of profit and loss
Interest expenses 48 5
Bad debts written off 0 0
Re-measurement of Employees benefits (Net) 1 (6)
Provisions for probable product expiry claims and
return of goods 8 2
Total (2,024) (2,657)
Operating profit before working capital changes 8,855 7,746
Adjustments for:
[Increase] in trade receivables (27) (5)
[Increase] in Non Current Financial Assets -Deposits 0 0
[Increase] / Decrease in Other Non Current Assets (1) 0
[Increase] / Decrease in inventories (258) 42
Decrease in Non Current Financial Assets-Loan 10 0
[Increase] / Decrease in Current Financial Assets (66) 7
Increase in Other Current Assets (20) (7)
Increase / [Decrease] in Other Current Financial (19) 186
Liabilities
Increase in trade payables 382 27
Increase in other Non Current Financial Liablities 11 22
Total 12 272
Cash generated from operations 8,867 8,018
Direct taxes paid [Net of refunds] (56) (132)
Net cash from operating activities 8,811 7,886
B. Cash flows from investing activities:
Purchase of fixed assets (138) (211)
Proceeds from sale of fixed assets 17 0
[Purchase]/Sale of current investments (10,898) (1,482)
Investment in Mutual Funds (Net) 6,469 (9,248)
Investment in Fixed Deposit (Net) (5,070) 6,239
Interest received 1,802 2,779
Net cash used in investing activities (7,818) (1,923)

84 | Zydus Wellness Limited

Cash Flow Statement for the year ended March 31, 2017
INR-Lakhs
Particulars Year ended March 31, 2017 Year ended March 31, 2016
C. Cash flows from financing activities:
Proceeds from Short Term Borrowings 2,500 0
Interest paid (48) (5)
Dividends paid (2,549) (4,840)
Tax on dividends paid (517) (994)
Net cash used in financing activities (614) (5,839)
Net increase in cash and cash equivalents 379 124
Cash and cash equivalents at the beginning of the year 724 600
Cash and cash equivalents at the end of the year 1,103 724

1 All figures in brackets are outflows.

2 Previous year’s figures have been regrouped wherever necessary.
3 Cash and cash equivalents comprise of: As at March 31 As at April 1
2017 2016 2015
a Cash on Hand 3 3 597
b Balances with Banks 1,100 721 3
c Total 1,103 724 600

As per our report of even date For and on behalf of the Board

For Dhirubhai Shah & Doshi

Chartered Accountants
Firm Registration Number: 102511W

Kaushik D. Shah Dr. Sharvil P. Patel

Partner Chairman
Membership Number: 016502

Place: Ahmedabad Amit B. Jain Dhaval N. Soni Tarun G. Arora

Dated: May 27, 2017 Chief Financial Officer Company Secretary Whole Time Director

Annual Report 2016-17 | 85