BSE Prices delayed by 5 minutes... << Prices as on Aug 17, 2018 >>   ABB 1227 [ 2.35 ]ACC 1592.85 [ 2.11 ]AMBUJA CEM 228.75 [ 1.83 ]ASIAN PAINTS 1399.8 [ 0.54 ]AXIS BANK 627.1 [ 0.52 ]BAJAJ AUTO 2660.9 [ -0.23 ]BANKOFBARODA 146 [ 2.17 ]BHARTI AIRTE 371.25 [ -0.22 ]BHEL 73.85 [ 2.00 ]BPCL 377.5 [ -0.13 ]BRITANIAINDS 6617.05 [ 2.01 ]CAIRN INDIA 285.4 [ 0.90 ]CIPLA 648.15 [ 0.12 ]COAL INDIA 281.2 [ -0.44 ]COLGATEPALMO 1141.65 [ 0.04 ]DABUR INDIA 455.45 [ 2.37 ]DLF 210.1 [ 1.57 ]DRREDDYSLAB 2363.35 [ 0.66 ]GAIL 387.25 [ -1.64 ]GRASIM INDS 1044.2 [ 4.52 ]HCLTECHNOLOG 1003.45 [ 0.75 ]HDFC 1883.6 [ -0.39 ]HDFC BANK 2077.25 [ 0.08 ]HEROMOTOCORP 3248.6 [ -1.14 ]HIND.UNILEV 1780.8 [ 2.63 ]HINDALCO 219.65 [ 1.57 ]ICICI BANK 340.05 [ 1.67 ]IDFC 52.05 [ 4.41 ]INDIANHOTELS 127.3 [ 2.79 ]INDUSINDBANK 1989.65 [ 0.33 ]INFOSYS 1431.35 [ 0.42 ]ITC LTD 313.75 [ 2.27 ]JINDALSTLPOW 198.6 [ 3.44 ]KOTAK BANK 1262.95 [ 1.45 ]L&T 1240.3 [ 0.60 ]LUPIN 879.35 [ 3.53 ]MAH&MAH 961 [ 1.24 ]MARUTI SUZUK 9148.3 [ -0.58 ]MTNL 15.1 [ 1.00 ]NESTLE 10875.35 [ 0.07 ]NIIT 92.15 [ 0.93 ]NMDC 104.35 [ 2.81 ]NTPC 157.95 [ -0.19 ]ONGC 163.1 [ -0.61 ]PNB 83.45 [ 2.14 ]POWER GRID 187.2 [ -0.05 ]RIL 1203.45 [ 0.27 ]SBI 302 [ 3.18 ]SESA GOA 215 [ 3.09 ]SHIPPINGCORP 57.75 [ -0.09 ]SUNPHRMINDS 623.3 [ 0.60 ]TATA CHEM 708.3 [ 1.91 ]TATA GLOBAL 242.15 [ 1.28 ]TATA MOTORS 257.35 [ 2.47 ]TATA STEEL 580.6 [ 2.20 ]TATAPOWERCOM 68.65 [ 2.16 ]TCS 2011.85 [ 0.15 ]TECH MAHINDR 686.8 [ 2.95 ]ULTRATECHCEM 4281.7 [ 1.64 ]UNITED SPIRI 638.9 [ 1.86 ]WIPRO 279.6 [ -0.09 ]ZEETELEFILMS 504.35 [ 0.63 ] BSE NSE
You can view full text of the latest Director's Report for the company.

BSE: 500790ISIN: INE239A01016INDUSTRY: Food Processing - Dairy/Fruits/Others

BSE   ` 10875.35   Open: 10887.00   Today's Range 10797.00
+7.15 (+ 0.07 %) Prev Close: 10868.20 52 Week Range 6585.00
Year End :2016-12 

Dear Members,

The Directors are pleased to present their report and financial statements for the year ended 31st December, 2016.

Financial Results and State of Company's Affairs

The Company supplemented the Provision for Contingencies with further amount of Rs, 1,684.7 million (net) for contingencies resulting mainly from issues, which are under litigation/ dispute and other uncertainties requiring management judgement.




Net Sales



Add: Other operating revenues



Less: Operating expenses



Less: Impairment loss on fixed assets



Less: Net provision for contingencies (from operations)



Profit from Operations



Add: Other income



Less: Finance costs



Less: Employee benefit expense due to passage of time



Less: Net provision for contingencies -others



Profit before exceptional items, corporate social responsibility and taxation



Less: Exceptional items



Less: Corporate social responsibility expense



Profit before taxation



Less: Tax expense



Profit after taxation



Add: Profit brought forward



Amount available for appropriation



Less: Interim dividends



Less: Proposed final dividend



Less: Dividend distribution tax



Less: Transfer to general reserve



Surplus in statement of profit and loss



Key ratios

Earnings per share (?)



Dividend per share (?)



Net Sales for the year increased by 12.8% on a base impacted by MAGGI Noodles issue. Net Domestic Sales increased by 13.5% and Export Sales increased by 3.5%

This was after the reversal, utilisation/ settlement of contingency provision of Rs, 128.9 million due to the satisfactory settlement of certain litigations and settlement of obligations under free replacement warranty for which provision is no longer required.

Exceptional Items during the year is net of:

(a) Provision made for diminution in the value of non-current investment: Rs, 200.0 million;

(b) Write backs, arising, inter alia, from actualization of estimates of part of the provision made for exceptional item in the previous year:

Rs, 212.2 million;

c) Cost towards the restructuring of a long term arrangement for supply of ingredients to extinguish the obligations under the arrangement in view of changed business circumstances:

Rs, 320.0 million.


The Board of Directors have recommended a final dividend of Rs, 23/- per equity share (Face value Rs, 10 per equity share) for 2016, amounting to Rs, 2,217.6 million. This is in addition to three interim dividends already paid for the year 2016, at the rate of Rs, 12/- per equity share, Rs, 12/- per equity share and Rs, 16/- per equity share which were paid on/ from 31st May, 2016,19th August, 2016 and 22nd December, 2016, respectively. The total dividend for 2016 aggregates to Rs, 63.00 per equity share, amounting to Rs, 6,074.2 million.


Despite the pressures in the external environment in 2016, the exports division leveraged your Company's diversified portfolio contributing to the total revenue. MAGGI Noodles were welcomed back by shoppers while confectionery opened doors to export to eight markets in the Middle East and Ghana. Though instant tea remained flat, instant coffee registered growth on account of increase in exports to Romania and Bangladesh. Infant Nutrition exports also showed good growth.

Customer feedback surveys were conducted from different markets to ensure long term sustained growth. Our efforts in developing exports of quality coffee, meanwhile, continued to earn us recognition.

Contribution to the Exchequer

Your Company, over the years, has been enabling significant contribution to various taxes. During the year 2016, the Company through its business, enabled tax collections at Central and State level close to Rs, 23.9 billion, in aggregate

Business Development

Your Company remained dedicated to strengthening Nutrition, Health and Wellness across its product portfolios. It made product propositions more compelling, widened tasty and healthier offerings by innovation and renovation and remained relevant to consumers' requirements. The year 2016 witnessed a spate of innovations and renovations with the launch of more than 30 new products and variants.

Having Nestle R&D Centre India in Manesar, has also brought Nestle global research and development closer to your Company's businesses. Along with the network of R&D Centres across the globe, R&D India and the Business Units worked towards developing winning concepts, suited to local consumers.

The teams got engaged in a lot of groundwork and several stages of ideation for all your Company's new as well as existing products. Your Company made every effort to increase penetration with more offerings, across all portfolios such as the following:

Launch of New MAGGI Noodles Variants

- MAGGI Noodles strengthened its leadership position with about 60% market share in the Noodles category as per Nielsen report. Your Company introduced 'MAGGI HOT HEADS' and 'MAGGI No Onion No Garlic Masala' variants of MAGGI Noodles

- Cup noodles were back with the introduction of MAGGI HOT HEADS Cuppa Noodles and the re-launch of MAGGI Cuppa Masala and MAGGI Cuppa Chilly Chow

- A comeback in the soups category through the New MAGGI Cup-a-licious Soups - a range of 6 instant soups available in exciting, contemporary and unique flavours

Strengthening of Milk Products and Nutrition Portfolio

- Your Company's focus in the milk product category has been on the value-added segment. NESTLE a GREKYO was introduced in several variants along with EVERYDAY Masala Fusion Dairy Whitener with 6 natural spice flavours

- NESCAFE RTDs (Ready-To-Drink) in three unique flavours were introduced in the market

- Products like CEREGROW for children between the age group of 2 to 5 and NESTLE a PRO-GROW, a protein rich milk were all clutter breaking innovations

- The Company renovated the entire CERELAC range fortifying it with Iron

Expanding Coffee and Beverages Portfolio

- NESCAFE SUNRISE INSTA-FILTER was introduced as part of your Company's focus into differentiated products. This revolutionary new coffee with dry decoction granules offers the authentic South Indian Filter Coffee Taste in an instant

- Three very exciting variants for NESTEA Iced Tea were launched along with NESCAFE Latte

More offerings in the Chocolate and Confectionery Portfolio

- Your Company continued its focus to grow brands like KITKAT, MILKYBAR, NESTLE MUNCH, BARONE and ALPINO

- KITKAT Duo was a first of its kind combination of brown and white and BARONE CHARGE and the New ALPINO were introduced to cater to niche audiences

The business of 'Prepared Dishes and Cooking Aids' saw the brand MAGGI go from strength to strength, throughout the year in 2016. It reclaimed the noodle category leadership with nearly 60% market share post re-launch. The year started with a strong focus on reinforcing nostalgia and re-invoking the quintessential MAGGI Moments via the #NothingLikeMAGGI campaign that helped build back brand equity, quickly. In addition to the thematic advertising, brand MAGGI also put immense focus behind small town and rural pockets via sampling, activation and vernacular media engagements. As a result, today brand MAGGI's equity and imagery scores stand almost at par with the pre-crisis levels, as also reflected in MAGGI's meteoric recovery in the Brand Equity's MOST TRUSTED BRAND SURVEY for 2016. In the said Survey, the brand had fallen to 95th Rank in the top 100 Most Trusted Brands in 2015, but in 2016 it gained 70 places to end at 25th Rank.

In the Foods category MAGGI ranked at 3rd position.

In addition to re-building the core back, brand MAGGI also unleashed a slew of innovations in noodles and other adjacent categories in 2016, thereby reinvigorating its portfolio. In noodles, a new range of spicy noodles targeted at new age youth was launched under the name of MAGGI HOT HEADS. All the four variants have met with good response and continue to sizzle the taste-buds across the country. Apart from these, MAGGI also expanded its sauces range by launching the MAGGI Masala Sauce that promises the signature MAGGI Masala taste in tomato sauce. Lastly, MAGGI made a comeback in the Soups Category though the New MAGGI Cup-a-licious Soups - a range of 6 instant soups available in exciting, contemporary and unique flavours.

The 'Chocolate and Confectionery' business focused on the mainstream and the high growth premium segments. An array of product launches were made to cater to rapidly evolving consumer tastes and preferences across the portfolio. KITKAT Duo and NESTLE MUNCH

TRIO were innovative launches targeted to delight consumers. The re-launch of the flagship premium brand ALPINO (bonbons made of milk chocolate, draped over a crispy cocoa wafer encasing a rich.

velvety centre), along with the launch of a range of premium imported tablets from Europe, rejuvenated your Company's premium chocolate offerings.

Innovative, category-first and relevant consumer promotions were offered to consumers throughout the course of the year. The Paytm cash promotion on KITKAT was an industry-first marketing activity. Innovation in communication was seen in KITKAT with film integration. The digital platform was highly leveraged across Twitter through #My Break campaign and YouTube through the Laughter Games (comedy creators) integration. KITKAT India won the first edition of the Twitter Aviator Awards in 2016, a global contest organized by Nestle and Twitter exclusively for Nestle markets, delivering a dynamic and real time campaign based on daily trends in India.

For 'Coffee and Beverages' 2016 was a

challenging year with increased competitive

2 intensity as well as m a volatile external "“'environment. Your Company first redefined the developed coffee market in the south by launching NESCAFE SUNRISE INSTA-FILTER - a revolutionary new coffee chicory mixture with dry decoction granules to offer the authentic South Indian Filter Coffee Taste in an instant. Three very exciting variants for NESTEA Iced Tea were launched along with NESCAFE Latte. Brand NESCAFE continued building its connect with the youth in line with the brand idea of 'It all starts with a NESCAFE'. The RJ campaign with the tagline of #StayStarted became the most viewed digital campaign which saw an extension of the Reel life into Real life with RJ Rishi coming to life and hosting a real radio show NESCAFE Mornings with radio channel Red FM. NESCAFE Labs created impact with its mega challenge events and with ground events at various colleges all over India. NESCAFE SUNRISE was also renovated with a superior taste.

The 'Milk Products and Nutrition' business category saw the extension of the journey from infants to toddlers as your Company launched CEREGROW during the year. A nutritious and tasty junior cereal for 2-5 year old kids, the product is packed with the nourishment of multigrain cereal, milk and fruits. The Company renovated the entire CERELAC range fortifying it with Iron to support cognitive and brain development in early infancy.

Nestle believes breast milk provides the best nutrition for babies. This is why the Company promotes the World Health Organization's recommendation of exclusive breastfeeding for the first six months of life and beyond. Good nutrition during the 'First 1000 days' places babies on the path to a healthy future. Under your Company's 'Start Healthy Stay Healthy' program, over 963 Breastfeeding Rooms were installed in clinics across 150 cities in the country. A breastfeeding room locator tool was also developed to enable mothers to find the nearest breastfeeding room. The SUPERBABY campaign was launched with the key message 'It takes you all to make a Super baby' in order to emphasize the role of various stakeholders to #Help Moms Breastfeed.

With focus on the value added segment, your Company launched a brand new exotic range of Greek Yoghurt under the brand name of NESTLE a GREKYO for the first time in India. A perfect blend of health and indulgence, NESTLE a GREKYO has a rich and creamy texture coupled with real fruit bits. Globally the Greek Yoghurt category came into prominence less than a decade back and in certain countries it has already captured a major share of the entire yoghurt market. In India, this category is still at a nascent stage but your Company is confident that it will lead the global trend for the Indian consumers soon. NESTLE a PRO-GROW has been another addition to the NESTLE a brand and addresses specific needs of protein for growing children. Your Company continued its journey as pioneers by customizing not just the taste, but also the mode of consumption to deliver 'Anytime Coffee' for today's active lifestyle and launched NESCAFE Ready-to-Drink range.

'Nestle Professional' business registered volume growth in 2016. The New NESCAFE Solution machine continued to perform well in the business and industry channels. The entire range of coffees pre-mixes for hot and cold machines, were renovated by your Company and NESTEA Masala Gold tea premix was successfully launched. All food categories generated growth.

Chef2Chef activities pan India offered good visibility to Nestle Professional products. Nestle Professional significantly developed sales in transport channels by enlarging the assortment of products in Airlines and the Indian Railways.

Commitment to Nutrition, Health and Wellness

In addition to providing consumers with differentiated and innovative choices, your Company also places high priority in providing consumers with nutrition information on food labels to make informed dietary choices. The GDA labelling provides guidance on the daily intake for energy and defines key nutrients to help consumers evaluate a product's role in their daily diet. To demonstrate this commitment your Company has started GDA labelling on the entire confectionery portfolio, Beverages portfolio, UHT milk, MILKMAID Sweetened Condensed Milk and EVERYDAY Dairy Whitener. Your Company enhanced labelling of products with a QR code that allows consumers to use their smart phones to find out more about its products. On scanning the QR code on the label, consumers can get information specific to the product under three heads, which are Nutrition, Environment and Society. Committed to promoting a healthy lifestyle, your Company partnered with PROCAM Running, the organizers for marathon events, across India in four metropolitan cities. Expert sports nutritionists provided personalized nutrition counselling to runners to help them get run-ready from nutritional perspective. Your Company also conducted sessions on nutrition counselling for consumers in modern trade outlets, government offices and corporate offices. The objective was to help the participants to make tastier and healthier food choices for a healthy lifestyle.

Awards and Recognitions BrandZ is an annual consumer study conducted by Kantar Millward Brown for WPP Group. Millward Brown then combines the BrandZ data with financial data of brands to compile their annual rankings of top 50 most valuable brands in India. In 2016, your Company was recognized as 'The Most Valuable Food Brand' in India. Your Company ranked 13th and MAGGI ranked 39th in the overall top 50 most valuable brands in India.

The Effie Awards are known by advertisers and agencies globally as the pre-eminent award in the industry, and recognizes all forms of marketing communication that contribute to a brand's success. Since 1968, winning an Effie has become a global symbol of achievement. Today, Effie celebrates effectiveness worldwide with the Global Effies and the Positive Change Effies, regional programs in Asia-Pacific, Europe, the Middle East / North Africa, North America, Latin America and more than 40 national Effie programs. 2016 was a landmark year for your Company's Effie's Journey. Nestle India became The Top Food & Beverage Client of the Year at Effies 2016. Your Company bagged the first ever Gold Metal for the MAGGI 'Winning Back A Mom's Trust' campaign in the Foods category. It also Bagged 2 Silver Metals for the 'MAGGI Comeback' campaign in the Foods and Integrated campaign categories and a Bronze Metal for NESCAFE in the Beverages category. Your Company was awarded CII SCALE award for being most innovative digital supply chain across FMCG during 2016. Your Company also won the ASSOCHAM excellence award for Best FMCG Company in Logistics and Warehousing.

Employee Focus

In 2016, the effort was towards re-visioning the culture of your Company in line with the ambition of being a Fast, Focused and Flexible organization. Rise2Gether was a cultural intervention basis evaluation of feedback from employees and from the leadership team and then identifying the key focus areas for change. Your Company has also made consistent efforts towards being an Employer of Choice for current and prospective employees. Your Company connected with students across campuses and held a national case study competitions panning HR, Supply Chain and Marketing. The members of the Management Committee also travelled across campuses delivering talks on leadership. To ensure your Company invests in high calibre talent, over 70 employees were part of high potential programs and another 100 employees went through the Executive General Management Program at IIM Calcutta.

Management Analysis

Review of economic scenario and outlook

Last year was marked by two important economic policy developments in India: a constitutional amendment making way for the goods and services tax (GST) and withdrawal of legal tender of high value currency notes (' 500 and '1000) which intends to curb black money and running of a parallel economy. With a slow start in 2016, the economic momentum recovered towards the middle of the year.

While this growth momentum was temporarly impacted with demonetization, the India economy appears to be recovering fast and will continue as one of the fastest growing nations.

Cashless transactions systems have been encouraged across the board. The move towards digital payment have benefitted e-commerce companies though dependence on cash-on-delivery got impacted. In the urban markets, the drop in sales in traditional retail outlets due to lack of cash availability have been partially compensated by the modern trade channel.

Greater formalization of the economy has triggered financial inclusion and the banking system has benefitted partially from higher levels of deposits as well as the opening of new accounts. The National Payments Corporation of India (NPCI) successfully finalized the Unified Payments Interface (UPI) platform enabling mobile phones in digitalization of payments. Over the past year much progress has been made in spreading JAM (Jan Dhan, Aadhar and Mobile) across the country which refers to large-scale, technology-enabled, real-time cash transfer. This has the potential of financial inclusion improving the economic lives of the poor.

Consumers are opting to spend on necessities rather than on discretionary items. The FMCG industry remained under pressure because of subdued consumer sentiments. Earnings for most companies were soft through the year and they struggled for volume growth.

The current emphasis on 'Make in India', investments in accelerating development of transport infrastructure, pro-reform approach and efforts at fiscal rationalization are all positive indicators and your Company is optimistic that the economy will pick up.

The passage of the GST bill in the Parliament is a positive for the economy bringing in more transparency in the tax administration. GST will create a common Indian market, improve tax compliance and governance. The transition to GST is complex from an administrative as well as a technological perspective. What will be critical is the efficiency in relation to its implementation. Your Company believes that in the medium run it will lead to more digitalization and will help in effective governance.

Risks and Opportunities

The economic and business environment is fast evolving, and with the rapid transformation of technology and the impact of cultural changes, society and consumers are also transforming on multiple dimensions. Increased exposure, improved education and awareness, as well as changing aspirations at various levels of the income pyramid and the urban-rural divide are creating opportunities that organizations need to understand and prepare for the emerging future. Your Company has significant strengths and being Nestle is in itself a very huge strength, because the brand brings with itself 150 years of trust and credibility. The General License

Agreement gives it access to Nestle Group's proprietary technology / brands, expertise and extensive centralized Research and Development facilities.

The Company is an integral part of Indian society and has state-of-the-art manufacturing facilities, efficient supply chain, sales automation with extensive reach and coverage in its target markets, strong brands and capable employees and partners who are committed to provide value with high quality and safe food products.

However, the Indian market is complex and demands a very efficient and complex supply chain configuration. This is further complicated by cascading indirect taxes. With GST roll out in 2017, this should be addressed though full gains out of it would take some time to realise. Your Company is operating in an industry that faces price volatility in raw materials and is dependent on agricultural commodities that need to meet stringent quality standards and on natural resources where alternatives are not viable. There is also increasing competition in processed foods and as the regulatory framework is evolving, standardization of norms is a major requirement for new and innovative product launches. Clearly, even though there is slower than anticipated momentum in the economy, there are opportunities. Consumer lifestyles are changing and there is increasing demand for value-up and premium products and your Company can leverage Nestle technology to develop more science based products that provide superior benefits of Nutrition, Health and Wellness at appropriate price points. Technology is throwing up immense opportunities to understand consumers and engage better with them. Digital and e-commerce can hold immense potential and strategic significance for your Company.


Your Company is proud of the immense commitment and support that trade partners and retailers have extended, for not only the strong comeback of MAGGI Noodles, but also for whole-heartedly supporting the launch of the many new products and variants. Your Company has also demonstrated the strength of its sales and distribution network by bringing new products on to the shelves, at a very fast speed with best-in-class visibility. Realizing the growing importance of e-retailing the Company continues to successfully engage with the leading e-retailers. The Company has been constantly looking for opportunities and partnerships to reach out to consumers in a relevant and engaging manner. It has leveraged all channels that consumers reach out for buying Nestle products. Hence along with traditional and modern trade partners, your Company has joined hands with e-commerce companies.

Technology, Quality and Safety

Nestle Continuous Excellence (NCE) as a management system ensures that the workforce of your Company is fully aligned with the organization's strategy towards delivering competitive advantage and consumer led growth. Last year was marked by the factories supporting and delivering continuously in order to meet business objectives by ensuring timely launch of new products. This was in addition to catering to the regular production of the existing brands available in the market.

In spite of increased production, the overall asset intensity (equivalent to operational efficiencies) and cost reduction improved. This was achieved through the following:

- Total Performance Management (TPM) and focused improvement projects have been consistently driven to achieve manufacturing excellence.

- The education and training pillar focused . on setting up of

- strong understanding t of methodologies 1 and stressed on the importance of capability building across the manufacturing units.

In line with the 'Zero Defect & No Waste' policy, the following defect reduction projects were driven up to consumer touch-points:

- 'Quality by Design' initiatives like packaging structural improvements with an additional overwrap protection for Nutrition portfolio. KITKAT tamper proof packaging and anti-counterfeit packaging on bigger NESCAFE soft packs, have helped address issues related to packaging.

- Continuing our strong collaboration with upstream raw material and packaging material vendors ensured right quality material for smooth operations.

- Special focus was given to improve the cool chain effectiveness for confectionery products. This included project where your Company collaborated with business partners (Distributors) to contribute in quality control.

Significant progress was also made on road safety awareness with our finished goods transporters and milk tanker fleets operational at our factories. Drivers' rest rooms have been organized at factories to give drivers proper rest before the journey commencement. Risk assessment for the journey is being discussed for all identified lanes, use of seat belts and proper maintenance of vehicles prior to the journey is being mandated.


As in the past, your Company continued to stress upon measures for the conservation and optimal utilization of energy in all the areas of operations, including those for energy generation and effective usage of sources/ equipment used for generation. Within Nestle India factories there have been continuous efforts to improve operational efficiencies, minimizing consumption of natural resources and reducing water, energy and CO2 emissions while maximizing production volumes.

As a result, during the period from 2001 to 2016, for every ton of production, your Company has reduced the usage of energy by around 47%, water usage by around 53%, generation of waste water by around 55%, reduction in specific direct greenhouse gas emissions by 55%.

During 2016 your Company consolidated and further accelerated the supply chain strategy to support the priorities of the market.

Product launches were done in an efficient and speedy manner from concept development to market launch by the team in close collaboration with all stakeholders.

In order to build logistics capability across supply chain team and prepare your Company to be GST- Ready, 'Logistics Excellence' review program was launched across the organization. This resulted in capability building of the logistics team on the ground and identification of waste across the value chain leading to cost efficient operations. As a result, material flow across our factory and distribution centres was enhanced leading to fresh products on the shelf and faster speed to market.

Sales and operations planning process across the organization was refreshed using enhanced use of data analytics for demand planning, creation of robust event management process leading to better delivery of sales execution on the ground.

In order to continuously create value for our consumers and customers in today's reality of commodity headwinds and intense competitive intensity at market place, your Company accelerated the deployment of LEAN mindset across value chain. This helps to align the value chain to continuously reduce non-value added activities and thereby optimizing cost structures across your Company.

Quality in the value chain initiative was launched across the Company ensuring that handovers across value chain are managed seamlessly.

This helps the Company to ensure that right quality of products are available on the shelves for our consumers, despite the journey through a fragmented trade structure, multiple storage points and unstructured handling.

Your Company further extended the Responsible Sourcing program to cover not only the direct materials suppliers but also our transporters, services and indirect material suppliers. This is part of our commitment to business integrity, openness, respect for universal human rights and core labour principles.

Cautionary Statement

Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Company's objectives, projections, estimates and expectations may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.

Directors' Responsibility Statement

The Directors state that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;

b) they have selected such accounting policies and applied them consistently and made judgments 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 that period;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Corporate Governance

In terms of Regulation 34 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter "Listing Regulations"), a Report on Corporate Governance along with Compliance Certificate issued by Statutory Auditor's of the Company is attached as Annexure - 1 and forms integral part of this Report (hereinafter "Corporate Governance Report").

Directors and Key Managerial Personnel

During the year under review, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors appointed Dr. Rakesh Mohan as an Independent Non-Executive Director of the

Company with effect from 1st May, 2016.

The Members, in its 57th Annual General Meeting held on 12th May, 2016, approved the appointment of Dr. Rakesh Mohan as Independent Non-Executive Director of the Company to hold office for a term up to 30th June, 2020.

Mr. Aristides Protonotarios, Whole-time Director of the Company designated as "Director -Technical", who was appointed for a period of five years with effect from 1st April, 2013, shall be taking up a new assignment within the Nestle Group and therefore shall cease to be the Whole-time Director of the Company with effect from 31st March, 2017.

Mr. Shobinder Duggal shall retire at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment. The brief resume and other details as required under the Act and Listing Regulations are provided in the Notice of the 58th Annual General Meeting of the Company.

The Independent Directors of your Company have given a declaration confirming that they meet the criteria of independence as prescribed both under the Act and the Listing Regulations.

The Nomination and Remuneration Committee had adopted principles for identification of Key Managerial Personnel, Senior Management including the executive directors which are based on "The Nestle Management and Leadership Principles" and "Nestle Leadership Framework" which is available on the Company's Website The Appointment and Remuneration Policy of the Company includes criteria for determining qualifications, positive attributes and independence of a director and policy relating to the remuneration of Directors, Key Managerial Personnel and other employees. The same is attached as Annexure - 2 and forms integral part of this Report.

The details of familiarization programmes to Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: https://www.nestle. in/investors/directors and officers/familiarisation-programme.

The Company has devised a formal process for annual evaluation of performance of the Board, its Committees and Individual Directors ("Performance Evaluation"). It covers the areas relevant to the functioning as Independent Directors or other directors, member of Board or Committee of the Board. The Company engaged a leading HR Consulting Firm for compilation of the feedback received from the Board members, Committee members and directors and for identifying key inferences and observations with respect to Performance Evaluation.

Corporate Social Responsibility

During the year under review, the name of the Corporate Governance and Social Responsibility Committee was changed to Corporate Social Responsibility Committee and Dr. (Mrs.) Swati A. Piramal, Independent Non-Executive Director, was appointed as Chairperson of the Committee in place of Mr. Suresh Narayanan. The Corporate Social Responsibility Committee comprises of Dr. (Mrs.) Swati A. Piramal (Chairperson),

Mr. Ravinder Narain, Independent Non-executive Director and Mr. Suresh Narayanan, Chairman and Managing Director of the Company. The terms of reference of the Corporate Social Responsibility Committee is provided in the Corporate Governance Report. Your Company has also formulated a Corporate Social Responsibility Policy (CSR Policy) which is available on the website of the Company at Annual report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been appended as Annexure - 3 and forms an integral part of this Report.

In terms of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014 as amended ("CSR Rules") and in accordance with the CSR Policy, during the year 2016, the Company has spent above two percent of the average net profits of the Company during the three immediately preceding financial years. The details are provided in the Annual Report on CSR activities. In addition to the above, the Company has been implementing societal activities since many decades under the umbrella of Creating Shared Value activities which has not been reckoned for arriving at the spends as per CSR Rules.

Some key initiatives which your Company has been engaged in are as follows:

Nestle Healthy Kids Programme The Nestle Healthy Kids Programme has been developed with a focus to raise nutrition and health awareness of school age children. The unbranded programme has been conducted since 2009, in village schools around the factories of your Company with the objective of raising awareness regarding good nutritional and cooking practices, good hygiene and promoting physical fitness. The programme has been conducted in partnership with six leading regional Universities through the Department of Home Science and Food Science.

Your Company has also been working in metros in partnership with Magic Bus (one of India's largest behaviour change organisations). Magic Bus has a well-entrenched community presence, across 22 states both in rural and urban geographies and the Healthy Kids Programme is conducted through the Magic Bus model of 'engaging through sports and activities' as a medium to bring change. Children are engaged in interactive sessions in which they receive nutrition and health knowledge and are encouraged to play regularly.

Project Jaagriti

Your Company rolled out the Project Jaagriti in partnership with Mamta Health Institute for Mother and Child as part of its commitment to provide education programmes for good nutrition and feeding practices improving nutritrion and health at key life stages - adolescents and caregivers. The programme has been conducted across 15 districts in 7 states and 1 union territory with a goal to accelerate the uptake of health services by improving continuum of care on health, nutrition and hygiene practices amongst adolescents, young couples and caregivers.

#Educate the GirlChild - Partnership with Nanhi Kali

Your Company was happy to be associated with #Educate The Girl Child program which aimed at raising awareness about girl child education.

We extended support to girl child education in association with Nanhi Kali, one of the largest community programs imparting education to underprivileged girl children across India. This partnership provided on ground support to girl children through necessary academic material and social backing by identifying critical centres of education of the Nanhi Kali project. Three most iconic brands of Nestle India - MAGGI, NESCAFE and KITKAT - changed packaging to support girl child education. Your Company changed packaging of 100 million packs with the aim of raising more awareness about the cause.

Collaboration between Nestle India, Food and Drugs Administration, Goa and NASVI joining hands

Your Company joined hands with Food and Drugs Administration, Goa and National Association of Street Food Vendors of India (NASVI) to train over 1000 street vendors in Goa. The training of street vendors was conducted through NASVI's training center and comprised of subjects such as health, hygiene, food handling, food safety, personal hygiene, cart hygiene, cleaning and chemicals, pest control, garbage disposal and entrepreneurship. The participants were also awarded a certificate at the end of the training.

Business Responsibility Report

Nestle's approach to business is Creating Shared Value or 'Saanjhapan' as used by your Company and it is about the impact of the business and engagement through it. Your Company has been conducting business in a way that both deliver long-term shareholder value and benefit society under approach of "Creating Shared Value" (hereinafter 'CSV).

The Business Responsibility Report as per

Regulation 34 of the Listing Regulations is annexed as Annexure - 4 and forms integral part of the Annual Report.

Statutory Auditors

As per Section 139 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, the term of M/s. A.F. Ferguson & Co. (Firm Registration No. 112066W), Chartered Accountants, New Delhi as the Statutory Auditors of the Company expires at the conclusion of the ensuing Annual General Meeting of the Company.

The Board of Directors of the Company at their meeting held on 28th October, 2016, on the recommendation of the Audit Committee, have made its recommendation for appointment of M/s. BSR and Co. LLP, Chartered Accountants (ICAI Registration No- 101248W/W-100022), as the Statutory Auditors of the Company by the Members at the 58th Annual General Meeting of the Company for an initial term of 5 years. Accordingly, a resolution, proposing appointment of M/s. BSR and Co. LLP,

Chartered Accountants, as the Statutory Auditors of the Company for a term of five consecutive years i.e. from the conclusion of 58th Annual General Meeting till the conclusion of 63rd Annual General Meeting of the Company pursuant to Section 139 of the Companies Act, 2013, forms part of the Notice of the 58th Annual General Meeting of the Company. The Company has received their written consent and a certificate that they satisfy the criteria provided under Section 141 of the Act and that the appointment, if made, shall be in accordance with the applicable provisions of the Act and rules framed there under.

The Report given by M/s. A.F. Ferguson & Co., Statutory Auditors on the financial statement of the Company for the year 2016 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report.

During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.

M/s. A.F. Ferguson & Co. over many years have successfully met the challenge that the size and scale of the Company's operations pose for auditors and have maintained the highest level of governance, ethical standards, rigour and quality in their audit. The Board place on record its appreciation for the services rendered by M/s.

A.F. Ferguson & Co. as the Statutory Auditors of the Company.

Cost Auditors

As per Section 148 of the Act read with Companies (Cost Records and Audits) Rules,

2014, the Audit Committee recommended and the Board of Directors appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019) being eligible and having sought appointment, as Cost Auditors of the Company, to carry out the cost audit of milk powder products manufactured by the Company falling under the specified Central Excise Tariff Act heading in relation to the financial year ending 31st December, 2017. The Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed there under. The remuneration of Cost Auditors has been approved by the Board of Directors on the recommendation of Audit Committee and in terms of the Companies Act, 2013 and Rules there under the requisite resolution for ratification of remuneration of Cost Auditors by the members has been set out in the Notice of the 58th Annual General Meeting of your Company.

Secretarial Auditors

The Secretarial Audit was carried out by M/s.

S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No.1774) for the financial year 2016. The Report given by the Secretarial Auditors is annexed as Annexure - 5 and forms integral part of this Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.

In terms of Section 204 of the Companies Act, 2013, the Audit Committee recommended and the Board of Directors appointed M/s.

S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No.1774) as the Secretarial Auditors of the Company in relation to the financial year 2017. The Company has received their consent for appointment.

Meetings of the Board

During the year, the Board of Directors had five Board meetings. For details of the meetings of the Board, please refer to the Corporate Governance Report.

Extract of Annual Return

The extract of the Annual Return of the Company is annexed as Annexure - 6 and forms integral part of this Report.

Details of Loans and Investments

Details of the loans given by your Company under Section 186 of the Act during the financial year ended 31st December, 2016 are as follows:

Nestle R&D Centre India Private Limited (Fellow Subsidiary): Rs, 400 million at the interest rate of 8.97% for general business purpose (Loan outstanding at the end of the year was Nil); and SMA Nutrition India Private Limited (Fellow Subsidiary): Rs, 35 million at the interest rate of 8.80% for general business purpose (Loan outstanding at the end of the year was Nil).

For details of investments, please refer note no.12 and 14 forming part of financial statements.

Related Party Transactions

Your Company has formulated a policy on related party transactions which is also available on Company's website at investors/policies. This policy deals with the review and approval of related party transactions. The Board of Directors of the Company has approved the criteria for making the omnibus approval by the Audit Committee within the overall framework of the policy on related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and at arm's length. All related party transactions are placed before the Audit Committee for review and approval.

All related party transactions entered during the Financial Year were in ordinary course of the business and on arm's length basis. No material related party transactions were entered during the Financial 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 to your Company.

Members may refer to note no. 40 to the financial statement which sets out related party disclosures pursuant to AS-18.

Risk Management

The Board of Directors had constituted Risk Management Committee to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks. The Committee on timely basis informed members of board of directors about risk assessment and minimization procedures which in the opinion of the Committee may threaten the existence of the Company. The details of Risk Management Committee are included in the Corporate Governance Report.

Public Deposits

Your Company had not accepted any Public Deposits under Chapter V of the Act.

Significant and Material orders passed by the Regulators/Courts/ Tribunals

No significant or material orders were passed by the Regulators or Courts or Tribunals which impacts the going concern status and Company's operations in future.

Complaint filed in National Commission

The Union of India, Department of Consumer Affairs in 2015 had filed a complaint before the National Consumer Dispute Redressal Commission on the allegation that by selling MAGGI Noodles in the past, the Company has indulged in an unfair trade practice, sold defective goods to the public and sold goods which will be hazardous. Complaint seeks compensation of ' 2,845.5 million and punitive damages of ' 3554.1 million. Your Company has challenged the complaint. The court proceedings are currently ongoing.

Internal Financial Controls and their adequacy

The Directors had laid down internal financial controls to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

The Audit Committee evaluates the internal financial control system periodically.

Audit Committee

The Audit Committee comprises Independent Non-Executive Directors, namely, M/s. AK Mahindra (Chairman), Ravinder Narain and Rajya Vardhan Kanoria. Powers and role of the Audit Committee are included in the Corporate Governance Report. All the recommendation made by the Audit Committee were accepted by the Board of Directors.

Vigil Mechanism

The Vigil Mechanism of the Company is governed by significant documents "The Nestle Corporate Business Principles", "The Nestle Management and Leadership Principles" and "Nestle Code of Business Conduct". The said mechanism is available to the Director(s)/ Employee(s), who can report to the Company

Secretary, on a confidential basis, any practices or actions believed to be inappropriate or illegal under the Nestle India Code of Business Conduct ("the Code"). The Code provides for adequate safeguards against victimisation of director(s)/ employee(s) who avail the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases.

It is affirmed that no person has been denied access to the Audit Committee. As an additional facility to all the Directors and Employees of the Company, the Company under the Code provides Integrity Reporting System ("IRS"), an independent third party operated free phone and web based facility for the directors and employees of the Company across all locations.

The details of IRS along with FAQs are available to the Directors and Employees on the Company's intranet portal. Further, the Company has appointed an Ombudsman for Infant Code, under which employees can report Infant Code violations directly to the Ombudsman, with adequate safeguard to protect the employee reporting. The Company also provides an independent third party operated free phone and web based facility, "Tell Us", to all internal and external stakeholders with a dedicated communication channel for reporting potential instances of non-compliance with Nestle Corporate Business Principles. Details of "Tell Us" are available on

Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Information required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 for the financial year ended 31st December, 2016 in relation to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in the Annexure - 7 forming an integral part of this report.

Information regarding Employees and related disclosures

Your Company considers people as its biggest assets and 'Believing in People' is at the heart of its human resource strategy. It has put concerted efforts in talent management and succession planning practices, strong performance management and learning and training initiatives to ensure that your Company consistently develops inspiring, strong and credible leadership. During the year the focus of your Company was to ensure that young talent is nurtured and mentored consistently, that rewards and recognition are commensurate with performance and that employees have the opportunity to develop and grow.

Your Company has established an organization structure that is agile and focused on delivering business results. With regular communication and sustained efforts it is ensuring that employees are aligned on common objectives and have the right information on business evolution. Your Company strongly believes in fostering a culture of trust and mutual respect in all its employees seek to ensure that Nestle values and principles are understood by all and are the reference point in all people matters.

The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Rules"), is appended as Annexure - 8 to the Report.

The information as per Rule 5(2) of the Rules, forms part of this Report. However, as per first proviso to Section 136(1) of the Act and second proviso of Rule 5(2) of the Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.

The Company has a Policy on "Prevention of Sexual Harassment of Women at Workplace" and matters connected therewith or incidental thereto covering all the aspects as contained under the "The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013". The Company received two complaints under the Policy, both of which were disposed of.

Trade Relations

The Company maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the Industry.

Your Company continued to receive co-operation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavour to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumer interest.


Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functions and areas as well as the efficient utilization of the Company's resources for sustainable and profitable growth.

The Directors hereby wish to place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible.

Your Directors look forward to the long term future with confidence.

On behalf of the Board of Directors

Suresh Narayanan

Chairman and Managing Director

Date : 15th February, 2017

Place : Gurgaon