Document 1

August 25, 2010
India: Consumer Staples
Domestic growth bolstered by overseas expansion; Marico top pick

Domestic growth robust; urbanization, “thorties” to drive demand
SUMMARY OF RATINGS AND TARGET PRICES
The FMCG industry in India was worth $25bn in 2009 up 13% over 2008,
driven by increased urbanization, low penetration and rising discretionary Ticker Rating 23-Aug-10 12-month Potential
Price Target Price Upside/
income. We think this level of growth will be sustained as increased (Rs) (Rs) Downside
COLG.BO Neutral 820.45 844.00 3%
urbanization and the emergence of a cashed-up “thorties” population DABU.BO Neutral 206.85 204.00 -1%
(those aged 30-49) drive consumption of discretionary goods and services, HLL.BO Neutral 267.90 273.00 2%
ITC.BO Neutral 159.40 168.00 5%
particularly in areas such as health and education — as highlighted by our MRCO.BO Buy 128.60 147.00 14%
NEST.BO Sell 2,898.35 2,570.00 -11%
Global ECS team. In our view, these trends will benefit domestic FMCG
firms like Marico and Dabur, which offer an array of different goods and Source: Datastream, Goldman Sachs Research estimates.
services that appeal to an emerging consuming class. GROWTH, RETURNS AND VALUATION SNAPSHOT
Ticker FY2012E FY10-13E FY2012E FY2012E

Seizing opportunities in other emerging economies P/E Net income Director's CROCI
CAGR Cut
With robust domestic business generating cash for local FMCG players, COLG.BO 21.4X 10% 2.1X 145%
DABU.BO 24.3X 20% 2.5X 39%
Dabur and Marico are looking to exploit growing demand for consumer HLL.BO 21.6X 12% 2.0X 97%
products in the Middle East, Africa, South and Southeast Asia. We forecast ITC.BO 20.9X 19% 2.2X 28%
MRCO.BO 21.9X 22% 1.9X 39%
robust mid-20% growth over FY2010-13E for their international revenues NEST.BO 29.5X 18% 2.4X 72%
through a mix of acquisitions (to gain local product knowledge, and access Source: Goldman Sachs Research estimates.
to supply and distribution channels) and organic growth via increased
INTERNATIONAL REVENUE SHARE INCREASING
penetration, market share gain, increased spending by existing customers.
International revenues - % of total revenues
Differentiated product offering, Focus on more localized solutions 35%
30%
Dabur and Marico offer a broad localized product base that caters to local 25%
20%
customs and traditions. As such their products and services serve a niche 15%
10%
as yet unexplored by multinationals. For example, by adding local flavors 5%
to its castor oil in South Africa, Marico increased sales significantly there. 0%
Robust growth, returns. We favor Marico (Buy) on valuation Marico Dabur
Although Marico and Dabur enjoy similar growth and returns — with net
Source: Company data, Goldman Sachs Research estimates.
income CAGR of 22% and 20% over FY2010-2013 and a CROCI of 39% for
Marico and Dabur in FY2012E — Marico trades at a discount to Dabur (22X
vs 24X FY2012E EPS). Also Marico trades at a discount to the sector on our
Director’s Cut screen. We retain our Buy on Marico and Neutral on Dabur.
We raise our P/E-based 12-month target price on Marico to Rs147 from
Rs144 with our EPS raise of 1%-2% over FY11E-13E and retain our Rs204
target price on Dabur. Risks: Marico: sustained losses at Kaya, unfavorable
outcome of Parachute excise litigation; Dabur: Upside: strong margin
expansion in FY11E and higher-than-expected growth in hair care.
Downside: rural slowdown, limited success with new launches.
Aditya Soman The Goldman Sachs Group, Inc. does and seeks to do business with
+91(22)6616-9345 aditya.soman@gs.com Goldman Sachs India SPL companies covered in its research reports. As a result, investors should
be aware that the firm may have a conflict of interest that could affect
the objectivity of this report. Investors should consider this report as
only a single factor in making their investment decision. For Reg AC
certification, see the end of the text. Other important disclosures follow
the Reg AC certification, or go to www.gs.com/research/hedge.html.
Analysts employed by non-US affiliates are not registered/qualified as
research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc. Global Investment Research

August 25, 2010 India: Consumer Staples
Overview: High growth opportunities; favor Marico on valuation 2

‘Demographic sweet spot’ for key Marico and Dabur products 3
International business: Recipe for sustaining growth rates 7
Marico: Robust domestic business, rapid overseas expansion, Buy 12
Dabur: Health and juices to accelerate; Strong international growth 17
Robust growth, improving returns — but valuations favor Marico 20
Prices in this report are based on the market close of August 23, 2010
Overview: High growth opportunities; favor Marico on valuation

Domestic growth potential for services and discretionary products is increasing
in India as the country urbanizes and as consumers increase their wealth.
However, while there is increasing competition to share in this growth, some
Indian FMCG companies, backed by their burgeoning cash reserves are also
going overseas to further bolster and diversify their growth potential with a
focus on niches being ignored by the established Western Multinationals, In the
process they are positioning to become Emerging Market Multinationals.
We focus on Marico and Dabur in this report — which we see as the chief
beneficiaries of both domestic growth and overseas expansion.
Urbanization and the “thorties” drive growing domestic demand

In their Global Economics Paper No: 201 on “India’s Rising Labour Force” dated July 28,
2010, our Global ECS teams highlights the impact demographics will play on the demand
for goods and services in India. This report highlights the growing influence of the
“thorties” — people aged 30-49 — will have on consumption. The paper also illustrates
how urbanization will lead to faster growth in demand for services (than for goods) and
within goods, and increased demand for discretionary goods.
We believe Dabur and Marico stand to benefit from these trends as they offer a broad
range of products and services that targets this growing “consumer” class and are well
placed to deliver robust revenue and earnings growth in their domestic business.
Looking overseas for incremental growth

Many Indian FMCG companies are vying for a share of this growth. As such, we believe
that companies positioned to augment domestic growth by tapping into other emerging
markets will be best placed to sustain their growth momentum. We expect Dabur and
Marico’s healthy cash flows to allow them to make necessary investments in the markets
they are targeting in the Middle East, Africa, South and Southeast Asia; and that this will
position them to grow both organically and through selective acquisitions (with a view to
access local products, supply and distribution networks). We believe that these markets
have sufficient growth potential to allow both Dabur and Marico to sustain their robust
growth rates.
Goldman Sachs Global Investment Research 2

We favor Marico—valuation not capturing growth or CROCI

potential
We raise our 12-month target price for Marico marginally to Rs147 (from Rs144). Our target
price is based on 25X FY2012E EPS and is inline with Director’s Cut valuation of Rs145.
We expect Marico to deliver sector-leading 22% net income CAGR between FY2010-
FY2013E — driven by robust double digit revenue growth in its “Parachute” and “Saffola”
brands and 28% CAGR for its international revenues. We believe the margins for its
international business will expand following recent investments made in setting up
manufacturing facilities in locations like Egypt, as we expect these investments to lead to
saving in freight and duties. We believe these improving margins will increase cash returns.
In our opinion, these attributes are not captured in valuations, with Marico trading at a
discount to sector average FY2012E P/E multiples and to our Director’s cut screen.
Although we remain positive on the growth fundamentals for key Dabur brands, we believe
that the market is attributing fair value to Dabur’s growth and returns potential and have a
Neutral rating on the stock. Our 12-month target price of Rs204 is based on 24X FY2012E
EPS and is in-line with our Director’s Cut valuation.
‘Demographic sweet spot’ for key Marico and Dabur products

Our Global ECS team in its Global Economics Paper: 201 on India’s Rising Labor Force
demonstrates how changing demographics will affect consumption patterns in India. This
paper makes the following observations:
 Increased urbanization will likely increase demand for discretionary goods compared
with non-discretionary goods.
 The rise of the number of people in their ‘thorties’ (aged 30-49) will trigger greater
demand for housing, transportation, consumer durables, and health and education
services.
Exhibit 1: Potential future urbanization in India is large Exhibit 2: Half the additions to India’s labor force are in
the 30-49 age group till 2030
Number of people Urbanizing, 2010-2050, million
Addition to India's Labour Force, million
Age group 15-29 30-49 50+
US
UNPOP GS Projections
2011-20 38.5 53.6 17.2
Russia
2021-30 21.3 58.6 19.5
2031-40 8.4 42.1 25.7
Brazil 2041-50 -3.7 16.8 26.2
China
India
-100 0 100 200 300 400 500 600 700
Source: UN, GS Global ECS projections. Source: UN, ILO, WDI,GS Global ECS projections.

As the exhibits below illustrate, consumption of discretionary goods and health and
education related services is projected by our Global ECS team to increase by 2020.
Exhibit 3: Proportion of health in total private consumption has increased 67% in India
Evolution of major consumption categories across Asia have similarities
Private Consumption Breakdown: 1988 vs. 2008

Recreation, Culture & Education Transportation & Communication
Health Housing, Furniture & Power
Clothing and Footwear Hotels and Restaurants
Food, Beverages and Tobacco
100%
80%
60%
40%
20%
0%
1988 2008 1988 2008 1988 2008 1988 2008
India Korea Taiwan Singapore
Source: CEIC, GS Global ECS Research.
Exhibit 4: India consumption spending 2020 vs. 2010 — services get a larger share
Consumption Spending, 2020 (Rs tn) Consumption Spending, 2010 (Rs tn)
Miscellaneous, Miscellaneous,
18.7 Recreation, 5.5
Recreation, Food, Beverages Culture &
Culture & & Tobacco, 37.5 Education, 1.4 Food, Beverages
Education, 7.2 & Tobacco, 14.3
Transportation
Hotels & &
Transportation
Restaurants, 5.8 Communication,
&
Communication, 8.2
Clothing & Hotels &
29.6
Footwear, 9.4 Restaurants, 1.3
Housing, Health, 1.8 Housing,
Health, 8.6 Furniture & Clothing &
Furniture &
Power, 27.4 Footwear, 3.1
Power, 6.9
Source: GS Global ECS Research projections.
The consumption dynamic in India remains robust with the McKinsey Global Institute’s
(MGI) study on the Indian consumer market titled “The 'Bird of Gold': The Rise of India's
Consumer Market”, expecting consumption to increase at a 7% CAGR in 2005-2025. The
report estimates consumption will be driven by a near eightfold increase in those
households earning between Rs200,000 and Rs500,000 per annum. The exhibits below
illustrate the potential increase in the number of middle-class households and the potential
increase in consumption by this segment of the populace.

Exhibit 5: Middle-class households (Seekers) to grow Exhibit 6: Consuming classes to consume 4X more in
rapidly 2015 than in 2005
Households by income class Consumption by income class
300.0 80.0
70.0
250.0
60.0
House hold (mn)
200.0
Globals 50.0 Globals
Rs trillion
150.0 Strivers 40.0 Strivers
Seekers 30.0 Seekers
100.0
Aspirers Aspirers
20.0
50.0 Deprived Deprived
10.0
0.0 0.0
2005 2015 2025 2005 2015 2025
Number of households Aggreagate consumption
Source: McKinsey Global Institute, Goldman Sachs Research. Source: McKinsey Global Institute, Goldman Sachs Research.
Annual income in Rs [Deprived: <90,000; Aspirers: 90,000-200,000; Seekers: 200,000-500,000; Strivers: 500,000-
1,000,000; Globals: >1,000,000]; consuming class is defined as Seekers, Strivers and Globals.
Despite this increase in aggregate consumption, the report forecasts per capita
consumption to remain well below the other BRIC economies.
Exhibit 7: Indian consumption CAGR of 7% till 2025 Exhibit 8: 2007 per capita consumption in India - low
Consumption (US$ bn) across most categories as compared with other BRICs
2005 2015 2025
70
1,521 1,511
60
Per capita consumption U$
50
746 783 40
30
370 388 India's low per
20 capita consumption
relative to BRICs
10
India Brazil India Italy India Germany
0
Per capita
334 2,082 584 13,540 1,064 18,429
U$, 2000
12 11 8 7 5 6
Rank
Source: McKinsey Global Institute, Goldman Sachs Research. Source: Euromonitor, Goldman Sachs Research.
Dabur and Marico have a slew of products targeting this demographic change. Products
such as health foods from Marico, low-calorie juices, beauty solutions and skin clinics are
positioned to target this shift to a more discretionary spend, in our view. Exhibit 9 below
shows how we estimate different products stand to benefit from increased urbanization
and an increase in the ‘thorties’ population. We believe that products like Saffola oil and
rice, Real Juices, Fem will appeal most to an increasingly urbanized population in the
“thorties” as these are discretionary in nature and focused on health and well being.
Similarly services by Kaya will also find resonance with this demographic as it focuses on
skin health.

Exhibit 9: Demographic shift augurs well for Marico and Dabur products
Saffola Refined Oil
Likely benefit from 'thorties'

Saffola Rice
Kaya Skin Clinic
New U Real Juices
Fem
consumption
Vatika
Meswak Dabur Red
Odonil
Parachute Coconut Oil
Parachute Advansed
Dabur Amla
Hajmola
Likely benefit from urbanisation (more

discretionary)
Source: Goldman Sachs Research estimates.
We believe that Marico in particular is well placed to exploit increasing urbanization with
products like Saffola oils and foods, Parachute Creams and Gels, and Parachute Advansed
and services offered by Kaya. These products and services will also appeal to the ‘thorties’,
in our view as they focus on health, skin and hair care. While Parachutes brands have had
robust double-digit growth, we believe that a significant proportion of future domestic
growth will hinge on leveraging the Parachute and Saffola brand to market new and
innovative products. We forecast domestic business revenues to grow at a CAGR of 14.5%
between FY10-13E.
In our opinion, Dabur’s health supplements and skin care businesses are best positioned to
benefit from this demographic shift towards urbanization. We are forecasting robust 24%
CAGR between FY10-13E for the health supplements business and a 19% CAGR in the
same period for the skin care portfolio for Dabur. On the whole, we expect the consumer
care division (CCD) growth to be 17% CAGR between FY10-13E benefitting largely from the
health portfolio.

International business: Recipe for sustaining growth rates

In our opinion, the international business for Dabur and Marico holds greater potential than
just use of surplus cash. We believe that with careful acquisitions and organic growth of
existing brands this business has the potential to grow at a mid-20% CAGR. Also, in our
opinion as the business matures, we expect margins to converge with domestic margins
and increase returns for the company.
Both Dabur and Marico have been focusing on emerging markets — particularly in South
Asia, the Middle East, Africa and South East Asia. The low penetration levels, cultural
differences with the West and the relative lack of attention from global multinationals have
left a space for the likes of Dabur and Marico to exploit. In our view, Indian FMCG
companies have little appetite to tackle developed economies, beyond servicing the South
Asian diaspora there, given the lower growth potential, high penetration levels and greater
competition in these developed markets. Similarly, other developing markets in Latin
America and the Far East are also lower priority given there tends to be a greater
preference among consumers in these markets for the more westernized products offered
by the global multinationals.
Middle-East: Higher penetration but a ready market starting with

large Indian diaspora
The original move from India to the Middle East took place to service the large Indian
dispora present there. Eventually Indian companies made inroads into the local population
either through acquiring local brands or by launching products catering to the local
population. For example, Marico acquired the Egyptian hair cream and gel brands ‘Fiancee’
and ‘Hair Code’ in 2006 and now these account for about 60% of the hair styling market in
Egypt. In addition Marico launched its Parachute hair cream in the GCC countries and this
has a high twenties percent market share. Similarly Dabur recently acquired the Hobi
Group in Turkey to acquire brands like ‘Hobby’ and ‘New Era’ which allows them access to
the hair and cream market in Turkey.
Exhibit 10: Marico and Dabur entered the middle-east by targeting the sizeable Indian
diaspora
Non-resident Indians in select Gulf countries, 2000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Saudi U.A.E. Kuwait Oman Bahrain Qatar
Arabia
Non-resident Indians
Source: Report of the High Level Committee on the Indian Diaspora Government of India, Goldman Sachs Research.

While the global financial crisis and the following financial crisis in Dubai had an impact on
consumption growth in the Middle East and North Africa (MENA) region, the World Bank
expects private consumption growth to recover in 2010 (Exhibit 11).
Exhibit 11: World Bank expects private consumption growth to recover for MENA in 2010E
Private consumption growth - MENA
5.0%
4.4%
4.5%
4.0%
3.5% 3.3%
3.0% 2.6%
2.5%
2.0%
1.5%
1.5%
1.0%
0.5%
0.0%
2007 2008 2009E 2010E
Private consumption growth in MENA
Source: World Bank, Goldman Sachs Research.
Exhibit 12: Evolution of Middle East business for Marico and Dabur
dependent on Indian cash
Targeting Indian diaspora with Indian products

flows, supply chain
Gulf business still
Introducing variants of Indian products

independent
increasingly
Business
Introducing localised Acquisition for local

products for non- expetise, product
Indian population lines
Source: Goldman Sachs Research.

Africa: Low penetration, increasing consumer spending and

urbanization
The consumer market in Africa, particularly sub-Saharan Africa has a considerable
potential for India-based consumer companies. Recently, in addition to Dabur and Marico,
companies like Godrej Consumer and Emami have also entered this potentially lucrative
and under-developed market. Some of attractions for Indian companies, in our view, are:
1. Growing middle class
2. Increasing urbanization – urbanization levels are already similar to those in China
3. Lower focus from global multinationals
4. Acquisition targets are likely not as expensive as those in South Asia
5. Low penetration levels in the hair and skin care market
As per the June 2010 McKinsey Global Institute report “Lions on the move: The progress
and potential of African economies”, Africa will have 12 million households with
discretionary income by 2020 and 50% of African will be living in cities. This represents a
very large and potentially untapped market for Indian companies to enter, in our view.
Exhibit 13: Consuming class (with discretionary income) to grow by 50% in 2020
Households by income class (millions)
300
250 Globals
200
Consuming middle
class
150
Emerging consumers
100
Basic consumer needs
50
Destitute
-
2000
2008
2020E
Source: McKinsey Global Institute, Goldman Sachs Research.
2005 PPP US$ [Destitute: <2,000; Basic consumer needs: 2,000-5,000; Emerging consumers: 5,000-10,000; Consuming
middle class: 10,000-20,000; Globals: >20,000]; The consuming class includes emerging consumers, consuming
middle class and Globals.
The McKinsey report also forecasts the continent’s labor force to expand to 1.1 billion by
2040, surpassing that of China or India. The report forecasts the consumer business
opportunity in Africa will exceed $1.3 trillion in 2020. All these factors, in our opinion, hold
considerable potential for growth for Indian consumer companies.

Exhibit 14: Consumer revenues in Africa to increase at a CAGR of 4% between 2008-2020

Annual revenues (USD, billion)
3,000
Annual revenues (USD, billion)

2,620
2,500
2,000
1,640
1,500 1,380
1,000 860
500
0
Consumer revenues Total revenues
2008 2020E
Source: McKinsey Global Institute, Goldman Sachs Research.
South Asia: Market dynamics similar to India

Indian consumer companies also have a significant presence in other South Asian
countries. Markets like Nepal, Bangladesh, Pakistan and Sri Lanka face similar
demographic conditions and dynamics to India and are characterized by low but increasing
penetration, growing middle class and increasing urbanization. These markets also have
cultural similarities to various regions in India in terms of consumption patterns and
product usage and are a natural extension for Indian consumer companies.
Our Global ECS team forecasts relatively steady GDP growth rates for Bangladesh and
Pakistan between 2010 and 2050. Although these economies will have per capita GDP
significantly less than that forecast for India in 2050, the USD GDP per capita is expected to
increase more than 10-fold (from $510 in 2010 to $5235 in 2050) for Bangladesh and almost
8-fold for Pakistan (from $897 in 2010 to $7066 in 2050) as shown below.

Exhibit 15: Bangladesh GDP per capita to increase 10-fold Exhibit 16: Pakistan GDP per capita to increase 8-fold by
by 2050 2050
6,000 8,000
7,000
5,000
6,000
4,000
5,000
3,000 4,000
Bangladesh 3,000 Pakistan
2,000
2,000
1,000
1,000
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
US$ GDP Per Capita US$ GDP Per Capita
Source: GS Global ECS Research Projections. Source: GS Global ECS Research Projections.
GS Global ECS also forests the labor force to grow by 68% in Bangladesh and 55% in
Pakistan between 2010 and 2015. We believe this increase will lead to significant new
additions to the “consumer class” in South Asia.
Exhibit 17: 66mn additions to labor force in Bangladesh Exhibit 18: Labor force in Pakistan add 32mn workers
between 2010 and 2050 between 2010 and 2050
180 100
160 90
140 80
70
120
60
100
50
80
Bangladesh 40 Pakistan
60
30
40 20
20 10
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
Labour force, mn Labour force, mn
Southeast Asia: Already large consumer class, potential acquisition

targets
Although Southeast Asia has significantly higher consumer goods penetration levels than
South Asia or Africa, we believe that this market has the potential for differentiated and
niche products. Also, penetration levels are much lower than those in the West or the Far
East. For example, while toothpaste/toothpowder consumption in Philippines and Malaysia
is 2-3 times higher than that in India, it is only about 40%-50% of that in the US. Similarly
the use of hair and skin products is higher than that in India, but much below the average
in Europe and the USA.
Southeast Asia also has historic and cultural ties to India and consumption and localizing
products in these markets is a lot easier for Indian companies than in other developing
regions like Latin America, in our view. Southeast Asia also has a growing consumer class
with a growing labor force and increasing per capita incomes.

Exhibit 19: Labor force in Indonesia to grow till 2035 Exhibit 20: Philippines labor force to be 90mn in 2050
190 100
185 90
180 80
175 70
170
60
165
50
160
Indonesia 40 Philippines
155
150 30
145 20
140 10
135 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
Labour force, mn Labour force, mn
As per projections by our Global ECS team, the US$ GDP per capita would increase 33X in
Vietnam by 2050 (in constant dollar terms) 13X in Indonesia and 12X in the Philippines. We
believe that this rapid growth in incomes would lead to increased consumption and benefit
companies that offer differentiated products and services.
Exhibit 21: Indonesia: 2050 per capita GDP 13X Exhibit 22: Philippines per capita GDP 12X by 2050
25,000 25,000
20,000 20,000
15,000 15,000
10,000 Indonesia 10,000 Philippines
5,000 5,000
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
US$ GDP Per Capita US$ GDP Per Capita
Marico: Robust domestic business, rapid overseas expansion, Buy

Robust growth in the domestic business. Marico’s two franchise brands – Parachute
(packaged coconut oil) and Saffola (refined safflower oil) have recorded robust volume
growth in the last few quarters as the exhibits below illustrate. While we believe the growth
potential for Parachute coconut oil to be consistent at a 7%-8% CAGR for the next 5 years,
we expect the Saffola business to grow much faster. We believe that Saffola’s positioning
as a healthier alternative to traditional cooking oils will appeal increasingly to a population
in the age-group at risk from heart disease. Additionally, we believe that as discretionary
spending increases, an increased proportion of the population will gravitate towards more
premium but healthy options like Saffola.

Exhibit 23: Parachute volumes robust in double-digits Exhibit 24: Volume growth above 15% for last 4 quarters
Volume growth (yoy) – Parachute (Rigid packs) Volume growth (yoy) – Saffola edible refined oil
16% 30%
14%
25%
12%
20%
10%
8% 15%
6%
10%
4%
5%
2%
0% 0%
Parachute Volumes - Rigid Packs Saffola refined edible oils
Source: Company data, Goldman Sachs Research. Source: Company data, Goldman Sachs Research.
We also believe that Marico’s entry into the functional foods space is a long-term positive
as we expect that increased urbanization and a growth in the number of women in the
labor force will lead to a rise in demand for packaged foods. We expect Marico’s entry into
the Rs4bn premium packaged rice market and the Rs1.3bn oats market to be positive for
long-term growth despite foods being a lower margin business.
Marico’s has also entered into the Rs4.5bn cooling oil segment with Parachute Advansed
Cooling Oil, the only segment in the hair oil market where it did not have a product. While
we expect Marico to lag the market leader in this segment, we believe that the addition of
this product allows Marico to allow a complete array of hair oil products to potential
customers and shield it from changing consumer preferences.
International business revenues expected to grow at a 28% CAGR between

FY10-13E. Marico began its international operations in the 1990s to supply Parachute
Coconut Oil to Indians settled abroad. Now this business accounts for close to a fourth of
its group revenues and we expect this share to increase to about 30% in FY2013E. Marico
has shown robust growth in this international business in the past six years with a 2004-10
CAGR of 42%. Marico now has a sizable presence in Bangladesh, the Middle East and
North Africa, and South Africa. It has also entered the Southeast Asian market with the
acquisition of ‘Code 10’, a Malaysian hair styling brand.

Exhibit 25: International business now accounts for almost a fourth of total revenues
Marico – revenue break-down (FY2010)
35%
15%
6% 14%
7%
23%
Parachute & Nihar Saffola Other hair oil

International business Kaya Others
Source: Company data, Goldman Sachs Research.
Exhibit 26: International business to be increasingly Exhibit 27: We expect the Rs13bn of international
important revenues in FY2013E
35% 14,000
30%
28% FY2010-2013E
30% 26% 12,000 CAGR 28%
23%
25% 10,000
20%
20% 17% 8,000
15% 13% 6,000 FY2004-2010

10% 11% CAGR 42%
8%
10% 4,000
5% 2,000
0% -
Source: Company data, Goldman Sachs Research estimates. Source: Company data, Goldman Sachs Research estimates.
Exhibit 28: Bangladesh, Egypt and South Africa - largest international markets for Marico
3% 21%
11%
20% 45%
Bangladesh Egypt South Africa Malaysia Others

Marico has a two pronged approach to the international business: organic growth by
setting up new facilities and acquisitions to get market share and access to the supply
chain.
Exhibit 29: Brief summary of Marico’s international operations
Marico - International business division

Bangladesh MENA (other than Egypt)
- Subsidiary listed in Dhaka - - Commenced operations by
Key product line similar to India targeting Indian expats with
but recently setup Parachute coconut oil in the
manufacturing facilities - UAE and other GCC countries
Parachute market share >70% - - Introduced hair creams and
Hair Code hair dye, which is the expanded target market to
second largest dye brand in include locals
Bangladesh - Used base in Egypt to expand
into markets like Sudan and
Morocco
Egypt South Africa
- Fiancee and HairCode, two - Acquired Enaleni
hair cream and gel brands Pharmaceuticals in 2007
acquired in 2006 - Entered ethnic hair care
- Market share above 55% market with three brands -
- Launched Parachute Gold hair Caivil, Black chic and Hercules
oil in 2010 - Also acquired Ingwe, an OTC
- Setup new plant for exclusive healthcare brand in 2010
manufacture of Parachute - To use base in South Africa to
products to supply to MENA expand into other neighbouring
region in 2010 markets
Others
- Entered Malaysian market with acquisition of Code 10, a hair gel
maker from Colgate in 2010
- Current market share of about 10% in Malaysia
- Also acquired Derma Rx through Kaya to augment skin care
business in 2010
- Plans to use brand and distribution to enter other Southeast Asian
markets
Source: Company data, Goldman Sachs Research
Marico is emerging from a series of investments in the international business to setup

plants and rationalize the supply chain in various markets. We expect the margins of the
international business to converge with those of the domestic business as the facilities
scale up and operate at capacity.

Kaya Skin Clinic – still loss making but green-shoots on the horizon. Three key
reasons were cited by management for Kaya’s underperformance:
1. Employee attrition: Employees disliked the repetitive nature of the job and saw
limited vertical mobility; company has undertaken better job rotation and training
programs to resolve this issue.
2. Customer retention: Clients prefer continuity with regards to store employees.

Kaya brand proposition was also perceived as a solution for skin problems and not
as a regular skin care provider. The company has launched Kaya Everyday
Radiance, a service which it says will enhance the number of repeat customers.
3. The management also identified non-profitable store locations and decided to re-
locate/ close these stores.
In our opinion, Kaya is an interesting proposition given the demographic trends we

highlighted earlier and will be attractive to both – an increasingly urbanized population as
well as a population moving into the “thorties”. Most Kaya stores are still relatively
immature and we believe that as these stores develop a loyal clientele, Kaya would break-
even by FY2013E.

Dabur: Health and juices to accelerate; Strong international growth

Dabur reported 19.5% sales growth in 1QFY11, which was largely driven by volume growth.
Dabur reported particularly robust revenue growth in the health supplements, home care,
foods and oral care categories, with each of these categories recording over 20% yoy
growth. Hair and skin care growth was relatively modest, but these businesses have a very
large base and are more difficult to grow. We believe that these results were in-line with
the demographic trend highlighted by our GS Global ECS team.
Exhibit 30: We expect Health supplements to grow at 24% CAGR between FY10-13E
Consumer care division – revenue break up by category
40,000
35,000
30,000
25,000
Rs mn
20,000
15,000
10,000
5,000
-
FY2009 FY2010 FY2011E FY2012E FY2013E
Health supplements Foods Home care

Oral care Hair care Skin care
Dabur has about 45% of its revenues coming from rural areas and as such is the company
with the most rural exposure under our India consumer staples coverage. While this is an
advantage in the short term as rural penetration is well below urban, we believe that
greater urban exposure is better over the longer term. Dabur has a greater proportion of
products aimed at a rural markets and as such is not as well placed as Marico to benefit
from rapid urbanization, in our view.
Exhibit 31: FY2010 Sales breakdown - Dabur has a large exposure to rural sales
Rural
45%
Urban
55%
Source: Company data, Goldman Sachs Research

International business to double by FY2013E. We are forecasting Dabur’s overseas

business to grow at a topline CAGR of 28% between FY2010-13E. In FY2010, the
international business accounted for about 18% of overall revenues and we expect this to
increase to 22% by FY2013E.
Exhibit 32: International business currently accounts for 18% of overall revenues
FY2010 – Revenue break-up
71%
8%
18%
3%
Consumer Care Division Consumer Health Division

International Business Others
Exhibit 33: International business growing in importance Exhibit 34: Overseas business revenue CAGR of 28% for
FY2010-13E
25% 22% 14,000
21% FY2010-2013E
19% 12,000 CAGR 28%
20% 18%
17%
16% 10,000
14%
15% 12% 12% 8,000
11%
6,000 FY2004-2010
10% CAGR 29%
4,000
5%
2,000
0% -
As with Marico, Dabur began its international operations as an export business to cater to
the large Indian expat population in the GCC countries. In 1989, Dabur setup a franchisee in
Dubai. Eventually it set up its own manufacturing facility in Dubai and Egypt. This was
followed by facilities in Nigeria, Ras al-Khaimah and Bangladesh.

Exhibit 35: Revenue break-down by key market
Others GCC
29% 30%
Bangladesh
5%
Mediterranean
Asia Egypt
8% 18%
Nigeria
10%
Dabur’s international operations are run independently of the Indian business, with its own
supply chain, product development and management. Dabur has acquired the Hobi Group
in Turkey, which is Dabur’s first overseas acquisition. Hobi sells hair, skin and body
products under the brand names Hobby and New Era, and these are complementary to
products marketed by Dabur. With this acquisition Dabur aims to have access to the
Turkish market, as well as a distribution network extending to over 35 countries.
Although this acquisition will be funded largely by a loan taken by Dabur International,
Dabur India has said it may have to guarantee the loan. The loan should ensure Dabur’s
existing cash remains intact and the company will have sufficient cash for any further
acquisition target that may appear.
Through its setup in Nigeria, Dabur is keen to enter other markets in Africa. Dabur has a
small presence in Southeast Asia and is looking to expand business there.
Dabur’s international business focuses on Hair Creams, Toothpastes, Hair Oils and
Conditioners. Unlike Marico, most Dabur products overseas are similar to the products sold
in India, with the exception of Dabur Herbal Toothpaste. Dabur also has a sizeable presence
in the US and the UK, albeit this is primarily aimed for distribution to the Indian diaspora
through stores selling Indian products.

Robust growth, improving returns — but valuations favor Marico
Exhibit 36: GS India Consumer Staples Valuations summary
Ticker Bloomberg GS rating Mkt. cap 08/23/10 12-m TP Potential ROE ROAA CROCI Dividend yield
Ticker (US$ mn) Price (Rs) (Rs) upside/ FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
downside
Returns
Colgate Palmolive (India) COLG.BO CLGT IN Neutral 2,390 820 844 3% 95% 77% 48% 44% 1.60 1.45 3% 3%
Dabur India DABU.BO DABUR IN Neutral 3,836 207 204 -1% 39% 38% 24% 25% 0.37 0.39 1% 2%
Hindustan Unilever HLL.BO HUVR IN Neutral 12,517 268 273 2% 92% 82% 26% 28% 0.73 0.97 3% 3%
ITC ITC.BO ITC IN Neutral 13,062 159 168 5% 30% 30% 21% 23% 0.27 0.28 2% 2%
Marico MRCO.BO MRCO IN Buy 1,678 129 147 14% 34% 31% 18% 18% 0.36 0.39 1% 1%
Nestle India NEST.BO NEST IN Sell 5,987 2,898 2,570 -11% 106% 105% 35% 37% 0.69 0.72 2% 2%
Average 66% 60% 29% 29% 0.67 0.70 2% 2%
Ticker Sales Net income Sales Net inc. Gross Margin EBITDA Margin EBIT Margin Net Margin
FY 11E (Rs FY 12E (Rs FY 11E FY 12E (Rs CAGR CAGR FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
mn) mn) (Rs mn) mn) FY10-13E FY10-13E
Growth & Margins
Colgate Palmolive (India) COLG.BO 22,910 26,469 4,672 5,217 16% 10% 57% 57% 25% 24% 24% 23% 20% 20%
Dabur India DABU.BO 39,868 47,453 6,152 7,365 19% 20% 51% 51% 21% 21% 19% 20% 15% 16%
Hindustan Unilever HLL.BO 191,446 210,983 23,565 27,028 10% 12% 47% 48% 16% 17% 15% 16% 12% 13%
ITC ITC.BO 200,746 227,316 49,929 58,415 12% 19% 47% 47% 38% 39% 34% 36% 25% 26%
Marico MRCO.BO 31,158 36,904 3,011 3,587 18% 22% 51% 50% 14% 14% 12% 12% 10% 10%
Nestle India NEST.BO 62,908 74,217 7,864 9,532 18% 18% 29% 30% 19% 20% 17% 18% 13% 13%
Average 15% 17% 47% 47% 22% 22% 20% 21% 16% 16%
Ticker Net Debt / (Cash) Total Equity Net Debt / Equity P/B P/E EV/EBITDA Director's Cut
FY 11E (Rs FY 12E (Rs FY 11E FY 12E (Rs FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
mn) mn) (Rs mn) mn)
Gearing & Valuations
Colgate Palmolive (India) COLG.BO (4,754) (6,289) 4,941 6,758 -0.96X -0.93X 23X 17X 24X 21X 19X 17X 2.3X 2.1X
Dabur India DABU.BO (1,515) (3,537) 15,932 19,498 -0.10X -0.18X 11X 9X 29X 24X 21X 18X 3.0X 2.5X
Hindustan Unilever HLL.BO (10,835) (19,740) 25,615 32,989 -0.42X -0.60X 23X 18X 25X 22X 19X 16X 2.8X 2.0X
ITC ITC.BO (13,213) (29,992) 166,004 195,830 -0.08X -0.15X 7X 7X 24X 21X 16X 13X 2.5X 2.2X
Marico MRCO.BO 284 (2,111) 8,974 11,725 0.03X -0.18X 9X 8X 26X 22X 18X 15X 2.3X 1.9X
Nestle India NEST.BO (1,613) (2,721) 7,448 9,056 -0.22X -0.30X 38X 27X 36X 29X 23X 19X 2.8X 2.4X
Average -0.29X -0.39X 18X 14X 27X 23X 19X 16X 2.6X 2.2X
* Nestle India has December year end. All other companies follow March year end.
** Nestle India data adjusted for year end difference for easier comparison
For methodology and risks associated with price targets mentioned, please refer to the analyst's previously published research. For important disclosures, please go to
http://www.gs.com/research/hedge.html.
Robust earnings growth for Marico and Dabur; FY10-13E Net Income CAGR of
22% and 20% respectively
We fine-tune our FY2011E, FY2012E and FY2013E EPS estimates for Marico by 1%-2% to
reflect higher growth and better margins in its international division. On the back of this,
we raise our 12-month target price to Rs147 from Rs144 — still based on 25X FY2012E P/E.
We are forecasting a FY10-13E Sales CAGR of 18% for Marico driven by a robust 28%
CAGR for the international business and sustained growth momentum in franchise
businesses like Saffola. We believe that EBIT margins before A&P spending will improve
with margin improvement for the international business and a reduction in costs as
inflation eases towards the latter half of FY2011E. We believe that the Kaya business will
start to generate profits on a store level in FY2012E and on a business level in FY2013E. We
are forecasting net income to grow at a CAGR of 22% between FY10-13E.
While we leave our estimates for Dabur unchanged, we are forecasting a robust 19% Sales
CAGR for Dabur between FY10-13E. We believe that top-line growth for Dabur will be
driven primarily by robust growth in the Health supplements, Oral care, Skin care and
Foods segments, in addition to the 28% CAGR delivered by the international business over
the same period. We expect EBITDA margins to expand from 19.5% in FY2010 to 21% in
FY2012E as the Fem business is integrated into the skin care category of the CCD segment
and as margins improve in the. We are forecasting a net income CAGR of 20% for Dabur
between FY10-13E. Our 12-month target price for Dabur is unchanged at Rs204 — still

based on 24X FY2012E P/E. We ascribe a multiple premium to Marico as we expect its
CROCI to improve following margin expansion as its investments bear fruit.
Exhibit 37: Sales growth significantly above the sector Exhibit 38: Net income growth also above the sector
Sales growth (yoy) Net income growth (yoy)
30% 60%
Net Income growth yoy

25% 50%
Sales growth yoy
20% 40%
15% 30%
10% 20%
5% 10%
0% 0%
FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E
DABU.BO MRCO.BO Sector DABU.BO MRCO.BO Sector
Improving cash returns post the investment cycle
While we forecast sales and earnings growth for Marico and Dabur to be above that for the
sector as a whole, the cash returns on gross cash invested (CROCI) for these companies
have traditionally been lower than that for Colgate-Palmolive India, Hindustan Unilever and
Nestle India. This is largely because these Colgate, HUL and Nestle do not capitalize the
value of their brands in the Indian financials and as such the returns look inflated.
However, we are forecasting the CROCI for Marico to improve as the cycle of investment
draws to a close and as margins improve. We also expect Dabur’s CROCI to improve as
margins expand and the recent acquisitions (Fem and Hobi) are integrated into Dabur.
Exhibit 39: CROCI to improve as cycle of investments draws to a close

Cash returns on gross cash invested (CROCI)
55%
50%
45%
40%
35%
30%
25%
20%
MRCO.BO DABU.BO Sector

Dabur valuations reflect growth/returns potential, Buy Marico
We believe that at 24X FY2012E EPS, Dabur P/E captures its high growth and improving
returns. On our returns-based Director’s cut valuation —Dabur at 2.5X FY2012E EV/GCI by
FY2012E CROCI/WACC looks expensive relative to the sector average multiple of 2.2X.
On the other hand, at 22X FY2012E EPS, Marico trades at a slight discount to the sector
(Sector average P/E of 23X for FY12E) despite its higher net income growth and improving
returns. On a Director’s cut multiple of 1.9X FY2012E CROCI/WACC is also at a discount to
the sector multiple of 2.2X.
Exhibit 40: Upside to Marico as it trades below the line of Exhibit 41: Marico FY12E P/E does not capture its
our Director’s Cut valuation growth, in our view
FY2012E EV/GCI to FY2012E CROCI/WACC FY2012E P/E vs FY10-13E net income CAGR
30.0X COLG.BO 31.0X
R² = 0.99
29.0X NEST.BO
25.0X
27.0X
FY12E EV/GCI
20.0X DABU.BO
FY12E P/E
NEST.BO 25.0X
HLL.BO
15.0X 23.0X COLG.BO
21.0X
10.0X DABU.BO HLL.BO ITC.BO
19.0X MRCO.BO
5.0X
17.0X
ITC.BO MRCO.BO
0.0X 15.0X
0.0X 2.0X 4.0X 6.0X 8.0X 10.0X 12.0X 14.0X 8% 13% 18% 23%
FY12E CROCI/WACC FY10-13E Net Income CAGR
Source: Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates.
Exhibit 42: Marico trading at par with the sector, despite Exhibit 43: Whereas Dabur is trading at a 10% premium
higher growth to the sector
12-month forward P/E relative to sector 12-month forward P/E relative to sector
20%
30%
20%
10%
10%
0%
0%
-10% -10%
-20%
-20%
-30%
-30%
-40%
-50%
-40%
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
Marico/GS India consumer coverage P/E Mean +1 Stdev -1 Stdev Dabur/GS India consumer coverage P/E Mean +1 Stdev -1 Stdev
Source: Dastream, Goldman Sachs Research estimates. Source: Dastream, Goldman Sachs Research estimates.
Risks
Marico: Downside risks include sustained inflationary pressure in India, an unfavorable
outcome in the Parachute litigation regarding excise duty on Parachute coconut oil packs of
volumes less than 200ml, sustained losses at Kaya
Dabur: Upside risks include strong margin expansion in FY11E and higher-than-expected
growth in the hair care segment. Downside risks are a rural slowdown, and limited success
with new launches.

Exhibit 44: Marico – Summary financials
Profit model (Rs mn) 3/10 3/11E 3/12E 3/13E Balance sheet (Rs mn) 3/10 3/11E 3/12E 3/13E
Total revenue 26,607.6 31,158.4 36,904.2 43,736.8 Cash & equivalents 1,114.6 3,674.6 5,569.9 7,936.0
Cost of goods sold (12,616.0) (15,392.3) (18,341.4) (21,868.4) Accounts receivable 1,506.9 1,579.9 1,820.7 2,037.9
SG&A (5,412.4) (6,044.7) (7,177.9) (8,572.4) Inventory 4,448.1 4,397.8 4,826.7 5,467.1
R&D 0.0 0.0 0.0 0.0 Other current assets 1,899.9 2,099.9 2,299.9 2,499.9
Other operating profit/(expense) (4,827.8) (5,359.3) (6,310.6) (7,435.3) Total current assets 8,969.5 11,752.1 14,517.1 17,940.8
EBITDA 3,751.5 4,362.2 5,074.3 5,860.7 Net PP&E 2,867.7 3,553.2 4,302.3 5,059.0
Depreciation & amortization (600.6) (560.9) (653.2) (774.1) Net intangibles 850.3 850.3 850.3 850.3
EBIT 3,150.8 3,801.3 4,421.1 5,086.6 Total investments 827.1 227.1 127.1 77.1
Interest income 110.7 95.8 184.9 270.1 Other long-term assets 1,745.4 1,745.4 1,745.4 1,745.4
Interest expense (256.8) (231.5) (204.0) (176.5) Total assets 15,260.0 18,128.1 21,542.3 25,672.6
Income/(loss) from uncons. subs. 0.0 0.0 0.0 0.0
Others 71.9 74.2 76.7 79.3 Accounts payable 3,095.8 3,777.1 4,522.5 5,452.1
Pretax profits 3,076.6 3,739.9 4,478.7 5,259.5 Short-term debt 0.0 0.0 0.0 0.0
Income tax (643.3) (710.6) (873.4) (1,051.9) Other current liabilities 1,040.5 1,418.4 1,836.4 2,324.6
Minorities (18.7) (18.7) (18.7) (18.7) Total current liabilities 4,136.3 5,195.5 6,358.9 7,776.7
Long-term debt 4,458.8 3,958.8 3,458.8 2,958.8
Net income pre-preferred dividends 2,414.6 3,010.6 3,586.7 4,188.9 Other long-term liabilities 0.0 0.0 0.0 0.0
Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 4,458.8 3,958.8 3,458.8 2,958.8
Net income (pre-exceptionals) 2,414.6 3,010.6 3,586.7 4,188.9 Total liabilities 8,595.1 9,154.3 9,817.7 10,735.5
Post-tax exceptionals (97.9) 0.0 0.0 0.0
Net income 2,316.7 3,010.6 3,586.7 4,188.9 Preferred shares 0.0 0.0 0.0 0.0
Total common equity 6,539.6 8,848.5 11,599.2 14,811.8
EPS (basic, pre-except) (Rs) 3.96 4.94 5.89 6.88 Minority interest 125.3 125.3 125.3 125.3
EPS (basic, post-except) (Rs) 3.80 4.94 5.89 6.88
EPS (diluted, post-except) (Rs) 3.79 4.92 5.86 6.85 Total liabilities & equity 15,260.0 18,128.1 21,542.3 25,672.6
DPS (Rs) 0.66 0.98 1.17 1.37
Dividend payout ratio (%) 17.4 19.9 19.9 19.9 BVPS (Rs) 10.74 14.53 19.04 24.32
Free cash flow yield (%) 0.6 3.6 3.5 4.2
Growth & margins (%) 3/10 3/11E 3/12E 3/13E Ratios 3/10 3/11E 3/12E 3/13E
Sales growth 11.4 17.1 18.4 18.5 ROE (%) 41.8 39.1 35.1 31.7
EBITDA growth 23.4 16.3 16.3 15.5 ROA (%) 17.4 18.0 18.1 17.7
EBIT growth 17.5 20.6 16.3 15.1 ROACE (%) 29.3 32.6 38.4 42.2
Net income growth 22.8 30.0 19.1 16.8 Inventory days 113.4 104.9 91.8 85.9
EPS growth 22.7 30.0 19.1 16.8 Receivables days 17.9 18.1 16.8 16.1
Gross margin 52.6 50.6 50.3 50.0 Payable days 80.4 81.5 82.6 83.2
EBITDA margin 14.1 14.0 13.8 13.4 Net debt/equity (%) 50.2 3.2 (18.0) (33.3)
EBIT margin 11.8 12.2 12.0 11.6 Interest cover - EBIT (X) 21.6 28.0 231.5 NM
Valuation 3/10 3/11E 3/12E 3/13E

Cash flow statement (Rs mn) 3/10 3/11E 3/12E 3/13E
Net income pre-preferred dividends 2,414.6 3,010.6 3,586.7 4,188.9 P/E (analyst) (X) 32.6 26.1 21.9 18.8
D&A add-back 600.6 560.9 653.2 774.1 P/B (X) 12.0 8.9 6.8 5.3
Minorities interests add-back 0.0 0.0 0.0 0.0 EV/EBITDA (X) 15.4 18.0 15.0 12.5
Net (inc)/dec working capital (1,287.0) 485.7 (124.2) (128.0) Dividend yield (%) 0.5 0.8 0.9 1.1
Other operating cash flow (271.1) (600.0) (879.4) (1,170.6)
Cash flow from operations 2,021.2 4,186.4 4,128.4 4,735.0
Capital expenditures (1,563.5) (1,246.3) (1,402.4) (1,530.8)

Acquisitions 0.0 0.0 0.0 0.0
Divestitures 37.5 0.0 0.0 0.0
Others (547.7) 702.2 291.3 326.5
Cash flow from investments (2,073.7) (544.2) (1,111.1) (1,204.3)
Dividends paid (common & pref) (472.1) (350.8) (418.0) (488.2)

Inc/(dec) in debt 951.3 (500.0) (500.0) (500.0)
Common stock issuance (repurchase) 218.2 0.0 0.0 0.0
Other financing cash flows (416.3) (231.5) (204.0) (176.5)
Cash flow from financing 281.1 (1,082.3) (1,122.0) (1,164.6)
Total cash flow 228.6 2,560.0 1,895.4 2,366.1 Note: Last actual year may include reported and estimated data.

Exhibit 45: Dabur – Summary financials
Profit model (Rs mn) 3/10 3/11E 3/12E 3/13E Balance sheet (Rs mn) 3/10 3/11E 3/12E 3/13E
Total revenue 33,656.6 39,867.7 47,453.5 56,563.3 Cash & equivalents 1,924.0 3,307.1 5,329.2 7,884.3
Cost of goods sold (15,951.4) (19,462.8) (23,166.0) (27,952.7) Accounts receivable 2,147.0 2,543.2 3,027.1 3,608.2
SG&A (11,932.6) (12,996.9) (15,374.9) (18,043.7) Inventory 4,283.0 5,225.8 6,220.2 7,505.4
R&D -- -- -- -- Other current assets 2,906.0 2,906.0 2,906.0 2,906.0
Other operating profit/(expense) 240.6 315.4 346.9 381.6 Total current assets 11,260.0 13,982.2 17,482.4 21,903.9
EBITDA 6,511.1 8,313.2 9,961.4 11,785.3 Net PP&E 9,032.0 10,335.9 11,532.1 12,675.0
Depreciation & amortization (557.3) (589.8) (702.0) (836.8) Net intangibles 0.0 0.0 0.0 0.0
EBIT 6,013.2 7,723.4 9,259.4 10,948.5 Total investments 2,904.0 2,904.0 2,904.0 2,904.0
Interest income 0.0 25.1 42.6 65.9 Other long-term assets 0.0 0.0 0.0 0.0
Interest expense (131.6) (143.4) (143.4) (143.4) Total assets 23,196.0 27,222.1 31,918.5 37,483.0
Income/(loss) from uncons. subs. 0.0 0.0 0.0 0.0
Others 146.7 0.0 0.0 0.0 Accounts payable 4,345.0 5,256.1 6,386.2 7,767.1
Pretax profits 6,028.3 7,605.2 9,158.7 10,871.1 Short-term debt 0.0 0.0 0.0 0.0
Income tax (984.9) (1,445.0) (1,785.9) (2,119.9) Other current liabilities 3,860.0 3,860.0 3,860.0 3,860.0
Minorities (8.1) (8.1) (8.1) (8.1) Total current liabilities 8,205.0 9,116.1 10,246.2 11,627.1
Long-term debt 1,792.0 1,792.0 1,792.0 1,792.0
Net income pre-preferred dividends 5,035.3 6,152.1 7,364.6 8,743.1 Other long-term liabilities 382.0 382.0 382.0 382.0
Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 2,174.0 2,174.0 2,174.0 2,174.0
Net income (pre-exceptionals) 5,035.3 6,152.1 7,364.6 8,743.1 Total liabilities 10,379.0 11,290.1 12,420.2 13,801.1
Post-tax exceptionals 0.0 0.0 0.0 0.0
Net income 5,035.3 6,152.1 7,364.6 8,743.1 Preferred shares 0.0 0.0 0.0 0.0
Total common equity 12,733.0 15,839.9 19,398.1 23,573.5
EPS (basic, pre-except) (Rs) 5.82 7.11 8.51 10.10 Minority interest 84.0 92.1 100.2 108.3
EPS (basic, post-except) (Rs) 5.82 7.11 8.51 10.10
EPS (diluted, post-except) (Rs) 5.79 7.08 8.47 10.06 Total liabilities & equity 23,196.0 27,222.1 31,918.5 37,483.0
DPS (Rs) 2.26 3.01 3.76 4.51
Dividend payout ratio (%) 38.8 42.3 44.2 44.7 BVPS (Rs) 14.68 18.26 22.36 27.17
Free cash flow yield (%) 1.9 2.2 3.0 3.7
Growth & margins (%) 3/10 3/11E 3/12E 3/13E Ratios 3/10 3/11E 3/12E 3/13E
Sales growth 20.0 18.5 19.0 19.2 ROE (%) 48.3 43.1 41.8 40.7
EBITDA growth 31.3 27.7 19.8 18.3 ROA (%) 24.0 24.4 24.9 25.2
EBIT growth 33.3 28.4 19.9 18.2 ROACE (%) 47.7 46.2 49.1 52.5
Net income growth 28.9 22.2 19.7 18.7 Inventory days 92.0 89.2 90.2 89.6
EPS growth 28.9 22.2 19.7 18.7 Receivables days 21.3 21.5 21.4 21.4
Gross margin 52.6 51.2 51.2 50.6 Payable days 97.0 90.0 91.7 92.4
EBITDA margin 19.3 20.9 21.0 20.8 Net debt/equity (%) (1.0) (9.5) (18.1) (25.7)
EBIT margin 17.9 19.4 19.5 19.4 Interest cover - EBIT (X) 45.7 65.3 91.9 141.4
Valuation 3/10 3/11E 3/12E 3/13E

Cash flow statement (Rs mn) 3/10 3/11E 3/12E 3/13E
Net income pre-preferred dividends 5,035.3 6,152.1 7,364.6 8,743.1 P/E (analyst) (X) 35.6 29.1 24.3 20.5
D&A add-back 557.3 589.8 702.0 836.8 P/B (X) 14.1 11.3 9.3 7.6
Minorities interests add-back 8.1 8.1 8.1 8.1 EV/EBITDA (X) 18.7 21.4 17.6 14.7
Net (inc)/dec working capital (680.9) (428.0) (348.1) (485.4) Dividend yield (%) 1.1 1.5 1.8 2.2
Other operating cash flow (702.2) (380.6) (380.6) (380.6)
Cash flow from operations 4,217.6 5,941.3 7,345.9 8,722.0
Capital expenditures (1,851.1) (1,893.7) (1,898.1) (1,979.7)

Acquisitions 0.0 0.0 0.0 0.0
Divestitures 0.0 0.0 0.0 0.0
Others (801.0) 0.0 0.0 0.0
Cash flow from investments (2,652.1) (1,893.7) (1,898.1) (1,979.7)
Dividends paid (common & pref) (2,154.0) (2,664.5) (3,425.8) (4,187.1)

Inc/(dec) in debt (483.9) 0.0 0.0 0.0
Common stock issuance (repurchase) 0.0 0.0 0.0 0.0
Other financing cash flows 0.0 0.0 0.0 0.0
Cash flow from financing (2,637.9) (2,664.5) (3,425.8) (4,187.1)
Total cash flow (1,072.4) 1,383.1 2,022.0 2,555.2 Note: Last actual year may include reported and estimated data.

Reg AC
I, Aditya Soman, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or
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Disclosures
Coverage group(s) of stocks by primary analyst(s)

Aditya Soman: India Consumer.
India Consumer: Colgate Palmolive (India), Dabur India, Hindustan Unilever, ITC, Marico, Nestle India.
Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies
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Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Dabur India (Rs210.35)
There are no company-specific disclosures for: Marico (Rs127.95)
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe
Rating Distribution Investment Banking Relationships
Buy Hold Sell Buy Hold Sell
Global 31% 53% 16% 47% 44% 34%
As of July 1, 2010, Goldman Sachs Global Investment Research had investment ratings on 2,814 equity securities. Goldman Sachs assigns stocks as
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Price target and rating history chart(s)

M arico (M RCO.BO) Stock Pric e Currenc y : Indian Rupee Dabur India (DABU.BO) Stock Pric e Currenc y : Indian Rupee
Goldman Sachs rating and s tock price target history Goldman Sachs rating and s tock price target history
140 25,000 250 25,000
124 165
141
120
20,000 200 136 179 169 20,000
119
100 95
15,000 150 15,000
122
80
10,000 100 10,000

60
40 5,000 50 5,000
Mar 25 Jul 1 Oc t 14 Feb 16
Stock Price
Index Price
Stock Price
Index Price
B N B N
A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J
2007 2008 2009 2010 2007 2008 2009 2010
Source: Goldman Sachs Investment Res earc h for ratings and pric e targets ; Fac tSet clos ing prices as of 6/30/2010. Source: Goldman Sachs Investment Res earc h for ratings and pric e targets ; Fac tSet clos ing prices as of 6/30/2010.
Rating Cov ered by A dity a Soman, Rating Cov ered by V is hnu Gopal,
A pr 27, 2009 S
Price target as of Mar 25, 2010 Price target as of A ug 3, 2009
Price target at remov al Not c ov ered by c urrent analys t Price target at remov al Not c ov ered by c urrent analys t
India BSE30 Sensex India BSE30 Sensex
The price targets show n should be c onsidered in the c ontex t of all prior publis hed Goldman Sachs research, w hich may or The price targets show n should be c onsidered in the c ontex t of all prior publis hed Goldman Sachs research, w hich may or
may not have included price targets, as w ell as developments relating to the company , its industry and f inancial markets . may not have included price targets, as w ell as developments relating to the company , its industry and f inancial markets .
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August 25, 2010

India: Consumer Staples

Domestic growth bolstered by overseas expansion; Marico top pick

Ticker FY2012E FY10-13E FY2012E FY2012E

Robust growth, returns. We favor Marico (Buy) on valuation Marico Dabur

The Goldman Sachs Group, Inc. Global Investment Research

Overview: High growth opportunities; favor Marico on valuation 2

Overview: High growth opportunities; favor Marico on valuation

Urbanization and the “thorties” drive growing domestic demand

Looking overseas for incremental growth

Goldman Sachs Global Investment Research 2

We favor Marico—valuation not capturing growth or CROCI

‘Demographic sweet spot’ for key Marico and Dabur products

-100 0 100 200 300 400 500 600 700

Goldman Sachs Global Investment Research 3

Private Consumption Breakdown: 1988 vs. 2008

India Korea Taiwan Singapore

Source: CEIC, GS Global ECS Research.

Source: GS Global ECS Research projections.

Goldman Sachs Global Investment Research 4

Goldman Sachs Global Investment Research 5

Saffola Refined Oil

Likely benefit from 'thorties'

Likely benefit from urbanisation (more

Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 6

International business: Recipe for sustaining growth rates

Middle-East: Higher penetration but a ready market starting with

Goldman Sachs Global Investment Research 7

Private consumption growth in MENA

Source: World Bank, Goldman Sachs Research.

Targeting Indian diaspora with Indian products

Introducing variants of Indian products

Introducing localised Acquisition for local

Source: Goldman Sachs Research.

Goldman Sachs Global Investment Research 8

Africa: Low penetration, increasing consumer spending and

1. Growing middle class

2. Increasing urbanization – urbanization levels are already similar to those in China

3. Lower focus from global multinationals

4. Acquisition targets are likely not as expensive as those in South Asia

5. Low penetration levels in the hair and skin care market

Source: McKinsey Global Institute, Goldman Sachs Research.

Goldman Sachs Global Investment Research 9

Exhibit 14: Consumer revenues in Africa to increase at a CAGR of 4% between 2008-2020

Annual revenues (USD, billion)

Source: McKinsey Global Institute, Goldman Sachs Research.

South Asia: Market dynamics similar to India

Goldman Sachs Global Investment Research 10

Southeast Asia: Already large consumer class, potential acquisition

Goldman Sachs Global Investment Research 11

10,000 Indonesia 10,000 Philippines

Marico: Robust domestic business, rapid overseas expansion, Buy

Goldman Sachs Global Investment Research 12

Parachute Volumes - Rigid Packs Saffola refined edible oils

International business revenues expected to grow at a 28% CAGR between

Goldman Sachs Global Investment Research 13

Parachute & Nihar Saffola Other hair oil

Source: Company data, Goldman Sachs Research.

15% 13% 6,000 FY2004-2010

Bangladesh Egypt South Africa Malaysia Others

Source: Company data, Goldman Sachs Research.

Goldman Sachs Global Investment Research 14