Chairman's Address At The Analysts' Meet On 17Th February, 2004

In January 2001 we had articulated a new strategy for HLL with three thrusts. These were:

• To grow through focussing on Power brands.
• To improve the profitability of our Foods business.
• To secure the future of our non-core businesses.

Let me update you on these in reverse order.

We have divested almost all our non-core businesses (Seeds, Animal Feeds, Nickel Catalyst, Oils & Fats, Mushrooms etc.). HLCL (Chemicals & Fertilisers) in which HLL holds 50% is to be merged with Tata Chemicals.

In doing so, we have secured excellent value for the shareholders.

We have also discontinued activities that were non Value adding such as traded exports.

HLL is now entirely focussed on its branded business which accounted for 93% of Sales in 2003 compared with 85% in 2000.

We have also made excellent progress on improving the gross margins of our Foods businesses - these have increased by 130 bps between 2000 to 2003. This increase in gross margin now provides the much needed 'fuel for growth' in terms of advertising and marketing spends that is needed to develop a high growth Foods business.

Let me now turn to our strategic thrust on 'Growth through focus on Power brands'.

In 2000, we had 110 brands. At the end of 2003 we have a very focussed portfolio of about 30 brands. Six of these account for over 40% of our business and are true mega brands with Sales of between Rs.500 cr.- Rs.750 cr. Each of these six has the potential to be a Rs.1000 cr. brand.

Our strategy on driving growth by focussing all our resources on these Power brands is beginning to pay off.

After a flat 2002, our continuing business has grown by 4.3% in 2003.

Our HPC business, which accounts for 68% of revenue and 88% of profit, has been growing steadily for 7 Quarters now. In 2003, it grew by almost 5% (up from about 3.5% in 2002). Indeed Power brands doubled their growth to 6.5% in 2003 compared to 3.2% in 2002. This performance has been achieved in the face of de-growing markets (-5%) and stiff competition.

Our Foods business has shifted its emphasis from driving profitability to driving growth during 2003. We are now focussing on 4 Power brands - Brooke Bond, Kissan, Knorr Annapurna, Kwality Walls.

In the second half of 2003 the Foods business has grown by 5.9% led by strong growth of 13.2% in Power brands.

So looking back, it is fair to say that we have made excellent progress on the three strategic thrusts outlined at the beginning of 2001.

Looking forward, we are now single-mindedly focussing on driving quality top-line growth for our Power brands in HPC & Foods. These include the new ventures we are developing such as HLL Network, Ayush, Water & Confectionery.

We recognise the challenge of intensified competition from both low priced players as well as international companies. Most recently, P&G have reduced prices and increased aggression in

Laundry. Our response, when faced with such challenges, will be to face them 'unblinkingly', with the level of investment required to both protect and grow our market positions.

We are prepared to make such investments because of our great belief in the long-term growth opportunity of the Indian market through increasing consumption levels and penetration. In addition we have immense confidence in our ability to grow our brands through delighting our consumers. Our confidence is based on our actions in the last couple of years. Firstly, we have significantly improved quality by investing over Rs.400 crores. in the last 3 years. Secondly, we have re-priced several of our brands at lower levels with key price points as appropriate, especially in Laundry, Hair, Tea, Toothpaste and Ice cream. Thirdly, our brand equities as measured by standard tracking techniques are stronger than ever. Fourthly, we have also strengthened our Sales operation and are leveraging our scale with Modern Trade and in deepening rural reach. Last but not least we have an excellent talent pool of people with a passion for winning.

We, therefore, remain confident of driving long-term shareholder value creation through sustainable growth in top and bottom line.