S H Kelkar and Company Limited Largest Indian-origin Fragrance - PowerPoint PPT Presentation

Crafting Sensorial Delight S H Kelkar and Company Limited Largest Indian-origin Fragrance & Flavour Company Investor Presentation January 2019

Disclaimer Certain statements and opinions with respect to the anticipated future performance of SHK in the presentation (“forward -looking statements”), which reflect various assumptions concerning the strategies, objectives and anticipated results may or may not prove to be correct. Such forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These include, among other factors, changes in economic, political, regulatory, business or other market conditions. Such forward- looking statements only speak as at the date the presentation is provided to the recipient and SHK is not under any obligation to update or revise such forward-looking statements to reflect new events or circumstances. No representation or warranty (whether express or implied) is given in respect of any information in this presentation or that this presentation is suitable for the recipient‟s purposes. The delivery of this presentation does not imply that the information herein is correct as at any time subsequent to the date hereof and SHK has no obligation whatsoever to update any of the information or the conclusions contained herein or to correct any inaccuracies which may become apparent subsequent to the date hereof. 2

Contents 1 3 5 Niche Financial Annexure Industry Highlights Who Our Key we are Business Highlights 2 4 6 3

Crafting Sensorial Delight Who We Are

Who We Are • Established 96 years back by SH Kelkar and VG Vaze Market • Leading Fragrance & Flavour company in India exporting to 52 countries Legacy Leadership • Global scale, state-of-the-art infrastructure • Leading domestic provider of Fragrance & Flavour to FMCGs Strong Excellent Management • Broad- based board – 50% comprise of Independent Directors Infrastructure • Professional management & leadership team 5

At a Glance 96 9,700+ 4,100+ 849 Years of Market Products Customers Employees Conviction ` 1,019 cr ` ~12.1% 7 4 Turnover – FY18 8-year Sales CAGR Manufacturing Creation & (FY2011-18) Locations Development Centres Shareholding Pattern 57% 23% 3% 1% 16% Promoters & Promoter Group FII / FPI MF Corporate Bodies Others 6 Note: As on Dec 31, 2018

Crafting Sensorial Delight Niche Industry

Global F&F Market & Key Characteristics Concentrated market FMCG & Innovation play • Consolidated Industry globally • FMCG companies greatly depend on the reliability, quality of Market Size (US$ BN) • 10 players control 79% of market service and the F&F company‟s share technical know-how 31.5 25.9 • Top 4 control 58% of the market in • Typically, long term supply CY17 relationships with F&F partner 2017 2021 Increasing consolidation Emerging market focus • Large players continue to • Emerging markets continuing to consolidate, for scale and grow with premiumization & differentiated product portfolio broadening of product offerings • Top 10 companies in the industry • Increasing disposable income in together accounted for nearly 79% world‟s emerging markets of the industry sales in 2017, as compared to 64% in 2000 8 Source : Leffingwell, Company estimates, Nielsen, Euromonitor and An overview of the Global Flavours & Fragrances Market, 10th edition by IAL consultants.

India‟s Favourable Dynamics Offer Huge Opportunities Globalization Rising young population  Population of 1.21 bn, growing 1.41% annually  Globalisation to further enhance and influence customer preferences  Young population ~65% below 30 years age  To bring in new product concepts and ideas  Growing working population to be large consumer of FMCG products into Indian markets India – GDP Growth Urbanization Literacy & lifestyle 8.2% 7.4%  Urbanization in India drives growth especially  Increasing literacy levels impacting consumer 7.1% 6.7% in the processed food industry awareness and knowledge  Urbanization has increased from 29.9% in 2007  Demand shift for better quality, innovative F&F to 33.5% in 2017 products 2014 2015 2016 2017  Greater demand for packaged and processed foods Rise of modern retail Rising disposable incomes  Increasing number of shopping malls and  Rising disposable income, pivotal for F&F growth complexes  India is witnessing continuous increase in disposable  Mall culture pick up in Tier 1 and Tier 2 cities income across India 9 Source : International Monetary Fund, Statista 2018, World Economic Outlook Database, April 2017

Indian F&F Market to Outpace Global F&F Growth High growth in Premiumization in Growth in Increasing Market Size (Rs Bn) FMCG personal care ‘naturals’ segment consumption 82  Directly correlated  Consumers are  Major shift in  All sub-segments 55 to FMCG growth increasingly buying consumer within Fragrance sophisticated preferences from and Flavours are premium personal synthetic to natural witnessing healthy care products fragrances growth 2017 2021  Increasing acceptance of private labels in India, with most big brands Increase in private expanding presence in developing economies labels:  Consumers are looking to experiment with newer fragrances and flavors F&F Market Size Fragrance Flavour • The Indian market is dominated by large global fragrance and flavour houses 43 39 which contribute more than 60% of the Indian production of blends 28 28 • SHK is the largest Indian player and closely competes with Global MNCs • Numerous small firms mostly cater to the unorganized market 2017 2021 2017 2021 10 Source: Company estimates, Ministry of Corporate Affairs, Nielsen, Euromonitor and An overview of the Global Flavours & Fragrances Market, 10th edition by IAL consultants.

F&F Industry - Strong Entry Barriers High customer acquisition time Established relationships with customers Sustained R&D efforts Availability of key Ingredients Stringent regulatory compliance 11

Crafting Sensorial Delight Our Business

Diverse Customer Base backed with Leading Brands  Fragrance customers Flavours customers  Over 4,100 customers including,  Category Leader Brands in the portfolio - SHK,  FMCG leaders, domestic companies, trade Keva and Cobra customers & global corporates  Branded small pack products “Cobra” sold to  Diversified and comprehensive portfolio hundreds of traders and re-sellers across India resulting in low concentration on any particular product or customer  Long term relationships with several customers spanning over 15 years Long term relationships with diversified customers driven by a portfolio of customised products and 13 strong brands

Client-Brief / Pitch Process Small yet potentially disruptive new players entering markets – provide comprehensive Branded support on the back of rich experience small pack  Technical and Commercial requirement: customers o Understanding of customer insight for sensory and technical perspective Pro-active pitch New Product / Product Library / Market Research:  o Development based on the received brief Domestic FMCG o Product innovation supported by strong market players research o Over 35,000 formulations form part of library Brief from customers Regulatory compliance and counsel:  Internation o In-line with global governing standards for F&F al customer industry Decentralization of decision making among MNCs base / MNC FMCG Reducing product life-cycle leading to new companies briefs every 3-4 years Key to winning: consumer insight combined with local market understanding 14

Strong R&D Capabilities  Focus on creative and consumer-centric research activities  R&D centre in Mulund recognised by the Government of India‟s Department of Science and Industrial Research  Only company of Indian origin to file patents in field of Fragrance and Novel Aroma Molecules 15

Creation & Development Centers  Creation & Development Centers (CDCs) – works in collaboration with customers, as an extended R&D arm  Strong and dedicated team of perfumers, flavourists, evaluators and application executives  Established Fine Fragrance Development Centre in Amsterdam o Strong base in Europe, along with CFF lab in Milan o To track early development in trends and target new business opportunities coming up in the region 16

Strong Raw Material Sourcing Capabilities Strategic investments in inventory – hedge against significant volatility in supply & price of key raw materials Library of Raw Materials: 1,200+ International Suppliers Domestic Suppliers 262 Indian Suppliers Raw material sourcing nations include Indonesia, Germany, 250 ingredients sourced from Brazil, China and US owned facilities Implemented SAP ERP for Established Long-term Sourced ~ 35% of RM collaborative planning, forecasting partnerships with key suppliers, requirement from top 10 and monitoring of replenishment some for over 20 years suppliers system 17