Godfrey Phillips Chairman Speech

Dear Shareholder,

The year 2017-18 has been a successful year for Godfrey Phillips across all business units but particularly with our cigarette volumes growing after successive declines in recent years due to steep tax increases. This has resulted in enhanced top-line growth and pleasingly an increased market share reflecting the overall strength of our brand portfolio. During the year, we also continued to expand our 24Seven convenience stores from 46 to 61 retail outlets and our chewing products also performed well. However, as we continue to operate in a challenging environment, I am proud of our sustainable growth and confident that we can deliver on the strategy of aggressively building our consumer and retail business lines.

The upswing in the global economy continued its momentum in 2017 driven by positive investment sentiment and a rebound in commodity prices. This broad based growth is a positive development and provides a solid foundation for consumer demand across major economies. With this favourable business backdrop, our international business should continue to build momentum and deliver profitable growth.

In context to the global landscape, India delivered a GDP growth of 6.7% in 2017 and remains one of the fastest growing economies. Domestic economic developments have had a positive impact and provided the impetus for consumer demand growth. One of the most important developments during the year was the introduction of the Good and Service Tax (GST), “One Nation One Tax” policy. This has allowed small and medium enterprises to streamline their business operations across the country and is expected to bring increased transparency. These economic reforms are set to boost medium term investment sentiment and have a cumulative impact on economic growth in the coming years.

Not only does India have the second largest population globally but also the highest ratio of 34% of the population in the age bracket of 18-35. This demographic is the underlying reason for the change in disposable income and purchasing power which is driving consumer spending in India. With continued urbanisation, rapid adoption of technology and greater public awareness, consumer preferences are also changing across product categories and geographies. As an example, the Electronic Nicotine Delivery System (ENDS) is being accepted and growing rapidly and Godfrey Phillips is well placed to capitalise on this changing consumer trend. Overall, we are well positioned to cater to high growth new consumer markets through our successful product and process innovation track record.

Although, the tobacco industry in India is heavily regulated, Godfrey Phillips readiness to adapt to changing environments continues to improve. Despite the much debated subject of the disproportionate taxation on cigarettes compared with other tobacco forms in India, we are all fully aware of our responsibilities and remain committed to the regulatory framework as a responsible corporate citizen.

Our experienced management team remains fully committed to implementing the growth strategy particularly by focusing on expanding the consumer & retail segment. 24Seven is capitalising on the fast-growing retail space and continues to successfully adopt innovative marketing strategies and product offerings.

I would like to extend my sincere appreciation to the Board of Directors for their guidance and all of our employees for their relentless commitment and contribution to the growth of the Company. At this time, I would also like to thank our shareholders, consumers, business partners and the wider community of stakeholders for their continued support to our strategic vision. Godfrey Phillips is well positioned to take up new challenges in the coming years and continue to successfully build our consumer and retail brand platform.

With best wishes and warm regards,

R. A. Shah