Hindustan Unilever Ltd. CREAM™ Report – Corporate Rating

CREAM Report Corporate Ratingcrme de la crme of India Inc.

An IBCM Research Publication

Hindustan Unilever Limited

5point formula for CEOs

IBCM Research announces the release of Corporate rating - CREAM Report Hindustan Unilever Ltd., [HUL] first in the series of crme de la crme of India Corporate. CREAM Report -1. Corporate Governance2. Risk management3. Earnings4. Accounting Quality, and5. Management Quality. Corporate Rating - CREAM Report triggers Sustainability Mechanism

3 Top takeaways - Sustainability Mechanism
1.1 Sustainability of Value System

SustainabilityDerived from CREAM Report

1. Sustainability of Value System1. Accounting Quality

2. Management Quality

2. Sustainability of Efficiency3. Risk Management

4. Corporate Governance

3. Sustainability of Profits5. Earnings

1. Sustainability of Value System- On CoBP - Code of Business Principles HUL has published in their website [since 2008]: It (CoBP[HUL]) forms the benchmark against which the world at large is invited to judge Companys activities.CREAM Report has judged HUL by measuring Process Blocks Accounting Quality [29] and Management Quality [124], including rating of CoBP Unilever & HUL independently.CREAM Report differentiates Conflicts of interests, conflicts of personal Interests and conflicts of conscience to drive home the point of self-governance as the target for the Corporate culture.Study confirms the Sustainability of Value System as the crucial collision point of Ethical and Fiscal Responsibility bringing the abstractions into reality, acknowledge value where value is due, and deconstruct what is valueless.

3 Top takeaways -Sustainability Mechanism
1.2 Sustainability of Value System - Ratings


1. Sustainability of Value System - Ratings2008-092009-102010-112011-122012-13

1. Accounting Quality01021

2. Management Quality22222

1. Rating System: CREAM Report derives the rating system from IBCM Research, the most powerful rating system on this planet that shall remain forever, the benchmark against which the world at large is invited to judge.2. The rating system rates Ethical Responsibility and Fiscal Responsibility, made feasible by Subject-Object distinction of Qualitative and Quantitative elements of Corporate Management that IBCM Research facilitates by Return on Intangible.3. The ratings are 0 5 in six-stages of movement of Object that Subject triggers, in two processes Creative Process and Action process.4. You may wonder why Accounting Quality is lower than Management Quality. Accounting Quality does not consider Ethical Responsibility, a bane on Corporate Management. This is a major work HUL, as well as other companies have to undertake in aligning Ethical Responsibility to Fiscal Responsibility.5. Management Quality gives that freedom for non-mandatory initiatives, the basis of leadership assessment by CREAM Report. To improve Accounting Quality as well as Management Quality change the denominator to human effort by Subject-Object relationship established.

1.3 Sustainability of Value System Intellectual Value Capital


Intellectual Value Capital2008-092009-102010-112011-122012-13

Ratings11121

1. Accounting Quality and Management Quality are the protons in the Corporate Atomic Structure, of creative process that Intellectual Value Capital of HUL is made up of.

2. The Intellectual Value Capital of HUL is at 1,1,1,2,1 a combined value of 29+124 = 153 Process Blocks comprising of Accounting Quality and Management Quality. Barring the year 2011-12 the value is flat, stuck at 1.

3. 124 Process Blocks under Management Quality identify the opportunities lost or misdirected

4. Society is the neutron in the Corporate Atomic structure that does not change the identity of the Company but adds mass to it.

5.Society cannot add mass in any other area excepting Management Quality where the Society is packed into a nucleus with the Board that Independent Directors have to take note of.

6.Among the stakeholders of HUL the Society tops the list and the shareholders follow next.

7.Incremental value of Intellectual Value Capital brings in huge energy to the organisation, very huge indeed that CREAM Report addresses, which is in a state of Quiescence, for 5 years now.

8. CSR means HUL improves their Ratings of Intellectual Value Capital to an optimised level of 5.

2.1 Sustainability of Efficiency Risk Management


2. Sustainability of Efficiency - Ratings2008-092009-102010-112011-122012-13

3. Risk Management33333

1. Risk management is made up of 8 Process Blocks covering Robust Systems, Key Control Issues, Aligning Risks and Controls, In line with Sarbans-Oxley [s.404] and other related Internal Controls

2.Risk Management and Corporate Governance fall into the category of Practices. However it is the Policies that we tend to report to the public and how one practices, public is not informed.

3. A good Quality Policy created is no guarantee for follow-up during Action Process, as Richard M Murphy finds out on Siemens [OECD antibribery instruments compilations of responses to consultation paper]: Governance is not compliance and ethics and disputes OECD's conclusion that large multinational companies generally have adequate internal compliance controls. He continues in the same breath: One need only look at the record at Siemens (whose code of conduct was described as the read, laughed and filed code), or the long, legalistic (and ineffective) code that existed at Enron to see the great danger in such sweeping conclusions.

4. CREAM Report looks for the missing link aligning Ethical Responsibility to Fiscal Responsibility that Corporate Management disregards.

5. Risk management is crucial in locating critical control points towards self-governance. This in its entirety rests on Ethical Responsibility brought in as substantive Qualitative element.

2.2 Sustainability of Efficiency Corporate Governance


2. Sustainability of Efficiency - Ratings2008-092009-102010-112011-122012-13

4. Corporate Governance22222

1. Corporate Governance covers 7 issue areas such as Disclosure of pending cases, Compliance with Governance Framework, Communication to Shareholders, of 23 Process Blocks.

2. One area where there has been a non-mandatory initiative is Compliance with Governance Framework as well as introduction of Secretarial Audit that CREAM Report rates higher.

3. The net Ratings of Corporate Governance comes to only 2. By and large aligning Ethical Responsibility to Fiscal Responsibility is crucial for higher ratings that HUL possibly could reach once Subject-Object Relationship is established. However there remains 0 [zero] ratings where HUL values high and CREAM Report finds valueless.

4. CREAM Report is based on Return on Intangible where the denominator is a team of individuals entrusted with a Process Block. A team becomes the owner of a Block. The same team is represented in each and every Process Block since human energy is same throughout. The numerator is checked as to the Action taken or not related to the Quality of the Object which is a Process Block.

5. Quality of the Object managed becomes crucial in Corporate Governance. Corporate Governance is not of The Board or CEO as it rests on facilitating the lowest-paid employee to discharge his/her duties aligned with Ethical responsibility. Hence rating of 2 indicates where the shortfall is.

3.1 Sustainability of Profits Earnings 15% Club


2. Sustainability of Profits - Ratings2008-092009-102010-112011-122012-13

5. Profit and Loss Account01010

1. Central to the Subject-Object distinction of Corporate management is the rate of growth in efficiency. You may increase the revenue generation or reduce costs resulting in better profits.

2. You plan and execute. Put in the effort. The effort is Intangible the denominator. Object is inert. The effort is to move the Object from one space to the other. As planned and executed the Object has moved according to the effort to reach the optimum level.

3. An average ratings of 5 process blocks on Net revenue, Cost of Materials, Employee benefits, Other expenses and profits before exceptional items HUL gets 1,2,1,2,1 assigned to the four Fiscal Responsibility group individually, 1. Managerial Force, 2. Operating Force, 3. Technology and 4. Finance. Adding a value of 0[zero] for Ethical Responsibility yet to be integrated to Fiscal Responsibility HUL gets a value of 0,1,0,1,0 as given above.

4. The ratings are arrived at, in a pattern of gradual linear development that an Object advances, directly proportional to the assigned effort put in. The target is set at 15% and the resultant ratings would be 5 if the targets are met. The ratings of HUL signify 15% Club targets reached.

3.2 Sustainability of Profits Growth 15% Club


2. Sustainability of Profits - Ratings2008-092009-102010-112011-122012-13

6. Balance Sheet00031

1. An average ratings of 6 process blocks on Dividend, Trade Payables, Tangible Assets, Inventories, Trade Receivables and Current Investments coupled with Ethical Responsibility fetches HUL ratings as above, 0,0,0,3,1.

2. This again is on the basis of 15% growth set for HUL.

3. Further analysis of Business Segments 1. Soaps and Detergents, 2.Personal Products, 3.Beverages, 4. Packaged Foods and 5. Others are, available under Significant Accounting Policies: 1. Revenue Recognition, 2. Expenditure, 3.Total Assets: Accounting Policy, by the 15% Club criteria.

5. Together you arrive at a HUL rating of 0,0,0,3,1 for the 5 years respectively.

6. What is highlighted is a variety of Policy initiatives or lack of it, in Dividend Policy, Inventories, Trade Payables, Trade Receivables, Investments policy, the 5-business segments as to how they have been made use of what their future is, considering the 3.15% Royalty fee to the holding company Unilever.

7. What is derived is the status of HUL in jeopardy as to where they began 80 years back and how they have been gridlocked by there own Management Quality. Or to know who the beneficiaries are?

3.3 Sustainability of Profits Emotional Value Capital


2. Sustainability of Profits Emotional Value Capital - Ratings2008-092009-102010-112011-122012-13

4.Corporate Governance22222

5. Risk Management33333

6. Earnings00010

Emotional Value Capital11121

Emotional Value Capital consists of the three elements CREAM Report deals with. These three elements start with gross Object whereas Intellectual Value Capital starts in a state of Quiescence.

Because of its nature Emotional Value Capital overwhelms the Intellectual Value Capital despite its total dependence on the latter.

Despite earnest attempts on Corporate Governance and Risk Management, Emotional Value Capital is low mainly due to Earnings capability is almost nil.

For the reason why it is low you have to check at Intellectual value Capital.

CREAM Report pulls out these reasons quite evident from the 154 process blocks of Intellectual Value Capital of HUL

3.4 Sustainability Intangible Value Capital


Intangible value Capital2008-092009-102010-112011-122012-13

Intellectual Value Capital11121

Emotional Value Capital11121

Intangible Value Capital11121

153 Process Blocks of Intellectual Value Capital matches with 36 Process Blocks of Emotional Value Capital 1,1,1,2,1. To reach optimum level HUL Index of Inactivity is as follows

ER Management - CER16.80%16.80%16.80%16.80%16.80%

Managerial Force - CFR10.40%9.60%10.40%8.00%9.60%

Operating Force - CFR10.40%9.60%10.40%8.00%9.60%

Technology - CFR10.40%9.60%10.40%8.00%9.60%

Finance - CFR10.40%9.60%10.40%8.00%9.60%

Index of Inactivity Total58.40%55.20%58.40%48.80%54.40%

Whereas Ratings represent the stages of completion Index of Inactivity considers the fractions from where tasks are resumed for completion.

CER Corporate Ethical Responsibility Management and CFR Corporate Fiscal Responsibility

Intangible Value Capital of Hindustan Unilever Ltd.- 1

1. Intellectual Value Capital: In areas of Code of Conduct, Code of Business Principles, Conflicts of Interests resolution, Secretarial Audit, Governance Framework initiatives HUL performance is pretty good.

2. The reason for a low turnout of ratings in Intellectual value Capital is of two kinds: I. Aligning Ethical Responsibility with Fiscal Responsibility which is imperative to enhance the ratings. ii. Kodaikanal Thermometer Factory tragedy in 2001 is yet not resolved. This is going to be a major handicap in understanding the Company with regard to UNGC Global Compact 10 Principles. Steps are not taken effectively on this count and would continue to weigh down the Intellectual Value Capital of HUL.

3. Emotional Value Capital, is also weighed down on account of two counts: I. The entry point for new ventures is part of the business segment 'others'. New ventures alone can hope to increase the gap for joining 15% club as existing ones have reached the point of no return with packaged foods surviving with a mere 1% margin. With Royalty payment to holding company Unilever that has already started in April 2013 would squeeze any margin left from every business segment that would endanger company's capability to move forward.

ii. Surplus assets are encashed. CREAM Report has recommended proposal for sale of surplus assets be given three years in advance to the Board. At the same time Investments in Market had begun that CREAM Report has commented 'Optimised results for this process Block creates a capability paradox.' Secondly Trade Payables stand at 177,212,182,142,138 days of consumption as against Trade receivables of 12,14,18,13,13 days of revenue.

Subject-Object Mechanism

Intangible Value Capital of Hindustan Unilever Ltd. - 2

4.HUL effectively is in cottage sector. Economic Survey 2012-13 forecasts: Growth optimists are confident in India's demographic dividend--the fact that India's dependency ratio, as measured by the share of the young and the elderly as a fraction of the population, will come down more sharply in the coming decades. More working age people will mean more workers, especially in the productive age groups, more incomes, more savings, more capital per worker, and more growth. Also, because demographic change is associated with fertility declines, the transition period may be accompanied by greater female participation in the labour force (Bailey, 2006). HUL strategy on use of surplus labour force would be crucial for its own development lest the government of the day is forced to develop AMUL Model for HUL Products.

5. Sustainability of Value System needs to be improved particularly effective measurable UNGC Global Compact 10 Principles by Subject-Object relationship established.

6. Sustainability of Efficiency rests on establishing self-governance processes for each process block, as the Share Dealing Code and Whistle Blower Policy are not sufficient.

7. Sustainability of profits is challenged. 1. Joint-ventures are found wanting. Create CREAM Report of Business partners. 2. Improve productivity by establishing Subject-Object distinction of Qualitative and Quantitative elements of Corporate Management. 3. Hierarchical top-down with one call centre is athing of the past, if future needs to be secured. 4. Ethical Responsibility controls the risk appetite and spreads risk culture towards self-governance. 5.HUL shall target Index of Inactivity as per the CREAM Report.

IBCM Research Inactivity Based Cost Management where Inactivity refers to Inactive elements of Intangible human energy.

CREAM Report Corporate Rating is based on SEBI's Mandatory Rating for IPO grading

1. The CREAM Report adopts a sound methodology, Return on Intangible with Intangible as the denominator and Action or Inaction as the numerator.

2.The binary value obtained for each process block enables merging one with the other any number of disparate elements Qualitative as well as Quantitative to arrive a single digit value of Intangible Value capital.

3.CREAM Report has begun a National Grid of Corporate Ratings where your organisation will be benefited in being part of crme de la crme of India Inc.

4. CREAM Report Corporate Rating of Hindustan Lever Ltd. Provides an Index of Inactivity as to the steps yet to be taken by the only resource area any Corporate has, human capital. This is the most advanced project management technique ever created keeping you on toes by real-time monitoring basis. Set targets, as Index of Inactivity shows and go ahead with tasks for completion: dT/dT going at the optimum speed of 5 of series of Tasks/Time.

5. CREAM Report Corporate Rating - Corporate Governance, Risk Management, Earnings, Accounting Quality, Management Quality - is based on SEBI's Mandatory Rating for IPO grading. Prepare yourself ready to attract the public during IPO. Plan your IPO, public has money, even for stupid movies. Tap the resource. Can you? Yes, you can with a CREAM Report Corporate Rating.

CREAM Report measures what Unilever CEO Paul Polman states Increasingly consumers will vote with their wallets for companies that are just and equitable.

Be part of CREAM Report Corporate Rating

Hindustan Unilever Ltd is a proud organisation that many a manager express the solidarity with the Company long, long after their association as 75 years volume published convey. India too is proud of their managers coming from humble background to man global positions .

India's problems are one too many, first of all the number of people in search of a living. State has abandoned the people with no development in any sector.

Historically it is the business community that had withstood the onslaught of corrupt practices, as Marco Polo had expressed about India. I enjoy seeing the villagers' weekly market where I stay. Integrity and honesty are not the catchwords CREAM Report Corporate Rating use, but measures them with Subject-Object relationship established.

HUL, the study reveals is working for the Society but location is misplaced. There is no gainsaying, MNCs look for return on their investments. 3.15% of Royalty payment to the holding company for every product sold by HUL portrays our stupidity, as HUL products are of Cottage sector. I am aghast.

Indian companies are capable of expansion and there are many struggling because of corrupt practices that disrupt their existence. Aligning Ethical Responsibility to Fiscal Responsibility gives you the strength in occupying business areas that MNCs are struggling to hold, HUL particularly.

I want Trustworthy India Inc. be brought to the fore, so that your IPOs are fully subscribed. Be a part of it. Be a just and equitable company that India can boast of for public to vote with their wallets, and for me to fight for.

Jayaraman Rajah Iyer, [email protected]

For the full report [1 page for each issue/350 pages] comprehensive CREAM Report Corporate Rating Hindustan Unilever Ltd. for adaptation to your company,obtain from http://www.amazon.com/dp/B00GR6K9UM

Lessons from - CREAM Report Corporate Rating - HUL

Hindustan Unilever Ltd. CREAM™ Report – Corporate Rating

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