MANAGEMENT ACCOUNTING

Project Report
On
Financial Analysis Of

WHIRLPOOL INDIA LTD.

 BRIEF COMPANY PROFILE

Whirlpool of India Limited (WIL) is an 82.3 per cent subsidiary of Whirlpool Corporation, US, one of the
leading global consumer durable players. Whirlpool is among India’s leading home appliances companies. It
manufactures and markets refrigerators, washing machines, air-conditioners and microwave ovens. Set up in
1995, Whirlpool India has 2,500 employees, extensive sales and distribution network, a robust manufacturing
and R&D infrastructure.

Whirlpool Corporation is one of the world’s leading manufacturers and marketers of major home appliances,
with annual sales of over US$ 12.3 billion, 68,000 employees, 50 manufacturing and technology research
centres around the globe. The company manufactures its products in 13 countries and markets them in more
than 170 countries under brand names such as Whirlpool, Kitchen Aid, Roper, Estate, Bauknecht, Ignis, Laden,
Inglis, Brastemp and Consul.

MARKET SHARE: WIL has a market share of 22.8 per cent in the direct cool segment, 17.5 per cent in the
frost-free segment, and 14 per cent in the washer segment.

INFRASTRUCTURE: Whirlpool has manufacturing facilities at three locations in India to manufacture

refrigerators and washing machines. Whirlpool has set up a Regional Technology Centre (RTC) at Ranjangaon,
Pune, which mainly focuses on India as a major manufacturing centre for the Asia- Pacific Region. Whirlpool’s
Pune research lab develops refrigerators and air-conditioners for Asia (including China), and Australia. 40 per
cent of Whirlpool’s Pune research lab’s resources are devoted to its core research on global projects. Whirlpool
has set up design centres at Pondicherry to meet the global business needs of the fabric care and small appliance
divisions. Whirlpool is exporting refrigerators and washing machines to South Asia, Asia-Pacific, Latin
America and West Asia and is the largest exporter of home appliances from India. The manufacturing unit at
Pondicherry exports small kitchen appliances under the ‘Kitchen Aid’ brand to the US market

WIDE PRODUCT PORTFOLIO: Whirlpool has a wide product portfolio ranging from air-conditioners to
microwaves. Whirlpool has just launched Whitemagic semi-automatic washing machines, which will boost its
market share. The washing machines market has been growing at around 14-16 per cent per annum. Among the
washing machines, the semi-automatic segment enjoys the largest market where Whirlpool has a significant
presence. Whirlpool's Products include

 Refrigerators
 Microwave
 Washing Machines
 Air Conditioners
 SHAREHOLDERS INFORMATION

1. Financial Calendar - Year 2009-10

Adoption of Quarterly Results for the quarter ending
 June 30, 2009 July, 2009 (3rd/ 4thweek)
 September 30, 2009 October, 2009 (3rd/ 4thweek)
 December 31, 2009 January, 2010 (3rd/ 4thweek)
 March 31, 2010 April, 2010 (3rd/ 4thweek) Or Audited Annual Results in May, 2010 (3rd/ 4th
week)
2. Book Closure Date
Sept. 17, 2009 to Sept. 24, 2009 (Both days inclusive)
3. Dividend Payment Date
No dividend has been recommended by the Board of Directors.
4. Listing on Stock Exchanges
The Equity Shares of the Company are listed on the Bombay Stock Exchange Ltd. at Mumbai. The
Company confirms that it has paid annual listing fee due to the Bombay Stock Exchange Ltd. for the
year 2009-2010.
5. Stock Price Performance - Whirlpool Vs BSE Sensex, Year 2008-09

*
Monthly average is based on High and Low price of Whirlpool’s share and BSE Index.
 6. Shareholders Pattern

CATEGORY NO. OF SHARES PERCENTAGE

Promoters 95153872 75.00
Mutual Funds 5285611 4.17
Non Resident Indians 254212 0.20
Banks, Financial Institutions & 8888 0.01
Insurance Companies
Foreign Institutional Investors 10748 0.01
Corporate Bodies 8080053 6.37
Central Government/State 1283 0.00
Government
Public 18077163 14.24
TOTAL 126871830 100.00
 BOARD OF DIRECTORS

The Board of Directors of the Company comprises of Executive, Non-Executive and

Independent Directors. The Chairman is a Non-Executive Director. In all there are 6 Directors
including 3 Independent Directors. As on March 31, 2009, the composition of the Board of
Directors of the Company meet the stipulated requirements of clause 49 of the Listing
Agreement of the Bombay Stock Exchange Ltd. Memberships of the Directors on other boards/
committees are given here under:

Name of the Category No. of Directorships and Committee

Directors Memberships/Chairmanships
Other Committee Committee
Directorship Memberships Chairmanship
s
Robert Mink Chairman & Non-
Executive Director --- --- ---
Arvind Uppal Managing Director 1 --- ---
Vikas Singhal Whole Time Director --- --- ---
Sanjiv Verma Non-Executive &
Independent Director 1 --- ---
S. J. Scraff Non-Executive &
Independent Director 1 2 1
Anand Bhatia Non-Executive &
Independent Director 3 1 ---
Retiring Directors:

Mr. Robert Lawrence Mink, Non Executive Chairman of the Company, is a Law Graduate and is currently
the VicePresident & Associate General Counsel- International of Whirlpool Corporation, USA. He has been
associated with the Indian Business since its inception and was Director on your Board since 1995 till 2004. He
was nominated as Chairman of your Company w.e.f. 20 th May 2008.

Mr. S.J.Scarff, Independent Non Executive Director of the company is a Non Executive Director & Chairman
of GlaxoSmithKline Consumer Healthcare Ltd. He worked for over 23 years with Smithkline with specific
reference to Marketing. In 1999 he was awarded the prestigious honour of the Officer of the Order of the British
Empire by Her Majesty, The Queen of England.

None of the directors is holding any shares/ convertible instruments of the Company.

COMMITTEES OF THE BOARD

i) Audit Committee: The functioning and terms of reference of the audit committee including the role, powers
and duties, quorum for meeting and frequency of meetings, have been devised keeping in view the requirements
of section 292A of the Companies Act, 1956 and the listing Agreement with the Bombay Stock Exchange Ltd.

(ii) Directors Remuneration Committee: The terms of reference / role of the Remuneration Committee is to
determine the Company’s policy on the remuneration package of its Executive Directors and to determine and
approve the terms & conditions and remuneration package of its Executive Directors, including revision thereof
from time to time, and to deliberate on and decide matters incidental thereto or consequential thereof.

iii) Investors Grievance Committee: This Committee looks into the Investors complaints on transfer of shares,
non receipt of Annual Accounts, non receipt of dividends declared and interest on debentures etc. and the
redressal thereof.

SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Preparation of Financial Statements:
The preparation of financial statements in conformity with Generally Accepted Accounting Principles
The financial statements have been prepared to comply in all material respects with the Notified
accounting standards by Companies Accounting Standards Rules, 2006 and the relevant provisions of
the Companies Act, 1956. The financial statements have been prepared under the historical cost
convention, except for revaluation of fixed assets.
2. Changes in Accounting Policies:
a) Accounting for Derivatives- As per the announcement by Institute of Chartered Accountants of
India (ICAI), derivative contracts, other than those covered under Accounting Standard 11 on
Accounting for the Effects of Changes in Foreign Exchange Rates are marked to market on a portfolio
basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to
the income statement. Net gains are ignored. In the previous year, no gains/losses were recognized
b) Accounting for exchange differences arising in respect of fixed assets acquired from outside
India- With the revised Accounting Standard-11 on Accounting for the Effects of Changes in Foreign
Exchange Rates, the exchange differences arising in respect of fixed assets acquired from outside India
are to be charged off to the Profit and Loss Account. In the previous year, such differences were
adjusted in the cost of the asset.
3. Revenue Recognition:
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured.
Sale of Goods- Revenue from sale of goods is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer. Sales are stated net of sales returns. Revenue is shown
gross of excise duty and net of sales tax.
Income from services- Service Income includes income from services being provided to various
parties in terms of agreements with them and is recognised on accrual basis. Revenues from
maintenance contract are recognised pro-rata over the period of the contract as and when services are
rendered.
Interest Income- Revenue is recognised on a time proportion basis on the amount outstanding and at
the rates applicable.

CODE OF CONDUCT
“We will pursue our business with honor, fairness and respect for the individual and the public at large…
ever mindful that there is no right way to do a wrong thing………” - Arvind Uppal, Managing Director.

THE WAY THEY WORK:

Employees of Whirlpool of India Ltd. complies with all laws, regulations, and Company policies that govern
their activities. They deal with employees fairly and honestly, and with concern for safety and well being.
Management is responsible for making sure that proper attention is given to, and controls are in place for,
promoting compliance with our code of conduct and the specific Company policies addressing each area.

ADVERTISING:

All Whirlpool advertising are truthful, not deceptive, and complies with the applicable laws, regulations, and
Company advertising policies. They hold themselves and their competitors to the same high standard when
making comparative claims about competing products.

CORPORATE GOVERNANCE:

Corporate Governance is the application of best management practices, compliance of law and adherence
to ethical standards to achieve the Company’s objective of enhancing shareholders value and discharge of social
responsibility. The Company believes in adopting the best practices in the areas of Corporate Governance. Even
in a tough competitive business environment, the Management and Employees of the Company are committed
to value transparency, integrity, honesty and accountability which are fundamental to Whirlpool Group.
Corporate Governance pertains to systems by which companies are directed and controlled keeping in mind
long term interest of Stakeholders. Whirlpool abides and complies with the mandatory requirements of the Code
of Corporate Governance introduced by Securities and Exchange Board of India (SEBI).
Whirlpool has created a symbol to capture the spirit of Whirlpool’s High Performance Culture.

The symbol depicts three stakeholders

 The Employee
 The Customer
 The Shareholder

Whirlpool lays great emphasis on doing business with integrity and ethics. Their philosophy is to implement the
Corporate Governance Practices for the good of all stakeholders and continuously improve upon the process for
effective functioning.

GIFTS FROM SUPPLIERS OR CUSTOMERS:

Employees deal honestly and fairly with suppliers and customers and award Whirlpool business based on
Quality, delivery, service and competitive pricing. To avoid the appearance of improper influence, no
employee, or member of employee’s immediate family, is allowed to accept any gift of more than token value
of Rs. 1000. Neither is it allowed to accept loans or unusual hospitality (excesses in meals, refreshment, or
entertainment) from suppliers or customers.

SECURITY LAWS/ INSIDER TRADING:

Under Indian securities law and the law of several other countries, if an employee knows important, nonpublic
information about Whirlpool or another Company, the employee should not buy or sell any securities (including
stock) of Whirlpool or the other company until the information is generally known by public. In addition, that
employee should not disclose the nonpublic information to others inside or outside Whirlpool who do not have
obligation to maintain confidentiality.
 COMPETITION

Last Price Market Cap. Sales Net Profit Total Assets

(Rs. cr.) Turnover

Blue Star 344.25 3,096.05 2,569.09 180.29 391.09

Hitachi Home 91.30 209.62 473.51 21.07 155.05

IFB Industries 57.80 171.98 498.13 315.07 112.68

Lloyd Electric 48.75 151.13 587.90 20.37 504.65

Fedders Llyod 39.10 120.31 446.34 22.39 222.39

Value Ind 19.35 76.07 1,285.72 8.01 1,112.41

Whirlpool 85.70 1,087.29 1,719.23 70.52 445.02
 WHIRLPOOL IN NEWS!!
Whirlpool India To adopt Quarter-wise Planning Cycle

-The Financial Express (January 25, 2009)

Whirlpool is looking at a 20% plus market share in refrigerators, microwave ovens, washing machines and
air conditioners by 2010, but its approach would be determined 'quarter-wise'. They don't want to go into
any long-term brand promotion contract or even distribution contract but will like to review every contract
on a quarterly basis. Whirlpool India has been spending Rs 60-70 crore every year on advertisements but at
a slowdown period, they realized that spending on advertisements has to be done cautiously.

Whirlpool Q1 net up 4% at Rs 46 crore

-The Economic Times (August 1, 2009)

The Indian subsidiary of world’s largest appliance maker Whirlpool, registered a 3.5% increase in net profit
to Rs 46.2 crore during the the first quarter ended June 30, 2009, mainly due to a change in accounting
policy and higher deferred tax provision. Better working capital management helped the company reduce
debt by Rs 78 crore making it a cash-surplus firm.

The company’s net sales during the quarter increased 13% to Rs 605 crore from Rs 534 crore in the
corresponding period last year, due to higher demand for products such as refrigerators and washing
machines. The total sales volume during the quarter moved up 11%. Whirlpool India recently forayed into
two new segments of home appliances — water purifiers and built-in-kitchen appliances.

Whirlpool India calls for creative pitch

-Telivisionpoint.com (August 14, 2009)

The Indian subsidiary of the world's leading home appliances maker, the $ 19 billion Whirlpool of US, plans
to increase its investment on marketing, sales and product development. DraftFCB Ulka is the main agency
with whom Whirlpool last worked with. Of all the agencies in the fray for the current pitch, DraftFCB Ulka,
by virtue of being a sound, long-standing incumbent, naturally finds a priority place at the presentation
table.
In 2007, Contract Advertising has been also brought on board to handle the creative duties for Whirlpool's
foray into new categories as well as the new products that the company planned to launch in existing
categories during that time.

Whirlpool India to pump Rs 300 crore on expansion

Whirlpool India, a leading home appliance company, has planned to spend around Rs 300 crore in India
over the next three years. The company aims to increase its investment on product development, marketing,
sales and service infrastructure. Presently, the company is betting on refrigerators, washing machines, water
purifiers and built-in kitchen segments for growth in its market share. The company posted a strong top line
performance as sales volumes were up 11 per cent during the quarter over the corresponding period last
year.
 AWARDS AND RECOGNITIONS

Whirlpool Corporation has been honored with two iF Product Design Awards 2009,
respectively, for the Whirlpool Glamour Oven and for GREENKITCHEN, a kitchen eco-system
design concept.

2009: Whirlpool was voted Product of the Year and received the award for the 'Best
Innovative Product' in the popular refrigerators category. Whirlpool Frost Free Refrigerators
with 6th sense as the Best Innovation in the Popular Refrigerator Category.

2009: Hewitt ‘Best Employers in India’ 2009 Study

2009: Named one of the “100 Best Corporate Citizens” by Chief Responsibility Officer
(formerly Business Ethics) magazine in 2009 and from 2000-2007

2008: Included in the Dow Jones Sustainability, FTSE4Good and KLD

Global Sustainability Indexes, three of the world’s most
comprehensive reviews of sustainable business practices
2008: Whirlpool brand was named one of the 10 top greenest brands by U.S. consumers, according to a
2008 BrandWeek magazine survey.

2008: Named one of the “2008 World’s Most Ethical Companies” by Ethisphere magazine

2008: Whirlpool OF India” was awarded the NDTV Profit Business & Leadership Award 2008
for “The Best Consumer Durables Company”.

2008: The Business Today - Mercer -TNS Study – 2008. ‘Top 20 Best Companies’ to work
for in India’

Sustainability Leadership Recognition

Received the 2009 ENERGY STAR Sustained Excellence award, the company’s 10th
ENERGY STAR award in 11 years.

ANALYSIS OF DIRECTOR’S REPORT

The Director’s Report has clearly defined the performance of the company in a nutshell. It also talks about the
various steps that the company took in order to improve its sales through proper marketing and advertisement.
The Director’s Report presents all the information under proper headings to make things very clear. According
to it, the “Whirlpool” brand gained strength in the Indian market as the sales were up by 5.8%. This has been
achieved by focusing on new product launches, product mix management, effective working capital
management and cost effective initiatives.

The Director’s Report also mentions the response by the Sales and Marketing department to the market
situation, i.e. they adopted a four-fold plan:

 Product Innovation
 Brand Visibility
 Conversion at the Shop Floor
 Motivation of Trade Partners

It also mentions about the export situation of the company, that the company’s Major Domestic Appliance
exports business registered a healthy 30% turnover growth during the last four months. Report mentions about
the various achievements held by Whirlpool during the last financial year.

There are some facts on which not much was written or no explanation was provided, which according to our
analysis can raise some questions on the company’s performance:

 It is mentioned that Dividend is not recommended for the year ended 31st March 2009 due to past
accumulated losses, but no further explanation was provided.
 It also states that their Small Appliances business operating from an EOU was closed down to change in
the sourcing strategy of the parent Corporation, again no rational reasons are cited for it.
 Further the report talks only about the growth and achievements and nothing much about the difficulties
it faced in the year of recession and how it come out of them, which again raises questions in our mind
that whether the company is really growing so much without facing any problems.
All in the entire Director’s report is a summary of company’s growth and achievements only.

ANALYSIS OF MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The MD&A report discuss the Industry structure and Developments, Outlook on Opportunities, Threats,
Risk and Concerns and Internal Control Systems and its adequacy. The report clearly defines volume
growth of its different product lines like Refrigerator and washer category growth were 6% and 7%
respectively. It also mentions the products which are doing good and their growth percentage.

The report also cites some reasons for a slowed progress like
 Brief and mild summer in many parts of the country, adversely impacting sales of refrigerators
and air conditioners;
 Rise in consumer price due to escalation of commodity costs;
 Deferment of purchases as a result of loss in consumer confidence, following the economic
meltdown.
The report further mentions the investments that Whirlpool did in order to refresh or launch new
products in the given financial year. According to MD&A report the company has in place adequate
internal control systems and procedures commensurate with the size and nature of business.
The best thing about this report is that it anticipates the situation for the next financial year that
the demand is likely to be low and also cites the reasons for it:
 Depreciating rupee
 Unstable oil prices
 High marketing and infrastructure investment by competition
 Influx of new multinational brands that will create additional pressure on advertising and
promotion budgets.

ANALYSIS OF AUDITOR’S REPORT

There has been a clear disclosure by the auditors appointed by the company as they have covered all the major
aspects which are of utmost importance. The auditors have been able to access the Assets Position, Accounting
standards followed, Disclosures, Notes to Accounts, Secured & Un-Secured Loans, Depreciation Policies etc in
detail. Valuation of Inventory has been well covered; Disclosures regarding the Assets Valuation, loans,
deferred tax asset, dues, etc.

The major problem identified by us while analyzing the Auditor’s Report is the use of following terms and
phrases, which questions the credibility of the report:

 We conducted our audit in accordance with auditing standards generally accepted in India.
 We have obtained all the information and explanations, which to the best of our knowledge and belief
were necessary for the purposes of our audit.
 In our opinion, proper books of account as required by law have been kept by the Company so far as
appears from our examination of those books.
 All fixed assets have not been physically verified by the management during the year but there is a
regular programme of verification which, in our opinion, is reasonable having regard to the size of the
Company and the nature of its assets.
 As informed, the Company has not taken any loan, secured or unsecured from companies, firms or
other parties.
 In our opinion and according to the information and explanations given to us, there is an adequate
internal control system commensurate with the size of the Company and the nature of its business.
 We have broadly reviewed the books of account maintained by the Company.

Use of the above mentioned and highlighted phrases weakens the trust which a general shareholder
holds while reading the Auditor’s Report. Auditors should support their opinions with some real facts
and figures and should present a more rational view of the details rather than the subjective comments
that they used here.