Research Report- Company Highlights- Heritage Foods Limited-

Dairy Sector in India: India is ranked 1st in milk production contributing 23 % of global milk production. Milk production in the country has grown at a compound annual growth rate of about 6.2 % to reach 209.96 mn tonnes in 2020-21 from 146.31 mn tonnes in 2014-15.

The top 5 milk-producing states are: Uttar Pradesh (14.9%, 31.4 MMT), Rajasthan (14.6%, 30.7 MMT), Madhya Pradesh (8.6%, 18.0 MMT), Gujarat (7.6%, 15.9 MMT) and Andhra Pradesh (7.0%, 14.7 MMT).

The Government of India in association with the Department of Animal Husbandry and Dairying in June 2020 announced a $ 2.1 Bn infrastructure development fund with an interest subsidy scheme to promote investment by private players and MSMEs in dairy, meat processing and animal feed plants which in return is expected to create 3.5 million jobs. 

The food processing ministry in 2021-2022 said its flagship scheme 'Pradhan Mantri Kisan Sampada Yojana (PMKSY)' has been extended till March 2026 with an allocation of INR 4,600 crore. PMKSY is an umbrella scheme incorporating ongoing schemes of the ministry like Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, Infrastructure for Agro-processing Clusters, Creation / Expansion of Food Processing and Preservation Capacities and Operation Greens.

The Rashtriya Gokul Mission has been extended till 2026 with an INR 2400 crore commitment to boost productivity and milk output, making dairying more profitable for farmers. It also strives to accomplish genetic improvement in the bovine population as well as the creation and preservation of indigenous bovine breeds.

Company brief: The Heritage Foods Limited was founded by Mr. Nara Chandrababu Naidu in the year 1992, which is one of the fastest growing Public Listed Companies in India, with two business divisions - Dairy and Renewable Energy. The annual turnover of Heritage Foods stood at INR 26,429 million in the financial year 2021-22.

Currently, Heritage's milk and milk products have a market presence in Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu,

Maharashtra, Odisha, NCR Delhi, Haryana, Rajasthan, Uttarakhand & Uttar Pradesh.

Company’s Product Portfolio includes: Milk, UHT Milk, Curd, Butter Milk, Ice- Creams, Frozen Desserts, Lassi, Flavored Milk, Milk Shakes, Panner, Sweets, Ghee, Butter, Cheese, Fresh Cream, Cold Coffee, Skimmed Milk Powder.

Company’s wide presence across 11 states, strong distribution network with Omni channel Presence on the back of 6500+ distributors.

Company having 18 states of the art milk processing plants, with 2.65 MLPD milk and 198 Bulk Coolers, Mini Chilling & Chilling Units with 2.08 MLPD milk chilling capacity.

Key Strengths:

• Company has 3 decades of experience in the dairy Sector.
• Company has created deeply entrenched distribution network with products sold across 11 States in India and including 121 Heritage Distribution Centres, 130,000+ Retail Outlets, 27 organized retail chains across India and 859 Heritage Parlours. It also has a strong presence across 16 E-Commerce websites.
• Company has wide range of expertise on the Company Board
• Company leveraged on the French partner Novandie-for global brand legacy, product knowledge and technology.
• Slowly and steadily company is launching new products.
• Company maintains steady volume growth.
• Company procured 1.12mn-litres of milk per day

Company’s Acquisition till date

• Company had completed the acquisition of dairy business of Reliance Retail ltd in 2018. (Dairy Life and Dairy Pure brands)
• Company has acquired Suguna Dairy’s Business in FY 22.

Highlighted Points:

• Under renewable energy project; company has constantly invested in renewable projects for the consumptions. Current installed capacity for solar is 4.20MW solar power and 6.30MW wind power.
• In 2022 company launched two new products Gulab Jamun (June), and Gluco Shakti (Sept)
• Company was rejected under PLI scheme – Dairy Products.
• Company had created the Provision against “Future Retail” around INR 6 crores and another 5 crores for the expenses in Q4.
• After looking at the industry trend, company eyeing and following the footsteps of the giants’ peers into Sweets Market – a high profitable margin business.
• Company yet to explore the ready to eat food under package foods at the fullest.
• The company announced a rights issue at 1:1 ratio, at Rs 5 on 30 Sept, 2022 for raising Rs 23 crores approx. for the business growth fund.
• Company also has used the Digital platform to reach the wider market through their app “Heritage Tuch” exclusively for the Hyderabad city.
• Company’s subsidiary “Heritage Nutrivet” which deals with Cattle Feed products, Feed supplements and Vet Medicines, and Fish Feed products.
• Company had taken a hit on EBITDA margin due to inflationary pressures on raw materials, resulting into historically high milk procurement (19% y-o-y).
• Company lacks marketing strategy compare to its peer group.
• Company looking for the INR of 100 – 125 crores for every next two to three years for capex.
• Company claims to be “Net Debt Free”.
• Company eyeing to achieve 40% sales from Value added products in next three years.
• Company has set the ambitious target of “6000 crore of the turnover”.

Disclaimer:

This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.

This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Such information and opinions are in all events not current after the date of this presentation. Certain statements made in

This presentation may not be based on historical information or facts and may be “forward looking statements” based on the currently held beliefs and assumptions of the management of Heritage Foods Limited. which are expressed in good faith and in their opinion reasonable, including those relating to the Company’s general business plans and strategy, its future financial condition and growth prospects and future developments in its industry and its competitive and regulatory environment. This document is confidential and may not be copied or disseminated, in whole or in part, and in any manner.