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IPO Note

03 May 2016

Parag Milk Foods Limited

Issue Snapshot:

Background & Operations:

Issue Open: May 04 - May 06 2016

Parag Milk Foods Ltd (PMFL) is one of the leading manufacturers and marketers of
dairy-based branded foods in India. Having started its business in 1992 with collection
and distribution of milk has now translated into a dairy-based branded consumer
products company with an integrated business model, manufacturing a diverse range
of products including cheese, ghee (clarified butter), fresh milk, whey proteins,
paneer, curd, yoghurt, milk powders and dairy based beverages targeting a wide range
of consumer groups through several brands. A significant portion of its product range
includes long shelf-life food and beverage products that enable it to sell its products to
retail and institutional customers across India. PMFL derives all of its products only
from cowsmilk. Its aggregate milk processing capacity is 2 million litres per day and
cheese plant has the largest production capacity in India, with a raw cheese
production capacity of 40 MT per day. Gowardhan and Go, its flagship brands, are
among the leading ghee, cheese and other value added product brands in India.

Price Band: Rs. 220 227 (Discount of up

to Rs 12 on issue Price (per equity share)
to all eligible retail individual bidders and
eligible employees)
Issue Size: 33,788,432 Equity Shares
(including Fresh issue of 13,215,859*
Equity Shares + Offer for sale 20,572,573,
equity shares including employee
reservation of upto 2,27,000 eq shares))
Offer Size: Rs.743.3 766.9 crs
QIB
Retail
Non Institutional

atleast 75% eq sh
upto
10% eq sh
atleast 15% eq sh

Face Value: Rs 10
Book value: Rs 41.94 (Dec 31, 2015)
Bid size: - 65 equity shares and in
multiples thereof
100% Book built Issue
Capital Structure:
Pre Issue Equity:
Post issue Equity:

Rs. 70.41 cr
Rs.83.63 cr

Listing: BSE & NSE

Book Running Lead Manager: Kotak
Mahindra Capital Company Limited, JM
Financial Institutional Securities Limited,
IDFC Securities Ltd, Motilal Oswal
Investment Advisors Pvt ltd
Registrar to issue: Karvy Computershare
Pvt Ltd
Shareholding Pattern
Shareholding Pattern

Pre
Post
issue % issue %

Promoters & Promoter 61.13

Group
Public (incl institutions
38.87
& employees)

47.76

Total

100.0

100.0

52.24

(*=Assuming issue subscribed at higher band)

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PMFLs manufacturing facilities are strategically located at Manchar in the Pune

district of Maharashtra and Palamaner in the Chittoor district of Andhra Pradesh,
which have a high population of dairy cows, with milk processing capacities of 1.2
million litres per day and 0.8 million litres per day, respectively. It produces cheese and
whey products only at Manchar facility, UHT products only at Palamaner facility and
other products at both facilities. It produces cheese in 75 stock keeping units at its
cheese plant. As of February 29, 2016, PMFL employed 1,618 personnel across its
operations. The company had pan-India distribution network comprising 15 depots,
104 super stockists and over 3000 distributors. It places significant emphasis on quality
control and product safety at each step of the manufacturing process, right from the
procurement of raw milk until the final product is packaged and ready for distribution.
In 2005, PMFL set up its Bhagyalaxmi Dairy Farm at Manchar, with an aim to educate
farmers about best practices of breeding, feeding, animal management and improving
productivity. Its dairy farm is fully automated and houses over 2,000 Holstein breed
cows with higher yields of superior quality milk. It supplies farm-to-home premium
fresh milk from Bhagyalaxmi Dairy Farm, which is marketed and sold under Pride of
Cows in Mumbai and Pune. Currently the company sells its products under its
Gowardhan, Go, Pride of Cows and Topp Up brands, are well recognized brands
and have been developed to cater to various sections of the market for dairy based
food and beverage products. Its Gowardhan brand was ranked among the top 25
most trusted brands in the food products category. PMFL classifies its product
portfolio into fresh milk, skimmed milk powder, ghee, cheese/paneer, UHT products,
whey products and other products, which accounted for 18.2%, 20.9%, 18.3%, 18.5%,
3.2%, 1.6%, and 11.5% of its total revenues for the financial year 2015, respectively.
Objects of Issue:
The Offer comprises a Fresh Issue by the Company and an Offer for Sale. PMFL will not
receive any proceeds from the Offer for Sale.
Fresh Issue
PMFL proposes to utilise the Net Proceeds from the Fresh Issue:
To meet the capital expenditure requirements in relation to expansion and
modernisation of existing manufacturing facilities of the Company at Manchar (the
Manchar Facility) and Palamaner (the Palamaner Facility), and improving the
marketing/ distribution infrastructure (the Marketing Infrastructure and
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together with the capital expenditure requirements for the expansion and
modernisation of the Manchar Facility and the Palamaner Facility, the Expansion
and Modernisation Plan);
Investment in Subsidiary for financing the capital expenditure requirements in
relation to the expansion and modernisation of the Bhagyalaxmi Dairy Farm;
Partial repayment of the Working Capital Consortium Loan; and
General corporate purposes
Particulars
Expansion and Modernisation Plan
Investment in Subsidiary for financing the capital expenditure requirements in relation to the
expansion and modernisation of the Bhagyalaxmi Dairy Farm
Partial repayment of the Working Capital Consortium Loan
General corporate purposes
Total

FY17
831.5
22.99
1,000
*
*

Schedule of Utilisation
FY18
FY19
Total
626.3
19.25
1,477.01
*
*

*
*

22.99
1,000
*
*

Competitive Strengths:
Well Established Brands Targeting a Range of Consumer Groups: PMFLs strong and recognisable brand is a key attribute in its
industry, which increases customer confidence and influences a purchase decision. It sells its products under Gowardhan,
Go, Pride of Cows and Topp Up brands, which are well recognised brands and has been developed to cater to various
sections of the market for dairy based food and beverage products. It sells fresh milk, ghee, butter, cheese, curd, milk powder,
paneer and gulab jamun mix under its Gowardhan brand, which is targeted at consumer consumption at home. It sells its
beverages for instant consumption under its Topp Up brand, which is targeted at the youth generation and travellers as a
source of instant nourishment. The strength of its brands helps it in many aspects of the business, including expanding to new
markets, entering into agreements with distributors and retailers and building relationships with its customers, investors and
lenders.
Integrated Business Model: PMFL has an integrated business model that encompasses the entire value chain of the dairy based
food and beverages business and includes a range of activities including manufacturing and processing to branding and
distributing a wide variety of products. It has well established relationships, developed over several years, with farmers in the
proximity of its facilities, and its continuous engagement with them enables it to consistently procure raw milk and at
competitive prices. Further, the strategic location of its manufacturing facilities enables it to control costs associated with the
transportation and handling of raw milk, without wastage or any substantive loss of quality or nutritional value. It has also
established a pan-India distribution network comprising 15 depots, 104 super stockists and over 3,000 distributors as of
February 29, 2016 to sell its products to the retail and institutional customers. Its integrated business model with a strong
procurement base, diversified product portfolio and growing distribution network enables it to cater to diverse customer
requirements and compete effectively.
Diversified Product Portfolio and Customer Base: PMFL has diversified its product portfolio, which consists a range of products
including fresh, premium fresh and UHT milk, ghee, cheese, milk powders, whey proteins, dairy based beverages, curd, paneer,
shrikhand, fruit yoghurts and fresh cream. It has recently introduced dairy based products, which focus on consumer health and
nutrition. It sells its products to several customer categories such as retail customers, hotels, restaurants, institutional
customers and caterers. It is one of the leading suppliers in India of whey protein to consumer product companies such as
Nestle India Limited and UTH Beverage Factory Private Limited. It also sells its skimmed milk powder, whey products, cheese
and other products to customers such as McCain Foods India Private Limited, MTR Foods Private Limited, Mother Dairy Fruit &
Vegetable Private Limited and Jubilant Foodworks Limited, who utilise its products as ingredients in their operations. Thus, it
derives its revenues from the sales of a variety of products to a diverse range of customers, which assists it in mitigating the
concentration risks associated with operations in a specific product and customer segment.
Growing Pan-India Distribution Network: In order to cater to PMFLs retail and institutional customers, it has established a panIndia distribution network which comprised 15 depots, 104 super stockists and over 3,000 distributors as of February 29, 2016.
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Its depots are present in 13 states and union territories in India and assist it in supplying its products to a wide network of retail
stores. To sell products to its end consumers, it uses modern trade channels, which comprise super-markets and hyper-markets
and general trade channels that include smaller retail stores. It caters to its institutional customers, hotels, restaurants and
caterers directly and through distributors appointed by it. PMFLs structured and growing distribution network facilitates the
efficient sale of the products in its targeted markets and promotes its brand visibility.
Established Track Record of Growth and Financial Performance: Over the years, PMFL has established a strong track record of
growth and financial performance. Its total revenues grew at a CAGR of 21.6% from Rs.6,585.03 million for the financial year
2011 to Rs.14,405.19 million for the financial year 2015. Its net profit after tax grew from Rs.188.97 million for the financial year
2012 to Rs.259.66 million for the financial year 2015. The volume of milk procured by it increased at a CAGR of 11.47% from
0.68 million litres per day for the financial year 2011 to 1.05 million litres per day for the financial year 2015. Further, it has
invested significant resources over the last few years to install additional plant and machinery and other technological
infrastructure at its facilities, including for its UHT, cheese and whey products and the company expects to derive benefits from
these investments in the near future.
Experienced Senior Management: PMFL has a strong management team with significant industry experience. Their experience
has helped the company to develop relationships with its vendors including farmers for the procurement of milk, institutional
customers and its dealers and distributors. Its management team of qualified and experienced professionals enable it to
identify new avenues of growth, and help to implement its business strategies in an efficient manner and to continue to build
on the track record of successful product offerings.
Business Strategy:
Grow Product Reach: While PMFL currently has a structured pan-India distribution network to cater to its retail and
institutional customers, it constantly seeks to grow its product reach to under-penetrated geographies. It intends to appoint
additional distributors and super stockists to increase the availability of its products in smaller towns in India and introduce new
low unit price products in Tier 3 cities and rural areas. Further, PMFL seeks to increase the penetration of its products in
markets in which it is currently present and widen the portfolio of its products available in those markets. It intends to achieve
this by appointing new distributors targeted at different consumer groups and increase its sales force. Currently it has 15 depots
located across the country and proposes to establish six more depots during the financial year 2017, of which two depots would
be located in northern India, two in southern India, one in western India and one in eastern India. Increasing the number of its
depots will enable retailers to source a greater number and a wider range of its products more efficiently.
Increase Milk Procurement: PMFL currently procure milk from 29 districts across the states of Maharashtra, Andhra Pradesh,
Karnataka and Tamil Nadu. Maintaining good relationships with milk farmers and other milk vendors is essential to increasing
its milk procurement. PMFL seeks to strengthen its existing relationships with milk farmers and vendors, and cultivate new
relationships through various methods including milk quality and quantity based incentives, providing farmers with cattle feed
and seeds, assisting with veterinary health-care, vaccinations, artificial insemination and facilitating loans to purchase cattle.
Further, it proposes to increase its milk procurement by setting up new collection centres for both its manufacturing facilities
and access new districts to procure cowsmilk. It also proposes to purchase new 75 bulk milk coolers and 100 automated milk
collection systems and install them at villages in the vicinity of its facilities and establishes new village level milk collection
centres in under-penetrated areas, thereby further increasing its milk procurement base.
Continue to Focus on Strengthening Brands: PMFLs brands are one of its key strengths and that its customers, distributors,
stockists and members of the financial community associate its brands with trusted and superior quality products. It intends to
continue to enhance the brand recall of its products through strategic branding initiatives, including through the use of social
media and consumer engagement programs. Its marketing team develops strategies to promote each of its products and it
currently proposes to focus on promoting its ghee, paneer and fresh milk under the Gowardhan brand and its UHT milk and
cheese products under itsGo brand. As of February 29, 2016, its marketing team comprises 560 personnel, or 34.6%, of its
total workforce.

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Increase Value-added Products Portfolio and Focus on Health and Nutrition: PMFL constantly focus on research and
development to distinguish itself from its competitors to enable it to introduce new products based on consumer preferences
and demand. It proposes to set up a research and development centre at its Manchar facility to develop new products and
processes and a technology centre at its Subsidiary for training and development activities and focus on animal husbandry. The
company intends to increase the share of its value-added product portfolio by focusing on health and nutrition to cater to
evolving consumer trends. It now intend to increase its dairy based beverages portfolio under Go brand and introduce milk
based high protein drinks.
PMFL also intend to introduce colostrum products, which can be consumed as a daily supplement to improve immunity and
general health, introduce several cheese products with low fat, high protein and mineral content and it seeks to add value to
and convert its milk powder into food supplements and nutritional products for different age groups. Further, it intends to sell
premium quality butter and ghee through the farm-to-home concept under its Pride of Cowsbrand. It can increase its margins
by focussing on increasing sales of its value-added products and that such initiatives will assist it in further diversifying the
business.
Increase Operational Efficiencies: PMFL intends to continue to increase its operational efficiencies to strengthen its competitive
position. It will continue to leverage its inhouse technological and research and development capabilities to effectively manage
its operations, maintain strict operational controls and enhance customer service levels. As part of its environmental, health
safety and energy management certifications, it has identified major focus areas of reducing energy and water consumption per
litre of milk processed, reducing milk and solid wastage and decreasing emission levels. It intends to further improve its
operational efficiencies and reduce operating costs at its production facilities.
Industry:
The Global Dairy Industry
The dairy industry includes businesses involved in cattle farming to food manufacturing. Dairy products produced by businesses
in the dairy industry using basic to sophisticated production processes, cover all types of food products derived from animal
milk. Globally, approximately 66% of milk and dairy products are consumed for factory use, 33% for fluid use and 1% for feed
use. The global production of milk grew at a CAGR of 2.3% between 2010 to 2014, reaching 792 MMT. This growth was
primarily driven by population growth, rising disposable incomes, urbanisation and westernisation of diets in developing
countries such as India and China.
It is expected that the global demand for milk and milk products will grow continuously. However, milk supply in China and
India, as well as countries within south-east Asia and Africa is not expected to keep pace with higher growth in these developing
economies. For the years between 2015 and 2020, the total production of milk and milk products is expected to grow at a CAGR
of 2.1% to reach 901.2 MMT by the year 2020. The European Union, India and the United States are currently the largest milk
and dairy product producers and consumers worldwide. These countries account for 20.3%, 18.3% and 11.9%, respectively, of
global production of milk and dairy products for the year 2014. Further milk and dairy products production is expected to
increase in India at a CAGR of 4.2% over 2015-20, resulting in India overtaking the European Union to become the largest milk
and dairy products producer by 2020.
The Indian Dairy Industry
India is the worlds biggest producer and consumer of milk on a country-wise basis. However, the per capita consumption of
milk at 97 litres per year is well below that of other major milk markets, except for China. Milk production volumes in India have
grown at a rapid pace from 17 MMT during the financial year 1952 to reach 147 MMT during the financial year 2015, enabling
India to become the worlds biggest milk producer. Similarly, on account of a steady population growth and rising incomes, milk
consumption continues to rise in India. India consumed 138 MMT of milk in the financial year 2015 and was the worlds largest
consumer of milk.
In 2014, Indias dairy industry was worth approximately Rs.4,061 billion, growing at a CAGR of 15.4% during 2010 to 2014. Total
production of milk and dairy products in India is expected to increase from 147 MMT in 2015 to 189 MMT in 2021, and total
consumption of milk and dairy products is expected to increase from 138 MMT in 2015 to 192 MMT in 2021. Indias dairy
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industry is expected to maintain growth at a CAGR of approximately 14.9% between 2015 to 2020, to reach a value of Rs.9,397
billion by 2020. In India, milk consumption mainly consists of buffalo milk at 49% followed by cow milk at 48% for the financial
year 2014. However, cow milk is growing at a faster pace than buffalo milk and is expected to account for the majority of the
total milk consumed in line with the developed markets. On a state level, Uttar Pradesh, Rajasthan and Andhra Pradesh were
the largest milk producers accounting for 17.7%, 10.5% and 9.8% of total milk production in 2014, respectively. Further, of the
35 states and union territories in India, cow milk is dominant in 24 states and union territories. The top five cow milk producing
states in India currently are Tamil Nadu, Uttar Pradesh, Rajasthan, Maharashtra and West Bengal
Indian Dairy Market Structure
The Indian dairy industry is divided into the organised and unorganised segments. The unorganised segment consists of
traditional milkmen, vendors and self-consumption at home and the organised segment consists of cooperatives and private
dairies. In 2014, 30% of the total marketable milk in India was processed by the organised segment, with private players
processing 55% and cooperatives processing 45% of the total marketable milk in the organised segment. During 2010 to 2014,
the organised segment grew at a CAGR 20.7% whilst the unorganised segment grew at a CAGR of 14.2% during the same period.
However, the unorganised segment still dominates the Indian dairy industry at 80% compared to the organised segment at 20%
by value in 2014. The organised segment is expected to grow at a CAGR of 19.5% between 2015 to 2020, accounting for
approximately 25.5% of the Indian dairy industry by 2020. The unorganised segment is expected to grow at a CAGR of 13.2%
during the same period and is expected to account for 74.5% of the total Indian dairy industry by 2020
Key Growth Drivers
There are several key factors driving growth in the dairy industry including:
Rising income levels
Rising middle class and urban population
Changing dietary patterns
Milk is considered a perfect health food in India
Consumer shift towards packaged milk to drive organised market
Key Concerns:
Operations are dependent on the supply of large amounts of cows raw milk: PMFLs manufacturing operations are dependent
on the supply of large amounts of cows raw milk, which is the primary raw material used in the manufacture of all its dairy
products. All of its products are derived only from cows milk and it procures milk from milk farmers and through chilling
centres and bulk coolers, with whom it has no formal arrangements. Since it has no formal arrangements with milk farmers,
chilling centers or bulk coolers, they are not obligated to supply their milk to the company and they may choose to sell their
milk to its competitors. Also, the amount of raw milk procured and the price at which it procures such supplies, may fluctuate
from time to time in the absence of a formal supply arrangement. Any disease or epidemic affecting the health of cows in India,
specially within its procurement regions, could significantly affect the ability to procure adequate amounts of raw milk. Further,
any change in the policies of the Government or the respective State Governments where its operations are based, including
those affecting the use or ownership of agricultural land or the dairy industry in general or any inability on its part to procure
sufficient quantities of raw milk and on commercially acceptable terms, could lead to a decline in its production and sales
volumes and value, which could have an adverse effect on its business, results of operations and financial condition.
A slowdown or shutdown in manufacturing operations or the under-utilisation of manufacturing facilities could have an
adverse effect on the business: PMFLs business is dependent upon its ability to manage manufacturing facilities, which are
subject to various operating risk. Although it has not experienced any significant disruptions at its manufacturing facilities in the
past, it cannot be assured that there will not be any significant disruptions in its operations in the future. Inability to effectively
respond to such events and rectify any disruption, in a timely manner and at an acceptable cost, could lead to the slowdown or
shut-down of its operations or the under-utilisation of its manufacturing facilities, which in turn may have an adverse effect on
the business, results of operations and financial condition.
Do not have long term agreements with suppliers for other raw materials and traded goods: Apart from raw milk, PMFL
require sugar, flavour, spices, cultures, packaging material, stabilizers, preservatives and other additives for its manufacturing
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operations. The price and availability of these raw materials depend on several factors beyond its control, including overall
economic conditions, production levels, market demand and competition for such materials, production and transportation
cost, duties and taxes and trade restrictions. It usually do not enter into long term supply contracts with any of the raw material
suppliers and typically place orders with them in advance of its anticipated requirements. The absence of long term contracts at
fixed prices exposes it to volatility in the prices of raw materials. Any inability on PMFLs part to procure raw materials from
alternate suppliers in a timely fashion, or on terms acceptable it, may adversely affect the operations Further, it source
packaging for its UHT products from Tetra Pak India Private Limited (Tetra Pak), which is a leading food processing and
packaging solutions company. If it is unable to procure packaging material from them on reasonable terms, it cannot be assured
that it will be able to make arrangements to procure alternate packaging material, which could disrupt its operations. Any
inability to obtain alternate packaging material or to pass on additional costs to its customers, could have an adverse effect on
the business, results of operations and financial condition.
Inability to expand growing distribution network may have an adverse effect on the business, results of operations and
financial condition: PMFL has an extensive sales and distribution network that covered approximately 15 depots, 104 super
stockists and over 3,000 distributors as of February 29, 2016, spread across most states and union territories in India. It
continuously seeks to increase the penetration of its products by appointing new distributors targeted at different customer
groups. If the terms offered to such distributors by its competitors are more favourable than those offered by PMFL,
distributors may decline to distribute its products and terminate their arrangements with the company. Further, its competitors
may have exclusive arrangements with distributors and may be unable to stock and distribute its products, which may limit its
ability to expand distribution network. If distributors fail to distribute the products in a timely manner, or adhere to the terms
of the distribution agreement, or if its distribution agreements are terminated, its business and results of operations may be
adversely affected.
A shortage or non-availability of electricity or water may adversely affect manufacturing operations and have an adverse
effect on the business, results of operations and financial condition: Manufacturing operations of PMFL require a significant
amount and continuous supply of electricity and water and any shortage or non-availability may adversely affect its operations.
The production process of certain products, as well as the storage of dairy products at particular temperatures requires
significant power. It is also required to store its raw milk and other raw materials in temperature controlled environments.
Although it has installed a cogeneration turbine at its Manchar facility and has diesel generators to meet exigencies at both its
facilities, it cannot be assured that its facilities will be operational during power failures. Any failure on its part to obtain
alternate sources of electricity or water, in a timely fashion, and at an acceptable cost, may have an adverse effect on its
business, results of operations and financial condition.
Manufacturing facilities and procurement operations are concentrated in a few regions: PMFLs manufacturing facilities are
located at Manchar, Maharashtra and Palamaner, Andhra Pradesh and it procure raw milk from 29 districts across Maharashtra,
Andhra Pradesh, Karnataka and Tamil Nadu from milk farmers and through chilling centers and bulk coolers. Further, for the
nine months ended December 31, 2015 and the financial year 2015, it derived approximately 57% and 55% of its revenue from
operations, respectively, from the sale of its products in the western regions of India. Since most of its infrastructure, facilities
and business operations are currently concentrated in these regions, any significant social, political or economic disruption, or
natural calamities or civil disruptions in these regions, or changes in the policies of the state or local governments of these
regions or the Government of India, could require PMFL to incur significant capital expenditure, change its business structure or
strategy, which could have an adverse effect on the business, results of operations and financial condition.
The supply of raw milk is subject to seasonal factors: The supply of raw milk is subject to seasonal factors. Cows generally
produce more milk in temperate weather, and extreme cold or hot weather could lead to lower than expected production. Each
of its products has a specific shelf life and if not sold prior to expiry, may lead to losses or if consumed after expiry, may lead to
health hazards. It cannot be assured that it will be able to sell surplus stock in a timely manner, or at all, which in turn may
adversely affect its business, results of operations and financial condition.
Non compliance with and changes in, safety, health and environmental laws and other applicable regulations, may adversely
affect the business, results of operations and financial condition: PMFL is subject to laws and government regulations,
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including in relation to safety, health and environmental protection. Further, its products, including the process of manufacture,
storage and distribution of such products, are subject to numerous laws and regulations in relation to quality, safety and health.
In addition, PMFL and its Subsidiary have, in the past, also received notices from MPCB for non-compliances with certain
environmental laws and the terms and conditions of the authorisations granted. It cannot be assured that it will not be involved
in future litigation or other proceedings, or be held liable in any litigation or proceedings including in relation to safety, health
and environmental matters, the costs of which may be significant. Any accidents at its facilities may result in personal injury or
loss of life, substantial damage to or destruction of property and equipment resulting in the suspension of operations. The loss
or shutdown of its operations over an extended period of time could have an adverse effect on the business and operations.
Business and prospects may be adversely affected if it is unable to maintain and grow brand image: PMFL is one of the
leading manufacturers and marketers of dairy based food and beverage products in India and its flagship brands Gowardhan
and Go are among the leading ghee, cheese and other value added product brands. Its brand and reputation are among its
most important assets and its brands serve in attracting customers to its products in preference over those of its competitors.
Consequently, any adverse publicity involving PMFL or any of its products may impair its reputation, dilute the impact of its
branding and marketing initiatives and adversely affect its business and its prospects.
Inability to meet obligations, including financial and other covenants under its debt financing arrangements could adversely
affect the business and results of operations: PMFLs financing agreements contain certain restrictive covenants that limit its
ability to undertake certain types of transactions, any of which could adversely affect the business and financial condition.
Furthermore, its financing arrangements contain cross-default provisions which could automatically trigger defaults under other
financing arrangements. Its failure to meet its obligations under the debt financing agreements could have an adverse effect on
the business, results of operations and financial condition.
Financing agreements entail interest at variable rates and any increases in interest rates may adversely affect results of
operations: PMFL is susceptible to changes in interest rates and the risks arising therefrom. Certain of its financing agreements
provide for interest at variable rates with a provision for the periodic resetting of interest rates.. Further, in recent years, the
Government of India has taken measures to control inflation, which has included tightening the monetary policy by raising
interest rates. As such, any increase in interest rates may have an adverse effect on its business, results of operations, cash
flows and financial condition.
The dairy products industry is intensely competitive: The dairy products industry in India is intensely competitive and PMFL
compete with large multinational companies, as well as regional and local companies in each of the regions that it operates.
Some of its international competitors may be able to capitalise on their overseas experience to compete in the Indian market.
While it derives all its products from cows milk, its competitors may also use milk from buffaloes for their operations, and thus
have a larger milk procurement base. It also compete with large dairy cooperatives that also procure milk from farmers in the
regions where it procure milk, and any incentives offered by the Central or State Government to such cooperatives, could
benefit such entities, which may in turn adversely affect the business. In addition, its competitors may significantly increase
their advertising expenses to promote their brands and products, which may require it to similarly increase its advertising and
marketing expenses and engage in effective pricing strategies, which may have an adverse effect on its business, results of
operations and financial condition.
PMFL is subject to extensive government regulation: PMFLs operations are subject to extensive government regulation and it
is required to obtain and maintain a number of statutory and regulatory permits and approvals under central, state and local
government rules in India, generally for carrying out its business and for each of its manufacturing facilities. If there is any
failure by it to comply with the applicable regulations or if the regulations governing its business are amended, it may incur
increased costs, be subject to penalties, have its approvals and permits revoked or suffer a disruption in its operations, any of
which could adversely affect its business.
Changes in legislation or the rules relating to tax regimes could adversely affect the business, prospects and results of
operations: Business of PMFL is subject to a significant number of state tax regimes and changes in legislation governing the
rules implementing them or the regulator enforcing them in any one of those jurisdictions could adversely affect the results of
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operations. Uncertainty in the applicability, interpretation or implementation of any amendment to, or change in, governing
law, regulation or policy, including by reason of an absence, or a limited body, of administrative or judicial precedent may be
time consuming as well as costly for it to resolve and may impact the viability of its current business or restrict the ability to
grow its business in the future.
Profit &Loss:
Particulars
Revenue from Operations
Other Income
Total Income
Total Expenditure
Cost of materials consumed
Purchase of traded goods
Changes in inventories of finished goods & WIP
Employee benefits expense
Other expenses
PBIDT
Interest
PBDT
Depreciation
PBT
Tax (incl. DT & FBT)
Tax
Deferred Tax
Reported Profit After Tax
EPS (Rs.)
Equity
Face Value
OPM (%)
PATM (%)

Rs in million

9MFY16
12306.0
5.9
12311.9
11231.4
8419.1
933.7
-138.5
507.8
1509.4
1080.5
349.3
731.2
236.5
494.7
175.5
144.1
31.4
319.2
4.8
661.6
10.0
8.7
2.6

FY15
14387.0
18.2
14405.2
13323.5
10833.5
392.4
-217.0
574.9
1739.8
1081.7
493.9
587.8
275.3
312.5
52.8
32.8
20.1
259.7
16.3
159.7
10.0
7.4
1.8

FY14
10882.5
12.5
10895.0
10059.4
8220.5
642.7
-504.5
478.0
1222.7
835.6
437.3
398.3
275.3
123.1
-36.6
0.0
-36.6
159.7
10.0
159.7
10.0
7.6
1.5

9MFY16

FY15

FY14

FY13

2775.1
661.6
2113.5

1231.7
159.7
1072.0

1555.3
1290.8
89.4
170.0
5.2
5370.7
2361.4
1471.0
1452.9
85.3
9701.1

1950.2
1726.2
58.1
161.5
4.6
6047.9
2572.4
1803.2
1667.0
5.2
9229.8

972.1
159.7
812.4
0.1
2879.1
2726.2
38.0
111.7
3.2
4377.6
2478.6
1248.9
649.5
0.5
8228.8

812.5
159.7
652.8
0.1
2407.2
2326.7
74.6
4.0
1.8
3694.7
2231.6
921.9
527.0
14.2
6914.4

3904.3
3130.2

3858.2
2908.0

3842.5
2413.9

3447.0
2431.4

Balance Sheet:
Particulars
Equity & Liabilities
Shareholders Funds
Share Capital
Reserves and surplus
Minority Interest
Non-Current Liabilities
Long-term borrowings
Deferred tax liabilities
Other long-term liabilities
Long-term provisions
Current Liabilities
Short-term borrowings
Trade payables
Other current liabilities
Short term provisions
Total Equity & Liabilities
Assets
Non-Current Assets
Tangible assets

RETAIL RESEARCH

FY13
9250.4
21.1
9271.5
8416.3
6796.0
80.2
30.9
398.0
1111.2
855.2
402.7
452.5
261.2
191.3
-16.5
9.2
-25.7
207.7
13.0
159.7
10.0
9.0
2.2
Rs in million

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RETAIL RESEARCH
Intangible assets
Capital work in progress
Intangible assets under development
Non-current investments
Long-term loans and advances
Other non-current assets
Current Assets
Inventories
Trade receivables
Cash and bank balances
Short-term loans and advances
Other current assets
Total Assets

1.8
245.5
44.6
3.1
468.7
10.5
5796.8
2267.6
2460.6
250.0
510.7
307.9
9701.1

3.1
213.7
46.7
3.1
665.5
18.2
5371.6
2118.9
1715.0
55.7
975.6
506.4
9229.8

5.2
336.3
37.6
3.1
1030.1
16.4
4386.3
1902.7
1634.7
42.1
422.5
384.3
8228.8

2.4
30.7
32.1
3.1
937.6
9.8
3467.4
1394.6
1472.9
22.2
214.8
362.9
6914.4

RETAIL RESEARCH Fax: (022) 30753435 Corporate Office

HDFC Securities Limited, I Think Techno Campus, Bulding B, Alpha, Office Floor 8, Near Kanjurmarg Station Opp. Crompton Greaves, Kanjurmarg (East),
Mumbai 400 042 Fax: (022) 30753435 Website: www.hdfcsec.com
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. This document is
not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The
information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such.
We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform
investment banking, or other services for, any company mentioned in this document. This report is intended for Retail Clients only and not for any other
category of clients, including, but not limited to, Institutional Clients. HDFC Securities Ltd. Is a SEBI Registered Research Analyst having registration no.
INH000002475."

RETAIL RESEARCH

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