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LEVERAGE BUYOUTPresented by:Akshay BakayaRavi BhojaniShruti RastogiFalguni ModiSushmit TripathiAnupam Godghate

Industry OverviewThe food processing sector is critical to Indias development, for it establishes a vital linkage and synergy between the two pillars of the economyIndustry and Agriculture. high-growth and high-profit sector due to its immense potential for value additionThe sector is governed by Ministry of Food Processing Industries

Segmentation of different sectors in food processing industry:SectorsProductsDiaryWhole Milk Powder, Skimmed milk powder, Condensed milk, Ice cream, Butter and Ghee, Cheese Fruits & Vegetables Beverages, Juices, Concentrates, Pulps, Slices, Frozen & Dehydrated products, Potato Wafers/Chips, etc Grains & Cereals Flour, Bakeries, Starch Glucose, Cornflakes, Malted Foods, Vermicelli, Beer and Malt extracts, Grain based Alcohol FisheriesFrozen & Canned products mainly in fresh form Meat & Poultry Frozen and packed - mainly in fresh form, Egg Powder Consumer Foods Snack food, Namkeens, Biscuits, Ready to eat food, Alcoholic

Reasons to invest in Food Processing IndustryStrategic geographic location and proximity to food-importing nations makes India favourable for the export of processed foods.

The cost of skilled manpower is relatively low as compared to other countries.

Attractive fiscal incentives have been instated by central and state governments and these include capital subsidies, tax rebates, depreciation benefits, as well as reduced custom and excise duties for processed food and machinery.

The major global players in the food domain are already present in India.

The food processing industry is growing at 17%

Candidates for LBO

Heritage Food LimitedThe Heritage Group, founded in the year 1992 by Sri Nara Chandrababu Naidu, is one of the fastest growing Private Sector Enterprises in IndiaMISSIONTo be a nationally recognized brand for healthy and fresh products with a revenue of INR 6000 Cr by 2020.VISSIONDelighting every home with fresh & healthy products And Empowering the farmer.

The annual turnover of Heritage Foods crossed Rs 2072.97 crores in financial year 2014-15.

In the year 1994, HFIL went to Public Issue to raise resources, which was oversubscribed 54 times and its shares are listed under B1 Category on BSE (Stock Code: 519552) and NSE (Stock Code: HERITGFOOD)

Range of Products

Business UnitsDAIRYHeritage is known for its high quality standards and premium range of milk and milk products and following high quality manufacturing, packing and distribution practices.. 15 lakhs households have been using Heritage brand everyday.RETAILHeritage Retailis a unique chain of retail stores promoted by Heritage Foods - the leading dairy brand in South India. Designed to meet the needs of the modern Indian consumer, the store rediscovers the taste of nature everyday, making grocery shopping a never before experience.

AGRIAims at production of quality F&V, at reduced cost of cultivation and ensure stable and more income to farmers by eliminating middle-men and hassles of marketing faced by farmers.Enhance Productivity, Quality & Profitability of Custom Farmers by extending Extension activities.Reduces time lag between harvest and sale time through retailing of F&Vs.BAKERYHeritage Bakery created its first freshly baked cookies and muffins in 2007, Hyderabad.It continued to expand its menu selections adding delicious brownies, croissants, quiches, sandwiches and Signature Cakes.RENEWABLE ENERGYThe project is located in Adavimasjidpally village, Mulugu Mandal, Medak dist. This is the first solar project in Medak district. Power generated will be used for the captive purpose i.e. For its dairy divisions

Geographical Presence

Strong Market DriversSegmentPeople who need milk, dairy products along with grocery and food products15 lakhs households have been using Heritage brand everyday

Target GroupMiddle class families of India

Market PositioningTrusted supplier of fresh, healthy, hygienic and affordable dairy and food products

SWOT ANALYSISSTRENGTHSA well-established brand in South IndiaWide product range including milk, milk products, bakery products, fresh fruits and vegetables, etcGood supply networkGood network of Heritage Fresh retail stores in Hyderabad, Bangalore and ChennaiProcurement of milk from cooperative dairies and agricultural products from farmers, helping the farmers, dairies to get a fair priceWEAKNESS

No PAN India ApproachStrong Competition in sectors of OperationsOPPORTUNITY

Rise in Purchasing power of peoplePAN India expansion of Heritage Fresh retail storesAcquisition of regional dairiesMarket and advertise Heritage as a national brand and increase its reachTHREATS

1Strong competition in retail space and dairy segment2.Dependence on weather for agricultural products3.Inflation makes it difficult to maintain competitive pricing

Operating PerformanceFINANCIAL PROFILEIncreasing Revenue, PAT and EBITDARevenue- 15%PAT-11.11%EBITDA- 19.2%However unstable cash flows

Operating RatiosLowe Debt Equity Ratio shows that the company is stable . Positive leverage position of the company

Expenses have decreased over the past year. However, it does not show a key trend.The cost of raw materials have increased but it doe not reflect in revenue because of the increase in inventory

Fixed assets are about 2 times the total secured debt. Hence, sufficient as a collateral base for the debt

P/E: 26.52 EV: 790.43 Cr EPS: 14.5 Dividend Payout: 24.67

Revenue MixREVENUE PROFILEValue Add Segment growing fast for HeritageThe dairy business has grown by 13% over the last yearThe company is expecting +25% by 2020Retail business soon to be in black

Key Growth OpportunitiesExpansion in Emerging MarketsSince the company is more prominent in the North, there is a potential for growth in South IndiaHeritage has planned to build up back end network and are in process of building front end network in Mumbai. This is likely to augment their revenue growth

Dairy Sector of Heritage Food LimitedHas a potential for massive earnings in different regions and a source for steady revenue stream

Opportunities for digital and online engagementsOpportunity for online platform for the retail segment of Heritage Foods

Valuation and Financials

Thank you