Heritage Foods Limited [Formerly known as Heritage Foods (India) Limited] 22nd Annual Report 2013-14 Our milky way!way! Heritage Foods Limited [Formerly known as Heritage Foods (India) Limited] CIN: L15209TG1992PLC014332 #6-3-541/C, Panjagutta Hyderabad-500082, Telangana Phone: 040-23391221/2 Email: hfl @heritagefoods.in Web site: www.heritagefoods.in Content and design: [email protected] PDF processed with CutePDF evaluation edition www.CutePDF.com Corporate information* Caution regarding forward-looking statements Board of Directors: This document contains statements about expected future events and fi nancial and operating results of Sri. D. Seetharamaiah Non Executive Independent Chairman Heritage Foods Limited, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is signifi cant N. Sri Vishnu Raju Non Executive Independent Director risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Sri. M. Siva Rama Vara Prasad Non Executive Independent Director Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors Sri. N. P. Ramakrishna Non Executive Director could cause assumptions, actual future results and events to differ materially from those expressed in the Dr. V. Nagaraja Naidu Non Executive Director forward-looking statements. Accordingly, this document is subject to the disclaimer and qualifi ed in its entirety by the assumptions, qualifi cations and risk factors referred to in the management’s discussion Sri. N. Lokesh Non Executive Director and analysis of the Heritage Foods Limited Annual Report 2013-14. Smt. N. Bhuvaneswari Vice Chairperson & Managing Director Smt. N. Brahmani Executive Director Chief Financial Offi cer: CA A. Prabhakara Naidu Company Secretary: CS Umakanta Barik Senior Management: Dr. M. Sambasiva Rao President Sri. K. Durga Prasad Rao Chief Operating Offi cer-Dairy Division Sri. S. Jagdish Krishnan Chief Operating Offi cer-Retail & Bakery Divisions Sri. Anil Kumar Srivastava Chief Operating Offi cer-Agri Division Board Committees * Audit Committee Stakeholders Relationship Committee Sri. D. Seetharamaiah, Chairman Dr. V. Nagaraja Naidu, Chairman N. Sri Vishnu Raju Sri. D. Seetharamaiah Sri. M. Siva Rama Vara Prasad N. Sri Vishnu Raju Dr. V. Nagaraja Naidu Smt. N. Bhuvaneswari Sri. N. Lokesh Nomination & Remuneration Committee Management Committee N. Sri Vishnu Raju, Chairman Sri. D. Seetharamaiah, Chairman Welcome to the Heritage Foods Limited Sri. D. Seetharamaiah N. Sri Vishnu Raju Sri. M. Siva Rama Vara Prasad Smt. N. Bhuvaneswari 2013-14 Annual Report. Sri. N. Lokesh Sri. N. Lokesh This is what you will fi nd inside. CSR Committee Sri. D. Seetharamaiah, Chairman AGM Notice 01 Directors’ Report 16 Management Discussion and Analysis 25 N. Sri Vishnu Raju Report on Corporate Governance 32 Corporate Governance Certifi cate of Auditors and CEO & CFO 45 Smt. N. Bhuvaneswari Secretarial Auditor Report 46 Independent Auditors’ Report on Standalone Financial Statements 48 Registered Offi ce : #6-3-541/C, Panjagutta, Hyderabad - 500 082, Telangana, Tel: 040-23391221/2 Standalone Balance Sheet 52 Standalone Statement of Profi t & Loss 53 Standalone Cash Flow CIN: L15209TG1992PLC014332, E-mail: hfl @heritagefoods.in Statement 54 Signifi cant of Accounting Policies on Standalone Financial Statements 56 Statutory Auditors : M/s. Raju & Prasad, Chartered Accountants Notes on Standalone Financial Statements 59 Auditors’ Report on Consolidated Financial 401, “DIAMOND HOUSE”, Adj. Amrutha Hills, Panjagutta, Hyderabad - 500 082. Statements 90 Consolidated Balance Sheet 91 Consolidated Statement of Profi t & Loss 92 Bankers : Bank of Baroda, Andhra Bank, ICICI Bank Limited. Consolidated Cash Flow Statement 93 Signifi cant of Accounting Policies on Consolidated Listed with : BSE Limited, Mumbai and National Stock Exchange of India Limited, Mumbai. Accounts 95 Notes on Consolidated Financial Statements 99 Registrar and Transfer Agents : M/s Karvy Computershare Private Limited Plot No.17 to 24, Vittal Rao Nagar, Madhapur, Hyderabad - 500 081. Attendance Slip & Proxy Form 133 & 135 Website : www.heritagefoods.in *As on 30th July, 2014 At Heritage Foods, our universe is our milky way, refl ected in a unique connectedness that we share with our consumers. Our products create lifelong bonds (“If you have milk every day, you will grow strong!”), spark new conversations (“Will you add fl avour to my life just as chocolate sauce on vanilla ice cream!”) or restart old ones (“I instantly know your mood by the curd you serve – either sweet or salty!”). At our Company, we are proud that our products are an integral story of our consumers’ lives! A heritage of nourishment! Welcome to our milky way! A heritage of creating bonds! A heritage of spreading love! Heritage Foods Limited A heritage of bringing neighbourhoods closer! A heritage of environmental responsibility! A heritage of strengthening relationships! 22nd Annual Report 2013-14 2013-14 key milestones Increasingly focused on Liquid milk supply stood at 293.80 million litres; Andhra Pradesh consolidating the retail business with the closure of commenced liquid milk continued to lead milk unprofi table and supplies to new markets sales with an average of under-3,000 sq. ft stores; in the states of 4.45 lakh litres per day, added 7 new stores, Delhi and Odisha followed by Tamil Nadu taking the overall retail portfolio (1.83 lakh litres daily), to 74 stores spread over Karnataka 2.23 lakh sq. ft (1.09 lakh litres daily), (as on 31 March 2014) Maharashtra (0.41 lakh litres daily), Kerala (0.12 lakh litres daily), Odisha (0.07 lakh litres daily) and Delhi Focused on consolidating (0.06 lakh litres daily) our operations, with a special emphasis on our retail business Agri and bakery divisions continued to remain strong backward support systems, supplying core everyday consumption products to the retail stores Smt. N. Bhuvaneswari, our Vice Chairperson & Managing Commissioned a 2.34 MW solar Director, was named as one power plant at Medak district, of the most powerful business Telangana, in September 2013 woman in India and placed for captive energy consumption at the 45th rank in the list of Share of value-added products Fortune-50 most powerful (comprising ice-cream/frozen business women for the Heritage Foods made its maiden dessert, curd, paneer, sweets, year 2013. She is a new entry into India’s prestigious fl avoured milk, lassi etc) entrant in the list top-500 companies list for 2013, constituted 18% Retail losses (EBIT) compiled by The Economic of the overall turnover, declined to Times, on the basis of industry up from 15% ` -13.82 cr respect and key fi nancial in the previous year parameters, among others Heritage Foods Limited 2013-14 core financial highlights Turnover EBIDTA EBIDTA margin Cash profi t ` 1,722.04 cr ` 98.65 cr 5.73% ` 86.21 cr 7.51% 14.96% -4.62% 96.71% 6.46 bps3.78 bps 146.46% 3.58% Growth Growth De-growth Growth Growth Growth Growth Growth over over over over over over over over 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 Net profi t Earnings per share Dividend per share Capital employed ` 45.31 cr ` 19.69 ` 3.00 ` 303.78 cr -9.30% 435.48%-12.64% 178.27%100% 150%18.60% 18.29% De-growth Growth De-growth Growth Growth Growth Growth Growth over over over over over over over over 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 22nd Annual Report 2013-14 Strong heritage Heritage Foods Limited Heritage Foods is Mission Bringing prosperity into rural families among the leading through co-operative efforts and providing consumers with hygienic, dairy companies of the affordable and convenient supply of nation, listed on the fresh and healthy products. BSE and NSE. Vision In addition to We expect to achieve our mission through: supplying liquid milk, Delighting consumers with fresh and healthy food products that are a the Company is also benchmark for quality in the industry forward integrated into Enhancing prosperity and empowerment of the farming community processing value-added through our unique relationship farming products including model Emerging as a preferred employer by ice-cream/frozen nurturing entrepreneurship, managing career aspirations and providing dessert, paneer, ghee, innovative avenues for enhanced employee prosperity curd, fl avoured milk, lassi and sweets, among others. Heritage Heritage Foods was founded by Shri Chandrababu Naidu in 1992 with Through an integrated the express objective of assuring remunerative prices to milk producers. value chain, it caters to Shri Naidu was the Chief Minister of the needs of over undivided Andhra Pradesh during 1995- 2004 and is currently the Chief Minister 15 lakh consumers of the residuary state of Andhra Pradesh. every single day. Market capitalisation The Company’s market capitalisation (on the NSE) stood at `461.43 cr at the close of 2013-14. The promoter group holds 40.03% of the Company’s equity. 22nd Annual Report 2013-14 Leading the way Key facts and statistics USD 24 USD 8 14,000 8.34 lakh 7,695 Total number of billion billion farmers associated litres litres Total projected size of Total projected size of with Heritage Milk supplied by Heritage-branded the country’s organised the country’s Heritage every day ice-cream/frozen dairy sector by 2020 ice-cream/frozen dessert consumed (USD 10 billion today) dessert market by 2020 every day (USD 4 billion today) Heritage Foods Limited 18% USD 793 74 1,222 `90 cr Share of value-added Number of Number of Heritage Expected capex planned products of overall billion Heritage Fresh stores Parlour outlets for the next 2 years 2013-14 turnover Projected size of the (exclusively serving Indian retail industry by Heritage products) 2017, up from USD 490 billion today 22nd Annual Report 2013-14 THE HERITAGE LENS “At Heritage Foods, our brands are deeply entrenched in our consumers’ lives, our relationships are centered around the propositions of health and happiness, our strategies are directed towards strengthening corporate sustainability and our team is resourceful and determined.