Presentation on Heritage foods ltd

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SECURITY ANALYSIS AND
PORTFOLIO MANAGEMENT
PROJECT
[COMPANY SELECTED – HERITAGE FOODS]

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1.MACRO ECONOMIC ANALYSIS
Macroeconomics is the study of the behavior of the economy as a whole. This is different
from microeconomics, which concentrates more on individuals and how they make economic
decisions. Needless to say, macroeconomy is very complicated and there are many factors that
influence it.
These factors are analyzed with various economic indicators that tell us about the overall health of
the economy. During the macroeconomic analysis, the economic trend will allow the economists to
predict if there is a likelihood of inflation in the future. If this is the case, businesses and even
governments can take proactivemeasures to mitigate the effects of the inflation. When the
inflation is unanticipated, such protective measurewill not be taken, leaving the business vulnerable
to the effects.
ANALYSIS :
India has emerged as the fastest growing major economy globally. GDP growth stood at 7.6 percent
in 2015-16, higher than 7.2 percentin 2014-15. In 2016-17, thegrowth rate for the firstquarter at
7.1 percent continues to exhibit strength. The robustpace of economic growth is creditable
especially in view of tepid export demand and two successiveshortfalls in monsoon rains.
India's consumer prices increased by 4.31 percentyear-on-year in September 2016, easing froma
5.05 percentgrowth in the previous month and missing market expectations of a 4.8 percent gain. It
was the lowest inflation rate sinceAugustlast year, as food cost roseat a slower pace.
Year-on-year, costof food and beverages rose4.12 percent(+5.83 percentin August), provisional
estimates showed.Thefood index alone increased by 3.88 percent compared to 5.91 percentin the
previous month. Upward pressurecamefromsugar (+25.77 percentfrom+24.75 percentin
August), followed by pulses (+14.33 percentfrom +22.01 percent) and fruits (+6.07 percentfrom
+4.46 percent); while costof vegetables fell sharply (-7.21 percentfrom+1.02 percent).
GROSS DOMESTIC PRODUCT
The gross domestic product(GDP) is one of the primary indicators used to gauge the health of a
country's economy. Itrepresents the total dollar value of all goods and services produced over a
specific time period; you can think of it as the size of the economy. Usually, GDP is expressed as a
comparison to the previous quarter or year.
Measuring GDP is complicated (which is why we leave it to the economists), butat its mostbasic,
the calculation can be done in one of two ways: either by adding up what everyoneearned in a year

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(income approach), or by adding up whateveryonespent (expenditure method). Logically, both
measures should arriveat roughly the sametotal.
2015-2016
India's GDP grew by 7% year on year in the firstquarter of fiscal year 2015/16 (April-March), slowing
froma 7.5% expansion during the same period in the last fiscal year. According to the data, weak
expansion in output in the agriculturaland mining sectors dragged down overall output. Itwas the
lowest reading since the fourth quarter of 2014, as privateconsumption expanded at a slower pace
while fixed investment dropped further.
Private consumption growth eased to 6.7 percent from 8.3 percent in the previous quarter while
government spending jumped 18.8 percent, accelerating from a 2.9 percent growth in Q1. Gross
fixed capital formation shrank at a faster 3.1 percent, following a 1.9 percent contraction in the
previous period.
Exports increased 3.2 percent, following a 1.9 percent drop in the first quarter; while imports
declined 5.8 percent after falling 1.6 percent in the precedent period.
On the production side, the gross value added for public administration, defence and other services
expanded the most (+12.3 percent), followed by: financial, insurance, real estate and professional
services (+9.4 percent); electricity, gas, water supply and other utility services (+9.4 percent);
manufacturing (+9.1 percent); trade, hotel, transport, communication and services related to
broadcasting (+8.1 percent); agriculture, forestry and fishery (+1.8 percent) and construction (+1.5
percent). By contrast, mining and quarrying contracted 0.4 percent.
2015-2016
India's gross domestic product advanced 7.1 percent year-on-year in the second quarter of 2016,
slowing froma 7.9 percent expansion in the previous period and missing market expectations of 7.6
percent growth.

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INTEREST RATE:
The Reserve Bank of India lowered its repurchase rate by a surprise 25bps to 6.25 percent on
October 4th, 2016, saying the stance of monetary policy remains accommodative and the decision
will help to bring inflation rate back to central bank's 4 percent target in the medium-term while
supporting growth. India’s consumer prices index rose 5 percent year-on-year in August, easing
from its 6 percent increase in July. The repo policy rate is now at its lowest since November 2010.
Interest Rate in India averaged 6.70 percent from 2000 until 2016, reaching an all time high of
14.50 percent in August of 2000 and a record low of 4.25 percent in April of 2009. Interest Rate in
India is reported by the Reserve Bank of India.
The central bank also cut its reverserepo rate to 5.75 percentwhile it kept its cash reserveratio at 4
percent.The decision of the MPC is consistent with an accommodative stance of monetary policy in
consonance with the objective of achieving consumer price index (CPI) inflation at 5 per cent by Q4
of 2016-17 and the medium-term target of 4 per cent within a band of +/- 2 per cent, while
supporting growth.
INFLATION :
The term inflation means the devaluation of money caused by a permanentincrease of the price
level for products (consumer goods, investmentgoods). TheConsumer PriceIndexshows theprice
development for privateexpenses and shows thecurrentlevel of inflation when increasing. The
value of a dollar does not stay constantwhen there is inflation. The value of a dollar is observed in
terms of purchasing power, which is the real, tangible goods that money can buy. When inflation

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goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2%
annually, then theoretically a $1 pack of gum will cost$1.02 in a year. After inflation, your dollar
can't buy the same goods it could beforehand.
Inflation Rate in India is expected to be 5.60 percent by the end of this quarter, according to Trading
Economics global macro models and analysts expectations. Looking forward, weestimate Inflation
Rate in India to stand at 5.90 in 12 months time. In the long-term, the India Inflation Rate is
projected to trend around 4.80 percentin 2020, according to our econometric models.
IIP:
Industrial production in India contracted 0.7 percent year-on-year in August of 2016, following an
upwardly revised 2.5 percent fall in July. It is the second consecutive decline in industrial output as
manufacturing dropped 0.3 percent, mainly hurt by electrical machinery and apparatus (-49.4
percent); furniture (-22.4 percent) and wearing apparel; dressing and dyeing of fur (-6.6 percent). In
addition, mining went down 5.6 percent while electricity edged up 0.1 percent. From April to
August, industrial production shrank 0.3 percent. Industrial Production in India averaged 6.24
percent from 1994 until 2016, reaching an all time high of 20 percent in November of 2006 and a
record low of -7.20 percent in February of 2009. Industrial Production in India is reported by the
Ministry of Statistics and Programme Implementation (MOSPI).
GOVERNMENT SPENDING:
GovernmentSpending refers to public expenditure on goods and services and is a major component
of the GDP. Government spending policies like setting up budget targets, adjusting taxation,
increasing public expenditure and public works are very effective tools in influencing economic
growth.
Government Spending in India increased to 3490.59 INR Billion in the second quarter of 2016 from
2303.08 INR Billion in the first quarter of 2016. Government Spending in India averaged 1796.46
INR Billion from 2004 until 2016, reaching an all time high of 3490.59 INR Billion in the second
quarter of 2016 and a record low of 735.82 INR Billion in the second quarter of 2004. Government
Spending in India is reported by the Ministry of Statistics and Programme Implementation (MOSPI).
Impact Of BREXIT on Indian Economy
The Brexit referendum on June 23, 2016 was an unprecedented global development. The United
Kingdom (UK) voting for the ‘Leave’ from the European Union (EU) is expected to have considerable
socio economic and political ramifications in the years ahead. The decision assumes greater
significance in context of the changing global order which is moving towards greater multilateralism
and where countries are striving to lower their boundaries. According to preliminary estimates by
Standard & Poor, Brexit is expected to shave off 100 bps from UK’s growth and about 50 bps from
EU’s growth in 2017. Also, investment flows to the UK are likely to be affected over the near term as
the decision is expected to cause skepticism among investors. Further, elections in France and
Germany are due next year and the October constitutional referendum in Italy adds to existing

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uncertainty in the region. It is being anticipated that the real negotiations between the UK and EU
might start by next year when there is greater clarity on the political front in the region.
Impact on Indian businesses
UK has been a valued economic partner for India and the decision to leave the European Union has
created some amount of ambiguity for the Indian businesses. Thesamehas been reflected in the
survey conducted by FICCI as well. Even though over half of the respondents havereported that
they don’t intend to set up separate operations in any other EU country because of Brexit, they
seemed concerned aboutthe impact on intra company transfers/movementof professionals and
Indian migration over the medium term. Also, the participants indicated that they expect
investments to the UK to take a beating over the courseof next three to five years. Furthermore, it
is anticipated that the companies that haveoperations in the UK and the EU will have to face
significant translation losses with the probability of volatility in currencies remaining high. The
exposureon account of un-hedged borrowing abroad willalso impact the company balance sheets.
Also, post Brexit some concerns havebeen raised by companies about facing investigation from
competition authorities both in the UK and the EU. Until now, a majority of the competition law in
the UK was derived fromthe EU. The companies havealso pointed out that in event of a
merger/acquisition, a notification may have to be made both at the UK and EU level leading to an
increase in compliance costs.
India businesses havepresence in a wide array of sectors in the UK which include automobiles, auto
components, pharmaceuticals, gems and jewellery, education and IT enabled services. Most of
these sectors will be vulnerable to changes in demand and currency values.
Auto components India is a major supplier of auto components to the EU region. The region
accounts for about 36% of India’s total auto component exports, while the share of UK is about 5%.
The UK Passenger Vehicle market is highly export oriented and the segment has close linkages with
the EU automotive market. The anticipated slowdown in the UK and the EU region will have a
dampening effect on the sector. Also, the depreciating Pound will impact the revenue stream
companies of over the near term. The real impact will also depend on imposition of any trade
restrictions between the EU and UK, which will become clearer over the medium term.
Information Technology India is one of the largest exporters of IT-enabled services and the sector
has significant exposure to the European market especially the UK. UK accounts for about 17% of
India’s total IT exports. India’s IT exports to other European countries is at about 11%. The IT
companies thus are expected to face the heat in light of the Brexit. Given the risk of further
moderation in growth in the UK and EU, there is an increased probability that the companies lower
their IT budgets (a discretionary spend). This would have an impact on the domestic software
companies. Further, the depreciation of Pound does not augur well for the sector and can
negatively impact the growth in the sector.
Majority of the costs by the IT companies are incurred in INR owing to the offshoring model
deployed by the Indian IT services player. So a sustained depreciation of Pound might call for a

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renegotiation of the contract, as the profitability of these contracts might fall below the expected
levels. Uncertainty on account of pricing of contracts spanning European Union which currently
enjoys zero tariffs cannot be ruled out.
Skilled labour mobility issues can arise as the mutli-location contracts will get deferred on account
of lack of clarity at present. Further, the overhead expenses are likely to increase if restrictions are
imposed on the mobility of professionals between UK and EU as the companies might have to open
an additional office in the EU.
Pharmaceutical United States is India’s biggest market for Pharmaceutical exports, while EU
accounts for 10-13% of India’s total pharma exports. The share of UK in India’s pharma exports is
about 3-4%. The pharma companies do not really expect a big hit following the Brexit and have
indicated a limited impact of Pound depreciation. The pharma companies reported having hedged
their exposure to the Euro. Further, the companies pointed out that the rules, regulations and
product registrations are already different for UK and EU and hence any adverse impact on the
sector can be ruled out.
Garment Readymade garment is one of the key export items to the UK from India. Readymade
garments account for about 20.0% of the India’s total exports to the UK. The sector is expected to
feel the pinch on account of moderation in demand; the spend on readymade garments is primarily
discretionary. Also, the drop in the Pound is expected to impact the un-hedged export contracts
with British counterparts. Nonetheless, some of the garment exporters have also opined that they
might be insulated if a Free Trade Agreement is negotiated with the UK post Brexit.
Financial Services There are currently bond issuances planned of range USD100-150m in USD and
INR. Brexit is making it very hard for UK and other markets (like Singapore, Paris and Frankfurt as
green bond investors are mainly EU) are being looked. UK’s credit rating has been cut, and given
most buyers of the bonds are fromthe EU there is nervousness around thesebond issuances. This is
important for India as it would be difficult to imagine financing India’s huge infrastructure appetite
through debt finance in London as aggressively as currently planned. Again, this would depend on
what Brexit scenario that plays out. But in the meantime, greater uncertainty will impact the bond
pricing.
2. FOOD PROCESSING INDUSTRY
The Indian food industry is poised for huge growth, increasing its contribution to world food trade
every year. In India, the food sector has emerged as a high-growth and high-profitsector due to its
immense potential for value addition, particularly within the food processing industry.
The food industry, which is currently valued at US$ 39.71 billion!is expected to grow at a
Compounded Annual Growth Rate (CAGR) of 11 per cent to US$65.4 billion by 2018. Food and
grocery accountfor around 31 per cent of India’s consumption basket.

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Market Size
The Indian food and grocery marketis the world’s sixth largest, with retail contributing 70 per cent
of the sales. Food has also been one of the largestsegments in India's retail sector, which was
valued at US$ 490 billion in 2013@. TheIndian food retail market is expected to reach Rs 61 lakh
crore(US$ 894.98 billion) by 2020.
The Indian food processing industry accounts for 32 per cent of the country’s total food market, one
of the largest industries in India and is ranked fifth in terms of production, consumption, exportand
expected growth. Itcontributes around 14 per cent of manufacturing Gross Domestic Product
(GDP), 13 per cent of India’s exports and six per cent of total industrial investment. Indian food
serviceindustry is expected to reach US$ 78 billion by 2018.TheIndian gourmetfood marketis
currently valued at US$ 1.3 billion and is growing at a Compound AnnualGrowthRate (CAGR) of 20
per cent. India's organic food market is expected to increaseby three times by 2020##.
The online food ordering business in India is in its nascentstage, but witnessing exponential growth.
The organised food business in India is worth US$ 48 billion, of which food delivery is valued at US$
15 billion. With online food delivery players like FoodPanda, Zomato,TinyOwland Swiggy building
scale through partnerships, theorganised food business has a huge potential and a promising
future.

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Investments
According to the data provided by the Department of IndustrialPolicies and Promotion (DIPP), the
food processing sector in India has received around US$ 6.82 billion worth of Foreign Direct
Investment(FDI) during theperiod April 2000-March 2016. TheConfederation of Indian Industry
(CII) estimates thatthe food processing sectors havethe potential to attract as much as US$ 33
billion of investmentover the next 10 years and also generate employment of nine million person-
days.
Mr Tomasz Lukaszuk,theAmbassador of the Republic of Poland had also highlighted the keen
interest shown by Polish companies looking for opportunities in India to expand collaboration and
invest food processing.

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Some of the major investments in this sector in the recent past are:
 Di Bella, the Australia-based coffee chain, plans to invest Rs 67 crore (US$ 10 million) for
setting up around 20 new outlets in Mumbai, besides entering Delhi and Bangalore by 2017.
 KKR & Co LP, the US-based privateequity firm, plans to invest about Rs 520 crore(US$ 77.38
million) in dairy company Kwality Ltd, which will be used to strengthen its milk procurement
infrastructureand increaseprocessing capacity.
 Henry Ford Health Systems (HFHS), a US-based health and wellness group, plans to enter
India by signing a franchisepartnership with Chandigarh-based hospitality and food services
firm KWalls Hospitality, and set up 'Culinary Wellness' branded stores across thecountry.
 Mondelez International, the US-based confectionery, food, and beverage major, inaugurated
its new manufacturing plant in Andhra Pradesh set up for Rs 1,265 crore(US$ 190 million),
with an annual production capacity of 250,000 tonnes.
 PureCircle, a Malaysia-based naturalsweetener producer, plans to invest around Rs 1,300
crore(US$ 200 million) in India to set up a manufacturing plant and make the country its
regional production and export hub in the next five years.
 Swiggy, a food delivery start-up owned by Bundl Technologies PrivateLimited, has raised Rs
230.34 crore(US$ 33.80million) in a Series C funding round, with its existing investors SAIF
Partners, Accel Partners, NorwestVenturePartners and Apoletto Asia Ltd contributing 79 per
cent of the new funds raised.
 GujaratCooperative Milk Marketing Federation (GCMMF), popularly known as 'Amul', plans
to invest Rs 5,000 crore(US$ 733.6million) to establish ten new processing plants as well as
expand the currentcapacity to touch 32 million litres per day (MLPD) capacity by 2020.
 American doughnutchain Dunkin' Donuts has tied up with local online grocery delivery
platformGrofers for home-delivery of its packaged and freshly made products.
 Private Equity (PE) firm India ValueFund Advisors (IVFA)plans to invest around US$ 100-150
million in the food business in India over the next two years.
 Zomato, a restaurantsearch and discovery platform, has raised US$ 60 million from Singapore
government-owned investmentcompany Temasek, along with existing investor Vy Capital, in
order to explore new business verticals.
 ITC Limited plans to investRs 800 crore(US$ 117.4 million) to set up a world-class food
processing facility in Medak, a district located in Telangana. The company has also formulated
plans to enter the dairy market.
Government Initiatives
In order to promote food processing industries, increaselevel of processing and exploit the
potential of domestic and international market for processed food products, Vision Document-2015
was prepared by the Ministry of Food Processing Industries. Thedocument envisages trebling the
sizeof investment in the processed food sector by increasing the level of processing of perishables
from6 per cent to 20 per cent, value addition from20 per cent to 35 per cent and sharein global
food trade from 1.5 per cent to 3 per cent by 2015. According to the Ministry, an investment of Rs
100,000 crore(US$ 14.67 billion) would be required in 2015 to achieve these targets. The

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Governmentof India has also relaxed foreign direct investment (FDI) norms for thesector, allowing
up to 100 per cent FDI in food producte-commerce through automatic route.
Some of the major initiatives taken by the Governmentof India to improvethe food processing
sector in India areas follows:
 The Government of India allocated Rs 1,500 crore(US$ 225.7million) and announced various
measures under the MerchandiseExports fromIndia Scheme (MEIS), including setting up of
agencies for aquaculture and fisheries in coastal states and export incentives for marine
products.
 Union Budget 2016-17 has proposed 100 per cent FDI through FIPB(Foreign Investment
Promotion Board) route in marketing of food products produced and manufactured in India.
 All of the ration cards in India havebeen digitised and 42 per cent of the digitised ration cards
are now linked to Unique Identification (UID) or Aadhaar cards.
 Governmentof India plans to allow two Indian dairy companies, Parag Milk Foods and
Schreiber DynamixDairies, to export milk products to Russia for six months, after these
companies got approvalfor their products by Russian inspection authorities.
 MsHarsimratKaurBadal, Union Minister for Food Processing Industries, Governmentof India
inaugurated the firstof its kind Rs 136 crore(US$ 20 million) mega international food park at
DabwalaKalan, Punjab. Shehas also expressed confidencethat the decision to allow 100 per
cent Foreign Direct Investment(FDI)in multi-brand retail with 100 per cent local sourcing
condition, will act as a catalyst for the food processing sector, thereby controlling inflation,
uplifting the condition of farmers, and creating morejobs in the country.
 The Food Safety and Standards Authority of India (FSSAI) has issued new rules for importing
products, to address concerns over the entry of sub-standard items and simplify the process
by setting shelf-life norms and relaxing labelling guidelines.
 The Ministry of Food Processing Industries announced a schemefor Human Resource
Development (HRD) in the food processing sector. The HRD scheme is being implemented
through State Governments under the National Mission on Food Processing. Thescheme has
the following four components:
o Creation of infrastructurefacilities for degree/diploma courses in food processing
sector
o Entrepreneurship DevelopmentProgramme(EDP)
o Food Processing Training Centres (FPTC)
o Training at recognised institutions at State/National level
 The Food Safety and Standards Authority of India (FSSAI) under theMinistry of Health and
Family Welfare has issued the Food Safety and Standards (Food ProductStandards and Food
Additives) Regulations, 2011 and the Food Safety and Standards (Contaminants, Toxins and
Residues) Regulations, 2011 which prescribethe quality and safety standards, respectively for
food products.
 The Ministry of Food Processing Industries has taken somenew initiatives to develop the food
processing sector which will also help to enhance the incomes of farmers and export of agro
and processed foods among others.

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 Spices Board, set up by the Ministry of Commerce to develop and promote Indian spices
worldwide, aims spice exports of US$ 3 billion by 2017.
 The Government of India has approved the setting up of fivenumbers of Mega Food Parks in
the states of Bihar, Maharashtra, HimachalPradesh and Chhattisgarh. The Governmentplans
to set up 42 such mega food parks across thecountry in next three to four years.
 In the Budget 2015-16, a corpus of Rs. 2,000 crore(US$ 293.44 million) was created under
National Bank for Agricultureand Rural Development (NABARD) to providecheaper credit to
food processing industry. Exciseduty on plant and machinery for packaging and processing
has been broughtdown to six per cent from 10 per cent.
Road Ahead
Going forward, theadoption of food safety and quality assurancemechanisms such as Total Quality
Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and CriticalControl Points
(HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food
processing industry offers severalbenefits. Itwould enable adherence to stringent quality and
hygiene norms and thereby protect consumer health, preparethe industry to face global

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competition, enhance product acceptance by overseas buyers and keep the industry technologically
abreastof international best practices.

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3. COMPANY: HERITAGE FOODS
TheHeritageGroup,foundedintheyear1992byMr.NaraChandrababuNaidu,isoneofthefastestgrowing
Public Listed Companies in India, with five-business divisions-Dairy, Retail, Agri, Bakery and
RenewableEnergyunderitsflagshipCompanyHeritageFoodsLimited(FormerlyknownasHeritageFoods(I
ndia)Limited).The annualturnoverofHeritageFoodscrossedRs2072.97croresinfinancialyear2014-
15.CurrentlyHeritage's
milkandmilkproductshaveamarketpresenceinAndhraPradesh,Telangana,Karnataka,Kerala,TamilNad
u, Maharastra, Odisha and NCR Delhi and its retail stores across Bangalore, Chennaiand Hyderabad.
IntegratedagrioperationsareinChittoorandMedakDistrictsandthesearethebackbonetoretailoperation
sandthestateofartBakery plant at Uppal, Hyderabad, Telangana. In 1994, HeritageFoods public
Issuewas oversubscribed by54 times. Thecompany is listed on BSE and NSE. The Company has two
subsidiary companies, Heritage
FoodsRetaillimitedandHeritageConproLimited.HeritageFoodsistheonlypackagingpartnerforcurdforN
estleinSouth India. The company’s valuechain commences right fromthe grassroots levelwith over
3 lakh farmersfrom
whom9lakhlitresofmilkisprocureddailyanddeliveredtoover15lakhcustomerslocatedacrossIndiaand
also various value-added milk products through HeritageParlours and Heritage Fresh stores. The
companyalso exports ghee and butter in bulk and consumer packs to Asia, Europeand Gulf
countries including Singapore.The
verticalintegrationoflinkagesbetweenfarmlevelproduction,procurementanddownstreamprocessinga
nd
tradehasleadtomoreefficientandeffectivecontrolofcostandqualityasvisibleintheimprovedprofitand
operating margins in the past fewquarters.
DairyDivision
Heritage is recognized as one of India's largest and most successful Dairy for the last 21 years
in Hyderabadwith an existing brand presence in Andhra Pradesh, Telangana, Tamilnadu,
Karnataka, Kerala, Maharastra, Odishaand
Delhi.HeritageDairyPlant,GokulatKasipentlainChittoorDistrictiscertifiedandapprovedforexpor
tofGhee and Butter being manufactured in this plant by the Exports Inspection Agency, India.
The company’s productsare being exported to Europe, the Gulf and several countries in Asia
including Singapore. The Dairy segment grewby11% and stood at Rs. 4303.50 mn. Dairy
Parlors as on 31.12.2015 are 1401Nos.
RetailDivision

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Heritage Retail is a unique chain of retail stores with wide range of choicest fresh fruits and
vegetables whichare directly sourced from the farmers and reached to the stores through its
integrated cold chaininvestment. “Farmers Pride”, in-house brand under which full range of
staples (rice, pulses, spices & dry fruits) of thehighest quality sourced at most competitive
prices are provided to customers. “Oven @ Fresh”, in-house brand ofbakery products which
includes an extensive range of breads, cakes, pastries, savories, chocolates,
cookies,sandwiches
andsalads.IntheDecemberquarterofFY16,Retailrevenuesroseby22%Rs.1444.44mnascompared
toRs.
1188.31 mn in Q3FY15.
AgriDivision
AgrodivisionaimsatproductionofqualityF&V,atreducedcostofcultivationandensuresstableandm
ore income to farmers by eliminating middle-men and hassles of marketing faced by farmers.
The verticalintegration
oflinkagesbetweenfarmlevelproduction,procurementanddownstreamprocessingandtradelead
stomore efficient and effective control of the quality of F&Vs in the retails stores. The company
has havealready
establishedafewadvanced,fullyintegratedPackHousestohandlefreshproduce.HeritageAgriisacti
ngasa
supplychainarmforHeritageFreshStores,otherMRFStoresandWholesalers.HeritageAgrihasalsoe
ntered
intotheexportofFresh&ProcessedFruitsandCereals.RevenuefromAgrisegmentroseby14%from
Rs.
211.95 mn to Rs. 240.63 mn in Q3FY16.
HeritageBakery
HeritageBakerysupplieshighqualitybakeryproductstoleadingmultinationalchainslikeKFC,Pizza
Hut,Hard Rock Café, and top star hotels, apart from it's own Heritage Fresh outlets. The
company’s product rangeincludes breads, cakes, pastries, desserts, savories and cookies. The
company is equipped to handle a wider rangeofbakery products, and are open to contract

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manufacturing and private labelopportunities.
RenewableEnergy
TheprojectislocatedinAdavimasjidpallyvillage,MuluguMandal,Medakdist.Thisisthefirstsolarpr
ojectin Medak district. Power generated will be used for the captive purpose for its dairy
divisions. Thecompanystrongly committed to extending its 'Green' footprint. In line with this
thinking, the company embarked ona
cleanenergyinitiativewitha2.34MWSolarPowerProjectwhichprovidescaptivepowertooneofits
Dairy
UnitsinHyderabad.CapitalEmployedforRenewableEnergydivisionRs127.32mn.TurnoverofRen
ewable
energyinQ3FY16wasatRs.7.85mn.marketplacemodel.Proposedtosetup2.1MWWindpowerProj
ectat Vajrakarur, AnantapurDist, AndhraPradesh.
SHAREHOLDING PATTERN (quarter ending September 2016):
Description Percent of Share (%)
Promoters 45.71
Individuals 27.75
Institutions 0.70
FII 9.34
Govt. 0.00
Others 16.50
(Source: profit.ndtv.com)
LISTING DETAILS:
HERITAGE FOODS Listing Information
Key Dates
Year Ending Month Mar
AGM Date (Month) Aug

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Book Closure Date (Month) Aug
Listing Information
Face Value Of Equity Shares 10
Market Lot Of Equity Shares 1
BSE Code 519552
NSE Code HERITGFOOD
BSE Group B
Whether The Company Forms APart Of The Following Indices -
Sensex No
Nifty No
BSE-100 No
BSE-200 No
S&P CNX 500 No
CNX Midcap No
CNX FMCG No
Listed On The Stock Exchange, Mumbai,National Stock Exchange of India Ltd.,Uttar Prad
Exchange AssocLtd.,Jaipur Stock Exchange Ltd,Bangalore Stock Exchange
Ltd.,Hyderabad Stock Exchange Ltd,Madras Stock Exchange Ltd.,
(source:www.dynamiclevels.com)
Company Analysisis done on basis of various financial statements and for analysis of those
finanacial statements further various tools are used which are as following:
Varioustools for analysis of financial statementsare:
1.Ratio Analysis:Ratio analysis is the process of determining and interpreting numerical
relationships based on financial statements. A ratio is a statistical yardstick that provides a measure

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of the relationship between two variables or figures.This relationship can be expressed as a percent
or as a quotient. Ratios are simple to calculate and easy to understand.
2.ComparativeStaements:A statementwhich compares financial data fromdifferent periods of
time. The comparativestatement lines up a section of the income statement, balance sheet or cash
flow statement with its corresponding section froma previous period. Itcan also be used to
comparefinancial data fromdifferent companies over time, thus revealing the trend in the
financials.
3.Trend Analysis:A trend analysis is a method of analysis that allows traders to predict whatwill
happen with a stock in the future. Trend analysis is based on historical data about the stock's
performancegiven the overall trends of the marketand particular indicators within the market.
4.Common SizeStatements:A company financial statement that displays all items as percentages of
a common basefigure. This type of financial statement allows for easy analysis between companies
or between time periods of a company.
FUNDAMENTAL ANALYSIS
A method of evaluating a security that entails attempting to measure its intrinsic value by examining
related economic, financial and other qualitative and quantitative factors. Fundamental analysts
attempt to study everything that can affect the security's value, including macroeconomic factors
(like the overall economy and industry conditions) and company-specific factors (likefinancial
condition and management).
The end goal of performing fundamental analysis is to producea value that an investor can compare
with the security's currentprice, with the aim of figuringoutwhatsortof position to take with that
security (underpriced = buy, overpriced = sell or short).
TOP FOOD PROCESSING COMPANIES IN TERMS OFMARKET CAPITALISTAION (ason
30th October 2016)
Company Name Last Price % Chg
52 wk
High
52 wk
Low
Market Cap
(Rs. cr)
Nestle 6,925.00 -0.51 7,390.00 4,990.00 66,767.88
Britannia 3,312.55 0.19 3,575.00 2,523.90 39,750.87
GlaxoSmith Con 6,043.00 -0.14 6,800.00 5,366.50 25,414.16
KRBL 247.00 3.09 306.30 185.80 5,814.13
Hatsun Agro 344.45 -0.45 406.40 305.20 5,241.44
Coffee Day 223.60 0.63 328.00 218.00 4,606.20

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9
ManpasandBever 728.90 0.71 775.80 383.00 4,168.30
Kwality 144.60 1.62 159.40 86.15 3,413.80
Parag Milk Food 318.05 1.84 356.70 202.10 2,675.26
Heritage Foods 911.55 0.54 955.55 480.00 2,114.70
(source: moneycontrol.com)
RATIOS OF HERITAGEFOODS:
Mar'16 Mar'15
Investment Valuation Ratios
FaceValue 10.00 10.00
Dividend PerShare 3.00 3.00
Operating Profit Per Share(Rs) 56.37 35.36
Net Operating Profit Per Share(Rs) 1,026.16 893.56
Free Reserves Per Share(Rs) -- --
Bonus in EquityCapital 50.00 50.00
ProfitabilityRatios
Operating ProfitMargin(%) 5.49 3.95
Profit Before Interest And
TaxMargin(%)
4.03 2.30
Gross ProfitMargin(%) 4.04 2.31
Cash ProfitMargin(%) 3.82 2.99
Adjusted CashMargin(%) 3.82 2.99
Net ProfitMargin(%) 2.32 1.36
Adjusted Net ProfitMargin(%) 2.32 1.35Return On Capital Employed(%) 29.79 16.41
Return On NetWorth(%) 23.09 14.61
Adjusted Return on NetWorth(%) 23.66 14.61
ReturnonAssetsExclud
ingRevaluations
103.45 83.20
Return on Assets
IncludingRevaluations
103.45 83.20
Return on Long TermFunds(%) 33.61 22.13
LiquidityAnd SolvencyRatios
CurrentRatio 0.82 0.65
QuickRatio 0.47 0.50

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0
Debt EquityRatio 0.44 0.74
Long Term Debt EquityRatio 0.27 0.29
Debt CoverageRatios
InterestCover 6.65 3.46
Total Debt to OwnersFund 0.44 0.74
Financial Charges CoverageRatio 8.88 5.59
FinancialChargesCoverageRatio
PostTax
6.82 4.90
Management EfficiencyRatios
Inventory TurnoverRatio 16.44 14.88
Debtors TurnoverRatio 89.80 101.50
Investments TurnoverRatio 16.44 14.88
Fixed Assets TurnoverRatio 4.73 4.63
Total Assets TurnoverRatio 6.93 6.22

21. 2
1
Asset TurnoverRatio
Average Raw MaterialHolding
7.00
--
6.46
--
Average Finished Goods
HeldNumber of Days In
WorkingCapital
-
-
5.8
4
-
-
10.8
0
Profit & Loss AccountRatios
Material CostComposition 80.66 84.27
Imported Composition of
RawMaterials
Consumed
-- --
Selling Distribution Cost
CompositionExpenses as
Composition of Total Sales
-
-
0.5
9
-
-
0.1
5
Cash Flow IndicatorRatios
Dividend Payout Ratio NetProfit 12.55 24.67
Dividend Payout Ratio CashProfit 7.73 11.18
Earning RetentionRatio 87.75 75.33
Cash Earning RetentionRatio 92.38 88.82
AdjustedCash FlowTimes 1.15 2.29
Mar'16 Mar'15
Earnings PerShare 23.89 12.16
BookValue 103.45 83.20
(source: moneycontrol.com)
DUPONT ANALYSIS
The Dupont analysis is a modification on calculating return on equity (ROE), but it uses a gross
value for assets, whereaccumulated depreciation is ignored. The DuPontanalysis method
renders a higher ROE. The DuPontCorporation developed this analysis tool in the 1920’s.
The formula is:
ROE = Profit Margin x AssetTurnover x Equity Multiplier
ProfitMargin measures operating efficiency. AssetTurnover measures assetuseefficiency –
how well did the managers use the assets to generate sales? Finally, the Equity Multiplier
measures the amount of financial leverage used by the company.

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2
The theory behind using gross assetvalueinstead of net assetvalue is that it encourages
managers to get the most out of the assets. If net assetvalues are used, ROE is lower because
of accumulated depreciation. To make it higher, managers invest in new equipment to make
the assets accounts higher.
Basic ROE analysis may providea misleading ROE. The three-step analysis of ROE used in the
DuPontmethod allows an investor to determine the reason the total ROE number changed.
For instance, if the profit margin or assetturnover portions of the ROE increase, then that is a
sign of good company management. However, if ROE goes up because the company borrowed
more money, thus using a greater amountof financial leverage, this might indicate that the
company is a risky investment.
Froman investor's perspective, ROEis a key ratio. The ROE (after subtracting preferred shares)
tells common shareholders how effectively their money is being employed. Ideallong term
averageROE should be above15%.
ROE: N.P. Pre-Tax Profits EBIT SALES ASSETS
Pre-Tax Profits EBIT SALES ASSETS EQUITY
= 23% for Current year as compared to 18% last year.
(source: moneycontrol.com)

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3