Dfm foods limited

www.rudrashares.com 1
LEAD RATIONALE08 JUNE 2020
CMP (`) 219
TARGET (`) 270
Upside 23%
M.Cap (` in cr) 1098
Equity ( ` in cr) 10.03
52 wk H/L ` 333/150
Face Value ` 2
Div. Yield 0.57%
NSE Code DFMFOODS
BSE Code 519588
Stock Data
P/E 30.85
EV/EBITDA 18.49
P/BV 7.1
RONW(%) 23%
Valuation Data
EV 1172.43
Net Worth 154.91
BV 30.89
EPS (TTM) 7.10
Financial Data
FUNDAMENTAL COVERAGE
DFM FOODS LIMITED RUDRA SHARES &
STOCK BROKERS LTD
Index Detail
Sensex 34370.58
Nifty 10167.45
DFM markets its products under brand name “CRAX” and
“NATKHAT” - has got strong recognition in snacks category
as whole.
CRAX (Corn Rings)- an flagship product that contributes ap-
proximately 70-75% of its overall revenues is being posi-
tioned in the market as a Niche Brand with leadership position in
Roasted Corn Snacks segment. Moreover, as Crax caters to only
children in the age group b/w 6-10 Years, helps it to position dif-
ferently from other Industry players. Focusing on High Gross
Margin product amongst others , will in turn help company
to improve return ratios and better PAT numbers.
It’s another product Curls, has given unprecedented success so
far in its first year of launch and expect to grow strongly ahead.
Encouraged by its success, also launched 2 new products Fritts
and Pasta Crunch (these does not limit itself as children product).
This move will help company to cover broader market. Hence, we
believe the unique launches embarks good future ahead for
the company.
If we Take fundamental triggers into consideration, com-
pany has a good balance sheet with sound financial ra-
tios.
In terms of leveraging, its Debt/Equity ratio is very comfortable
and with good cash flows, company can plan its next CAPEX
with Internal Accruals
Eyeing on the Sales, EBITDA & PAT growth CAGR which is
7.48%,12% & 11% respectively can be termed as satisfactory.
However, company has a remarkable ROE & ROCE of 29.23% and
28.52%. Gross margins and EBITDA margins (stood at
12.23%) also improved due to efficient purchasing of raw materi-
als and operating leverage respectively.

STOCK BROKERS LTD
On the corporate governance front too, DFM is equipped with good governance backed by
strong parental support of AI Global Investment (AI Global Investments (Cyprus) PCC Ltd.,
a subsidiary of U.S.-based private equity firm Advent International Corporation).
Has little growth constraints in terms of demand. With expanded capacity and increasing
distribution, it would be able to grow its earnings at a healthy pace going forward
Lower borrowing cost, growing EPS, increased cash, and Improving Asset turnover ratio,
- key triggers for company
Its zero receivable days is an added bonus, which makes it free of any provision, and pay-
ment receivables, can be termed as remarkable.
During Q3 FY20, Company has commissioned additional line having a capacity of 5000 MT per
annum in Greater Noida. With this expansion. the total capacity of the company stands at
48400 MT' per annum.
Has strong presence in North India which contributes around 70-75% of total sales and
also sells its products in central, western and southern regions. Further, its presence for
more than two decades in the industry , making it strong player in packaged food busi-
ness.
Thus, overall the triggers shape up a potential BUY for the company.
An Eye on Quarterly numbers
Sales were flat Y-O-Y for the quarter at ` 134.6 crores as new product launches were deferred.
For 9M FY20, revenue increased by 13.16% to ` 398.18 crores. Gross margins fell due to
abnormal increase in palmolein oil prices. EBITDA fell sharply due to fall in gross margins
and certain one-time costs during the quarter. PAT for Q3 FY20 came in 69% lower at
`3.3crores. Though for 9M, PAT surged by 13% to ` 25.65 crores. The pressure on gross
margins due to oil is expected to continue. Rise in other income, fall in interest costs and
tax helped a good growth in bottom-line ahead. Company said that the growth potential
remains intact, with new management focused on key growth levers of the business

STOCK BROKERS LTD
Disruption caused by Covid-19 and the resultant lockdown has impacted perform-
ance, profitability and cash flows— operations will be significantly impacted in the
short run. The company will draw up plans to cut non-essential costs and conserve
cash in the disruption. Though, supply chain will see a downside trend and limited
workforce will be an issue in the short run. .
In case of liquidity position- There are no significant liquidity concerns however
due to reduced level of operations it will be impacted for the short term. Company
will continue to be extremely vigilant with liquidity positions and monitor them on
an on-going basis.
FY 21 Est. Earnings 49.65
Equity Share Capital 10.03
FV 2
No. of Equity Shares 5.02
EPS( FY 21Est.) 9.90
Estimated P/E Ratio 27
Estimated Price/share 270
VALUATION ( ` in crores except per share)
Pure play snacks company having CRAX
brand being popular and niche play will
help it to grow , improve its margins and
ROE. By strong brand presence, recent
capacity addition of 5000 MT, and
launching innovative products, along
with change in management / owner-
ship in favor of Advent international
(holding of 73%), and reconstitution of
director, we believe DFM is set to in-
crease business aggressively.
We are estimating the share price of the
company as per P/E ratio. With P/E of
around 27x, and estimated EPS of ` 9.90
in FY21, stock is a BUY with next one
year target of ` 270.
Valuation Conclusion
Share Price Chart

Acquisition of DFM shares by ADVENT— New Era for com-
pany which gives Excellency of CORPORATE GOVERANCE
in future
On 26th of Nov 2019, buyout firm “AI Global Investment” has of-
fered to acquire up to 13,070,429 equity shares, fully paid-up eq-
uity shares of face value of Rupees 2 each, representing 26% of the
expanded voting share capital, at per Equity share price of `
249.50.
Earlier on September 9, 2019 the Acquirer entered into -
(i) SPA 1 with the Promoter and the Target Company to acquire the Promoter Shares constitut-
ing 38.27% of the Paid Up Share Capital and 38.14% of the Expanded Voting Share Capital;
(ii) SPA 2 with West Bridge to acquire the West Bridge Shares constituting 24.87% of the Paid
Up Share Capital and 24.79% of the Expanded Voting Share Capital;
and (iii) SPA 3 with the Other Individual Shareholders to acquire Other Shareholder Shares con-
stituting 4.99% of the Paid Up Share Capital and 4.97% Expanded Voting Share Capital.
The open offer closed on Dec 18, 2019 and the acquirer succeeded in acquiring 4.62% stake in
the company (out of 26% offered to be acquired). West bridge sold 14.93% stake in DFM to the
acquirer on Jan 13, 2020. A further 0.25% stake was acquired by the acquirer on Jan 14, 2020.
Later on Jan 15, 2020, the acquirer acquired 54.13% stake from the promoters and some public
shareholders. Pursuant to the SPA and completion of open offer, AI Global Investments
(Cyprus) PCC Limited now holds 73.94% of the equity of the company, and the Board of
directors has been re—constituted. The company is recruiting a new leadership team,
which will be in place soon.
Thus, Post buying out stake from erstwhile promoters, Advent International has
stepped in as the owner of the company. Going by the track record of Advent in other
investee companies, we can look towards new era which raises confidence of corpo-
rate governance in future.
STOCK BROKERS LTD
Share Holding Pattern
74%
26%
Promoter Others

Industry Outlook
The Indian snacking food industry is a promising and a booming arm of the FMCG category,
thanks to the evolving consumer consumption patterns. India snacks market is segmented
into Extruded Snacks, Chips, Namkeen and Others. In terms of market value share, Namkeen
has the highest market share compared to all other segments Extruded Snacks, Chips and
Others. At present, in both organized and unorganized market, Namkeen is the leading seg-
ment.
The organized snack food industry consists of four segments – traditional namkeens, potato
chips, bridged and extruded snacks. Collectively the industry is estimated to be about Rs
23,000 crores per annum and from all counts is growing at a healthy clip. The organized sec-
tor consists of several kinds of players. These competitors range from having a product port-
folio covering all segments of the market and a national presence, to the majority who are
concentrated in one segment and have a strong regional presence.
Besides the organized sector, a large unorganized sector also exists. The unorganized sector
is very localized and normally operates in a single segment.
The growth of the Industry has continuously attracted new entrants in both the organized
and unorganized sector in virtually all the segments of the market. The bulk of Company’s
business comes from the extruded snack food segment, as that has so far been the main fo-
cus. The Company also has a small presence in the traditional namkeens segment.
Snack Foods market worldwide is projected to grow by US$217.2 Billion, driven by a
compounded growth of 5.6%. Salted Snacks, one of the segments analyzed and sized in
this study, displays the potential to grow at over 5.6%. The shifting dynamics support-
ing this growth makes it critical for businesses in this space to keep abreast of the
changing pulse of the market. Poised to reach over US$109 Billion by the year 2025,
Salted Snacks will bring in healthy gains adding significant momentum to global
growth.
STOCK BROKERS LTD

STOCK BROKERS LTD
Particulars 201603 201703 201803 201903 2020E 2021E 2022E
Income Statement and Estimates ( ` in Crore except per share)
Sales 389.51 341.91 425.31 483.62 548.18 626.02 723.18
Other Oper. Income - - - - - - -
Total Inc. from op-
erations
389.51 341.91 425.31 483.62 548.18 626.02 723.18
Operating EBITA 40.52 24.6 40.86 52.9 61.23 73.40 88.53
Quarterly Results (` in crore except per share)
Particulars LTM 201912 201909 201906 201903
Net Sales 529.90 134.60 135.86 127.72 131.75
EBITDA 64.80 9.72 17.96 16.95 20.20
Depreciation 11.30 3.01 2.84 2.75 2.67
Operating Income 53.60 6.71 15.12 14.20 17.53
Misc. Income (Expenses) 6.80 2.43 1.69 0.91 1.80
Interest Expenses 9.80 2.57 2.46 2.38 2.35
EBT 43.80 4.14 12.66 11.82 15.18
Taxes 8.20 0.89 -2.11 4.19 5.21
Net Income (Reg) 35.60 3.25 14.77 7.63 9.97
Extraordinary Items - - - - -
Reported Net Income 35.60 3.25 14.77 7.63 9.97
EPS 7.10 0.65 2.95 1.52 1.99
Adjusted EPS 7.10 0.60 2.90 1.50 2.00

STOCK BROKERS LTD
Profit & Loss
Particulars 201603 201703 201803 201903 2020E 2021E 2022E
Total Inc. from opera-
tions
TOTAL EXPENDITURE
EBITDA
Depreciation
Rep. profit before
othrinc., finance
cost,tax & excp. Item
Goodwill amortization
Rep. profit before
othrinc., fin.cost,tax &
excp. Item
OTHER INCOME
Profit from ordinary
act. Before Fin Cost
,TAX & Exp.Items
Net financials
Interest income
Interest expenses
Net Financial Items
Reported Pre-tax
profit
Reported Tax charge
Reported Net profit
Extra Ordinary income
Reported Net Income
389.51 341.91 425.31 483.62 548.18 626.02 723.18
342.42 310.08 374.48 420.22 475.11 540.69 622.44
47.09 31.83 50.83 63.40 73.07 85.33 100.74
(6.57) (7.23) (9.97) (10.50) (11.84) (11.93) (12.21)
40.52 24.60 40.86 52.90 61.23 73.40 88.53
- - - - - -
40.52 24.60 40.86 52.90 61.23 73.40 88.53
1.65 4.99 4.34 5.10 6.91 7.62 8.15
42.17 29.59 45.20 58.00 68.14 81.02 96.68
- - - - - - -
(5.67) (4.49) (10.02) (10.63) (10.00) (10.09) (10.25)
(5.67) (4.49) (10.02) (10.63) (10.00) (10.09) (10.25)
36.50 25.10 35.18 47.37 58.13 70.93 86.43
(11.46) (6.64) (11.87) (14.61) (17.44) (21.28) (25.93)
25.04 18.46 23.31 32.76 40.69 49.65 60.50
- - - (1.05) - - -
25.04 18.46 23.31 33.81 40.69 49.65 60.50
EPS and Dividend
Dividend Paid (5.00) (5.00) (5.01) (6.27) (6.25) (6.26) (6.26)
Retained earnings 20.04 13.46 18.30 27.54 34.45 43.39 54.24
Reported EPS 25.04 18.46 23.26 6.74 8.11 9.90 12.06
Adjusted EPS 4.99 3.68 4.65 6.74 8.11 9.90 12.06
DPS 5.00 5.00 5.00 1.25 1.25 1.25 1.25

STOCK BROKERS LTD
BALANCE SHEET
Equity & Liabilities
Shareholders' Fund
Share Capital 10.00 10.00 10.02 10.03 10.03 10.03 10.03
Reserves and Surplus 54.84 74.59 92.41 119.23 153.68 197.07 251.31
Minority Interests - - - - - - -
Total Shareholders' Fund 64.84 84.59 102.43 129.26 163.71 207.10 261.34
Non-Current Liabilities
LT Borrowings 41.20 73.80 80.85 83.44 83.61 83.77 83.94
Other LT Liabilities 7.67 2.52 3.96 3.98 4.02 4.06 4.10
Deferred Tax Liability 9.35 11.78 15.86 20.24 20.44 20.65 20.85
Long term Provisions 1.65 2.08 2.72 2.83 3.11 3.42 3.77
Total Non-Current Liab. 59.87 90.18 103.39 110.49 111.18 111.91 112.66
Current Liabilities
ST Borrowings 3.69 10.39 5.68 3.79 3.80 3.81 3.81
Trade Payables 32.28 40.86 34.74 43.04 44.95 48.83 52.79
Other current liability 20.88 33.04 23.06 23.93 24.67 26.29 28.20
Short term Provisions 9.39 0.19 0.12 0.67 0.74 0.81 0.89
Total current Liab. 66.24 84.48 63.60 71.43 74.15 79.74 85.70
Total Equity & Liab. 190.95 259.25 269.42 311.18 349.09 398.75 459.71
Assets
Non-Current Assets
Fixed Assets
Tangible fixed Assets 112.52 158.97 159.25 171.59 185.51 203.01 224.79
G/W On Consolidation - - - - - - -
Non-current Inv. - - - - - - -
Long term L&A 3.13 0.00 9.95 3.00 3.60 4.32 5.18
Other NC Assets 3.11 29.47 20.57 19.84 35.80 57.80 85.90
Deferred tax receiv. - - - - - - -
Total NC Assets 118.76 188.44 189.77 194.43 224.91 265.13 315.88
Current Assets
Current Investments 42.31 48.53 51.86 55.07 56.17 57.29 58.44
Inventories 15.03 19.13 23.55 21.93 24.67 26.29 28.93
Trade Receivables 0.01 0.02 0.03 - - - -
Cash & cash Equi. 12.79 1.76 2.34 37.02 40.26 46.51 52.37
Short Term L&A 0.89 - - - - - -
Other current Assets 1.16 1.37 1.87 2.73 3.07 3.51 4.05
Total current Assets 72.19 70.81 79.65 116.75 124.17 133.61 143.79
Total Assets 190.95 259.25 269.42 311.18 349.09 398.75 459.71

STOCK BROKERS LTD
Cash & cash equivalents 12.79 1.76 2.34 37.02 40.26 46.51 52.37
Other int. bearing assets 42.31 48.53 51.86 55.07 56.17 57.29 58.44
Interest-bearing debt 65.77 117.23 109.59 111.16 112.07 113.87 115.96
Net interest-bearing
debt
10.67 66.94 55.39 19.07 15.64 10.07 5.15
Number Of Shares
Opening Balance 10.00 10.00 10.00 10.02 10.03 10.03 10.03
Issued during year - - 0.02 0.01 - - -
Closing Balance 10.00 10.00 10.02 10.03 10.03 10.03 10.03
FV 10.00 10.00 10.00 2.00 2.00 2.00 2.00
Wtd. Avg. no. of shares 1.00 1.00 1.00 5.02 5.02 5.02 5.02
Particulars 201603 201703 201803 201903 2020E 2021E 2022E
Investments
Tangible assets
Gross capex (31.96) (53.68) (10.25) (22.84) (25.76) (29.42) (33.99)
Sale of fixed assets 0.49 0.43 0.64 0.11 - - -
Net capex (31.47) (53.25) (9.61) (22.73) (25.76) (29.42) (33.99)
Depreciation tangibles (6.57) (7.23) (9.97) (10.50) (11.84) (11.93) (12.21)
Note:- The figures shown in the brackets means NEGATIVE.

STOCK BROKERS LTD
Note:- The figures shown in the brackets means NEGATIVE.
Cash Flow Analysis
Particulars 201603 201703 201803 201903 2020E 2021E 2022E
EBIT 42.17 29.59 45.20 58.00 68.14 81.02 96.68
Depreciation 6.57 7.23 9.97 10.50 11.84 11.93 12.21
Dep. (ex goodwill) 6.57 7.23 9.97 10.50 11.84 11.93 12.21
in Inventories 3.22 (4.10) (4.42) 1.62 (2.74) (1.62) (2.63)
in Debtors 0.02 (0.01) (0.01) 0.03 - - -
in Creditors 17.94 6.72 (6.12) 8.30 (1.91) (3.88) (3.96)
Other W.C Inc./decrease 0.18 (2.98) 1.51 (0.73) - - -
in W.C 21.36 (0.37) (9.04) 9.22 (4.65) (5.50) (6.60)
Tax paid (11.46) (6.64) (11.87) (14.61) (17.44) (21.28) (25.93)
Operating Cash
Flow
58.64 29.81 34.26 63.11 57.89 66.16 76.36
Net interest (5.67) (4.49) (10.02) (10.63) (10.00) (10.09) (10.25)
Cash Earnings 52.97 25.32 24.24 52.48 47.89 56.08 66.11
Gross CapEx (31.96) (53.68) (10.25) (22.84) (25.76) (29.42) (33.99)
Sale of fixed assets 0.49 0.43 0.64 0.11 - - -
Net CapEx (31.47) (53.25) (9.61) (22.73) (25.76) (29.42) (33.99)
Free CF pre divi-
dend
21.50 (27.93) 14.63 29.75 22.12 26.65 32.12
Dividend (5.00) (5.00) (5.01) (6.27) (6.25) (6.26) (6.26)
Free CF post Divi-
dend
16.50 (32.93) 9.62 23.48 15.87 20.40 25.86
Net acqui./disposals - - - - - - -
Net cash flow 16.50 (32.93) 9.62 23.48 15.87 20.40 25.86

STOCK BROKERS LTD
RATIO Analysis
Particulars 201603 201703 201803 201903 2020E 2021E 2022E
Return on assets - 8.20% 8.82% 11.65% 12.33% 13.28% 14.10%
Return on equity - 24.71% 24.93% 29.19% 27.78% 26.78% 25.83%
ROCE - 10.94% 14.23% 16.04% 16.63% 17.97% 19.30%
EBIT Margin - 8.65% 10.63% 11.99% 12.43% 12.94% 13.37%
Pre tax margin - 7.34% 8.27% 9.79% 10.60% 11.33% 11.95%
Net Profit Margin - 5.40% 5.48% 6.99% 7.42% 7.93% 8.37%
Total asset turnover - 1.52 1.61 1.67 1.66 1.67 1.68
Fixed asset turnover - 2.52 2.67 2.92 3.07 3.22 3.38
Equity turnover - 4.58 4.55 4.17 3.74 3.38 3.09
Current Ratio - 0.84 1.25 1.63 1.67 1.68 1.68
Quick Ratio - 0.61 0.88 1.33 1.34 1.35 1.34
Cash Ratio - 0.02 0.04 0.52 0.54 0.58 0.61
Receivable Days - 0.02 0.02 0.01 0.00 0.00 0.00
Inventory Days - 20.11 20.80 19.75 17.90 17.20 16.19
Payable Days - 42.49 36.41 33.91 33.61 31.56 29.67
Conversion Cycle
(Days)
- (22.36) (15.59) (14.15) (15.71) (14.36) (13.48)
Financial Leverage Ef-
fect
- 1.72 2.18 1.88 1.80 1.72 1.67
Debt to Capital - 0.58 0.52 0.46 0.41 0.35 0.31
Debt to Equity - 1.39 1.07 0.86 0.68 0.55 0.44

Disclosures :
Business Activity :
Rudra Shares & Stock Brokers Limited is engaged in the business of providing broking services & distribu-
tion of various financial products. RUDRA is also registered as a Research Analyst under SEBI(Research
Analyst) Regulations, 2014. SEBI Reg. No. INH100002524.
Disciplinary History :
There has been no instance of any Disciplinary action, penalty etc. levied/passed by any regula-
tion/administrative agencies against RUDRA and its Directors. Pursuant to SEBI inspection of books and
records of Rudra, as a Stock Broker, SEBI has not issued any Administrative warning to Rudra.
Terms & Conditions of issuance of Research Report:
The Research report is issued to the registered clients. The Research Report is based on the facts, figures
and information that are considered true, correct and reliable. The information is obtained from publicly
available media or other sources believed to be reliable. The report is prepared solely for informational pur-
pose and does not constitute an offer document or solicitation to buy or sell or subscribe for securities or
other financial instruments for clients.
Disclosures with regard to ownership and material conflicts of interest :
Rudra or its research analysts, or his/her relative or associate has any direct or
Indirect financial interest in the subject company. NO
Rudra or its research analysts, or his/her relative or associate has any other
material conflict of interest at time of publication of the research report. NO
Rudra or its research analysts, or his/her relative or associates have actual
ownership of one per cent or more securities of the subject company. NO
Disclosures with regard to receipt of compensation :
Rudra or its associates have received any compensation from the subject
company in the past twelve months. NO
Rudra or its associates have managed or co-managed public offering of
securities for the subject in the past twelve months. NO
Rudra or its associates have received any compensation or other benefits
from the subject company or third party in connection with the
research report . NO
STOCK BROKERS LTD

Other Disclosures:
The research analyst has served as an officer,director,employee of the
subject company. NO
Rudra or its research analyst has been engaged in market making activity
for the subject company. NO
Rudra or its or associates have received any compensation from the
subject company in the past twelve months. NO
Disclaimers:
This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK
BROKERS LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities.
The information presented in this report, are for the intended recipients only. Further, the intended recipients are ad-
vised to exercise restraint in placing any dependence on this report, as the sender, Rudra Shares & Stock Brokers
Limited, neither guarantees the accuracy of any information contained herein nor assumes any responsibility in rela-
tion to losses arising from the errors of fact, opinion or the dependence placed on the same.
Despite the information in this document has been previewed on the basis of publicly available information, internal
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accurate, complete or exhaustive. It should not be relied on as such, as this document is for general guidance only.
Besides this, the research analyst(s) are bound by stringent internal regulations and legal and statutory requirements
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ing whatsoever on any recommendation, that they have given in the research report. Rudra Shares & Stock Brokers
Ltd or any of its affiliates/group companies shall not be in any way responsible for any such loss or damage that may
arise to any person from any inadvertent error in the information contained in this report. Rudra Shares & Stock Bro-
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Subject to the restrictions mentioned in above paragraph, we and our affiliates, officers, directors, employees and
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securities and earn brokerage or profits.
STOCK BROKERS LTD

Dfm foods limited

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