LEVERAGE BUYOUT

Presented by:
Akshay Bakaya
Ravi Bhojani
Shruti Rastogi
Falguni Modi
Sushmit Tripathi
Anupam Godghate

Industry Overview
The 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 addition
The sector is governed by Ministry of Food Processing Industries
Segmentation of different sectors in food processing industry:
Sectors

Products

Diary

Whole 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

Fisheries

Frozen & 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

Industry
Strategic 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 Limited

The Heritage Group, founded in the year 1992 by Sri Nara Chandrababu Naidu, is one of the
fastest growing Private Sector Enterprises in India
MISSION
To be a nationally recognized brand for healthy and fresh products with a revenue of INR
6000 Cr by 2020.
VISSION
Delighting 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 Units
DAIRY
Heritage 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.

RETAIL
Heritage Retail is 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.

AGRI
Aims 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.

BAKERY
Heritage 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 ENERGY
The 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 Drivers

Segment
People who need milk, dairy products along with grocery and food products
15 lakhs households have been using Heritage brand everyday
Target Group
Middle class families of India
Market Positioning
Trusted supplier of fresh, healthy, hygienic and affordable dairy and food products

SWOT ANALYSIS
STRENGTHS
1. A well-established brand in South India
2. Wide product range including milk, milk
products, bakery products, fresh fruits and
vegetables, etc
3. Good supply network
4. Good network of Heritage Fresh retail stores in
Hyderabad, Bangalore and Chennai
5. Procurement of milk from cooperative dairies
and agricultural products from farmers, helping
the farmers, dairies to get a fair price

WEAKNESS

OPPORTUNITY

THREATS

1.
2.

1Strong competition in retail space and dairy

segment
2.Dependence on weather for agricultural products
3.Inflation makes it difficult to maintain competitive
pricing

3.
4.

Rise in Purchasing power of people

PAN India expansion of Heritage Fresh retail
stores
Acquisition of regional dairies
Market and advertise Heritage as a national
brand and increase its reach

1.
2.

No PAN India Approach

Strong Competition in sectors of Operations

Operating Performance
Revenues
5,269.17

FINANCIAL PROFILE

4,578.05
3,692.29
2,394.63
1,608.04

FY-2015

Increasing Revenue, PAT and EBITDA

Revenue- 15%
PAT-11.11%
EBITDA- 19.2%
However unstable cash flows
Net Increase/Decrease in Cash flow

FY-2014

FY-2013

FY-2012

FY-2011

PAT
140.93

126.63
96.53

90.99
45.94

FY-2015

FY-2014

FY-2013

FY-2012

FY-2011

12.07
329.57
5.8
3.75

FY-2015

FY-2014

2.89

2.56

FY-2013

FY-2012

EBITDA
276.03
211.04

165.27
101.1

FY-2011

FY-2015

FY-2014

FY-2013

FY-2012

FY-2011

Operating Ratios
Debt/Equity
2.2

Lowe Debt Equity Ratio shows that the

company is stable . Positive leverage
position of the company

1.51
0.74

0.71

0.69

FY-2014
FY-2013
FY-2012
FY-2011
Expenses have decreased over the past year. FY-2015
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
Expenses as composition of total sales

0.44

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

FY-2015

0.19

0.18

0.15

FY-2014

FY-2013

FY-2012
0

FY-2011

Revenue Mix
REVENUE PROFILE

Segment Wise Revenue

Dairy
Agri
Renewable Energy

Value Add Segment growing fast for

Heritage
The dairy business has grown by 13%
over the last year
The company is expecting +25% by 2020
Retail business soon to be in black

Retail
Bakery

4% 0% 0%
22%

73%

Key Growth Opportunities

Expansion in Emerging Markets
Since the company is more prominent in the North, there is a potential for growth
in South India
Heritage 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 Limited
Has a potential for massive earnings in different regions and a source for steady
revenue stream
Opportunities for digital and online engagements
Opportunity for online platform for the retail segment of Heritage Foods

Valuation and Financials

Thank you