Heritage foods(India) Ltd is a leading dairy company promoted
by Mr Chandra Babu Naidu ,which produces and markets milk and milk products
under the brand name of “Heritage”. The company has strong regional footprint
in the southern states of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala,
Maharastra and Orissa. Company having four divisions- Dairy Business, Retail
Business, Agri Business and Bakery Business. It has ‘farm to fork’
approach to business through the Dairy and Retail, and reach out to
over 15 lakh customers every day.
The Historical financial
performance of Heritage Foods (India) Ltd. was marked by increased losses from
Retail Business as they were in their early stages. The Retail Division started
in 2007 used to eat most of the profits of dairy division.Since FY 2013, with
almost stable raw milk prices and increased product prices there has been a
substantial jump in EBITDA and net profits. All this
had improved the net worth and have helped the company cut down on its debt and
finance costs
DAIRY DIVISION
Company sells Milk and
Milk Products including Ghee, Paneer, Ice Cream, Cooking butter, Lassi,
Doodhpeda, Fresh Cream, Curd etc. It is very difficult for any company to set
up such a large supply chain which is crucial for the success of any company in
Dairy business.Company also exporting Heritage Pure Ghee and Heritage Butter in
Bulk and Consumer Packs from two of its units located at Tirupati and Chittoor.
Currently there are 1176 parlors with an average shop area of 100sft to
sell its value added dairy products across south India.
ü The company is the only
packaging partner (curd) for Nestle in South India, and one of their only 2 Indian dairy packaging partners
(FY2013 Revenue:Rs12686mn EBITDA:Rs1219mn Capital Emp:Rs1523mn)
RETAIL DIVISION
Under the retail division, company
is selling Groceries ,fresh fruits and vegetables. Under the brand
"Farmers Pride”, company offers a full range of staples like rice, pulses,
spices , dry fruits..etc . The company has 71 company managed own ―Heritage
Fresh stores in South India
(FY2013 Revenue:Rs3266mn EBITDA:Rs-173mn
Capital Emp:Rs585mn)
AGRI BUSINESS DIVISION
Agri division activities are based at Chitoor (Andhra Pradesh), Kolar
(Karnataka), Krishnagiri (Tamil Nadu) Medak and Nalgonda in Andhra Pradesh
.Company having two pack houses one at Mattam and other at Mulugu. Heritage
also having a Poly Green House facility for Production of Vegetable Seeds for
supplying to farmers engaged in contract farming.
ü 50% supplies to Heritage
Fresh i.e 21 MT/day
The company has Air-conditioned
and humidity controlled pack houses with cold storage facilities and ripening
chambers at 2 strategic locations with a combined capacity of 300MT per
day.Through Agri Business Division, the Company has strong presence in contract farming of
vegetables and fruits. These items are selling through its own retail stores.
BAKERY DIVISION
ü Manufactures a range of
breads, puffs, pastries, puddings and custards
RENEWABLE ENERGY
Heritage Foods Ltd has
in association with Mahindra EPC Services Private Limited has commissioned a 2.34 MWP
Solar Power Project at IPH, Masjid Adavi Village, Mulugu Mandal, in Medak
district near Hyderabad on September 29, 2013, under REC mechanism and to meet
for the captive energy requirement.
ü Turnover in Q3FY14 was
Rs. 2.30 mn.
Without the loss making
retail segment , the dairy division alone is capable of posting more than 60 crs PAT.This is more than 25 rs EPS. There have been many instances
where rumours came about the company hiving off the retail division to enhance
share holder value. If this happens, we can expect significant appreciation in
share price. Hatsun agro, a comparable company that manufactures Arun Ice
creams trades at a P/E of more than 30 while Heritage with a better setup is
available below 9 P/E. I expect the company to post consistent profitable
performance in the coming years as it belongs to the great Indian consumption
story.At the cmp of 205 Rs, its worth putting some money into this company
Note:-I have vested interests in HERITAGE FOODS and its safe to assume that i am holding it from lower levels
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