IPO UPDATE

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SNAPSHOT

Issue Opens Wednesday, 4th May 2016

Issue Closes Friday, 6th May 2016

Price Band Rs 220 to Rs 227

Bid Lot 65 Equity Shares & in multiples thereafter

Face Value Rs. 10

Listing BSE and NSE

About the Issue offering: Rs. 749 Cr at Lower Band & Rs. 764 Cr at Upper Band. (Fresh Issue of Rs. 300 Cr and offer for sale of 2,05,72,573 Equity Shares by IDFC Private Equity Fund, Motilal Oswal Private Equity Fund and the part of Promoters holdings.

*Retail Individual Bidders and Employees to get a discount of Rs. 12 per share.

About the Company:

The company, incorporated in 1992 by the Mr. Devendra Shah and family is one of India’s elite private sector dairy company. It started off with collection and distribution of milk and over the years has developed into a dairy-based branded consumer products company. It manufactures a diverse range of products including cheese, ghee (clarified butter), fresh milk, whey proteins, paneer, curd, yoghurt, milk powders and dairy based beverages. It derives all its products from only Cow’s Milk.

Company's manufacturing facilities are located at Manchar in the Pune district of Maharashtra and Palamaner in the Chittoor district of Andhra Pradesh with a population of over 2000 dairy cows and milk processing capacities of 1.2 million litres per day and 0.8 million litres per day, respectively. It also has the largest Cheese manufacturing plant in India.

The company in 2005 set up its subsidiary Bhagyalaxmi Dairy Farm at Manchar. The main aim was to educate farmers about best practices of breeding, feeding, animal management and improving productivity.

From 1997-2002, the company was the highest exporter of Milk and Milk products in the country.

Objects of the Issue:

To meet the capital expenditure requirements for expansion and modernisation of existing manufacturing facilities at Manchar and Palamaner;

Investment in Subsidiary for financing the capital expenditure requirements in relation to the expansion and modernisation of the Bhagyalaxmi Dairy Farm;

Partial repayment of the Working Capital Consortium Loan; and General corporate purposes.

Industry Overview:

The Global Dairy Industry:

The dairy industry includes businesses involved in cattle farming to food manufacturing. Globally, approximately 66% of milk and dairy products are consumed for factory use, 33% for fluid use and 1% for feed use. The global production of milk reached 792MT from 2010 to 2014, growing at a CAGR of 2.3%. The global demand for milk and milk products is expected to grow continuously.

The European Union, India and the United States are currently the largest milk and dairy product producers and consumers worldwide. These countries account for 20.3%, 18.3% and 11.9%, respectively, of global production of milk and dairy products for the year 2014 as depicted in the graph below:

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Parag Milk Foods Limited

Issue Allocation

QIB 75%

Non Institutional HNIs 15%

Retail* 10%

Indian Dairy Industry:

On a country-wise basis, India is the biggest producer of milk. The per capita consumption of milk is however at 97 litres a year is below that of other major milk markets. Milk production volumes in India have grown at a rapid pace from 17 MMT during the financial year 1952 to reach 147 MMT during the financial year 2015, thus making India the world’s biggest milk producer. On the other hand, on account of a steady population growth and rising incomes, milk consumption continues to rise in India. India consumed 138 MMT of milk in the financial year 2015 and was the world’s largest consumer of milk. Indian Dairy Market Structure:

Source: Company Presentation

Source: Company Presentation

Key Growth Drivers of the Indian Dairy Industry:

Rising Income Levels. Rising Middle Class and Urban Population. Changing Dietary Patterns. Milk is considered a perfect health food in India. Consumer shift towards package milk to drive organized market. Competitive Landscape of the Indian Dairy Industry:

Regionalization of Milk procurement. Lack of cold chains and high cost of transportation. Lack of differentiation. Product Customization. Brand Image. Focus on core areas.

IPO UPDATE

Parag Milk Foods Limited

TM

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Company’s Brands:

Source: Company Presentation

Finance and related:

The company is growing with a CAGR of nearly 22% over the last 5 years

Segmental Revenues:

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Parag Milk Foods Limited

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Brands Products, Brand Attributes and target customer groups

The products under this brand include fresh milk, curd products (curd, trim curd and buttermilk), ghee, paneer, butter, milk powders, whey proteins, gulab jamun mix and shrikhand. Targeted at Household consumption and as a cooking ingredient.

Products include cheese products, UHT milk (go milk, go slim milk and go supremo milk), fresh milk: go kidz, fruit yoghurts in six flavours, fresh cream and beverages (lassi and buttermilk in two flavours). Targeted at children and the youth generation, primarily for direct consumption

Farm-to-home concept of milk, directly delivered from the farm to a consumer's door-step, through a subscription model. Targeted at household consumers seeking premium quality cow's milk. The product include under this brand is cow milk.

The products under this brand include flavoured milk in six flavours. Targeted at the youth generation and travelers as a source of instant nourishment.

Rs mn FY11 FY12 FY13 FY14 FY15

Year ending March March March March March

Total Sales 6,583 8,998 9,250 10,883 14,387

Total Expenses 6,081 8,175 8,416 10,059 13,324

EBITDA 501 823 834 823 1,063

EBITDA margin (%) 7.6% 9.1% 9% 7.6% 7.4%

Depreciation 181 225 261 275 275

Other Income 2 8 21 12 18

EBIT 98 205 191 123 312

Less: Taxation 102 16 (16) (37) 53

Net Income (PAT) (4.1) 189 207.8 159.7 259.7 FY11 FY12 FY13 FY14 FY15 9M Dec

6583

8998 9250

10883

14387

12306

Revenue CAGR

19%

29%

5%

20%

10%

8%

10%

Revenue Shares: 9MFY16

Cheese/Paneer

Ghee

UHT Products

Fresh Milk

Skimmed Milk Powder

Whey Products

Others

Key Highlights:

The company houses more than 2000 Holstein breed cows with higher yields of superior milk quality. In 2007, the company commissioned the largest Cheese processing unit in the country with an annual capacity of

12000 MT. The overall Cheese market in India accounts for 28000 MT of which 40% is dominated by Amul and 33% by the

company. The company has an integrated business model which comprises of the following:

Dairy Farming Milk Procurement Processing Distribution Branding

The company’s product growth is at an average of 13-15% over the past 5 years. The competitive strengths of the company are as follows:

Well Established Brands Targeting a Range of Consumer Groups

Integrated Business Model Diversified Product Portfolio and Customer Base Growing Pan-India Distribution Network Established Track Record of Growth and Financial Performance Experienced Senior Management

The company is also engaged in B2B business and supplies to Hotels, Restaurants and Cafes (HORECAs). Some of the leading institutional customers include leading restaurant and cafe chains such as Yum! Restaurants (India) Private Limited (for Pizza Hut, Taco Bell and KFC), Jubilant Foodworks Limited (for Domino’s Pizza) and Sankalp Recreation Private Limited (for Sam’s Pizza).

Maximum revenue contribution from each institution/HORECA is not more than 2% of the total B2B revenue. Sweet Whey: Whey is a component of milk protein; it is the liquid which is left after the removal of casein and fat from

milk in the manufacturing of coagulated products. It is obtained as a by-product during the manufacturing of cheese, paneer and chhana. The company is on its way to introduce the first of its kind domestic Whey nutrient Infant food, Health supplements etc.

As February 29, 2016 the company had 1,618 employees on its roll.

Company’s Distribution Network:

The company’s supply chain network includes procurement from 29 districts across Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu, through over 3,400 village level milk collection centres. It procures milk from milk farmers and through chilling centres and bulk coolers. The average daily milk procurement for the financial years 2015 and 2014 was approximately 1.05 million litres and 0.77 million litres, respectively. The sales and distribution network covers 15 depots, 104 super-stockists and over 3,000 distributors, spread across most states and union territories in India. The sales and marketing team comprises of 560 personnel based in the key distribution centres (about 34.6% of the work force).

Overall View: One can apply and sell on allotment.

IPO UPDATE

Parag Milk Foods Limited

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