largest private dairy company in india

1

Strictly Private & Confidential

Largest Private Dairy Company in India

Kwality Limited

Corporate Presentation

December 2016

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This presentation has been prepared by Kwality Limited (the “Company”) solely for information purposes, without regard to any specificobjectives, financial situations or informational needs of any particular person. All information contained has been prepared solely by theCompany. No information contained herein has been independently verified by anyone else. This presentation may not be copied,distributed, redistributed or disseminated, directly or indirectly, in any manner. No part of it should form the basis of or be relied upon inconnection with any investment decision or any contract or commitment to purchase or subscribe for any securities. Any person placingreliance on the information contained in this presentation or any other communication by the Company does so at his or her own risk andthe Company shall not be liable for any loss or damage caused pursuant to any act or omission based on or in reliance upon theinformation contained herein. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, thefairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Such information andopinions are in all events not current after the date of this presentation. Further, past performance is not necessarily indicative of futureresults. This presentation is not a complete description of the Company. This presentation may contain statements that constitute forward-looking statements. All forward looking statements are subject to risks, uncertainties and assumptions that could cause actual results todiffer materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results todiffer materially include, among others, future changes or developments in the Company’s business, its competitive environment andpolitical, economic, legal and social conditions. Given these risks, uncertainties and other factors, viewers of this presentation arecautioned not to place undue reliance on these forward-looking statements. The Company disclaims any obligation to update theseforward-looking statements to reflect future events or developments. Except as otherwise noted, all of the information contained herein isindicative and is based on management information, current plans and estimates in the form as it has been disclosed in this presentation.Any opinion, estimate or projection herein constitutes a judgment as of the date of this presentation and there can be no assurance thatfuture results or events will be consistent with any such opinion, estimate or projection. The Company may alter, modify or otherwisechange in any manner the content of this presentation, without obligation to notify any person of such change or changes. The accuracy ofthis presentation is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning theCompany. This presentation is not intended to be an offer document or a prospectus under the Companies Act, 2013, as amended, theSecurities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended or any otherapplicable law.This presentation does not constitute an offer or invitation, directly or indirectly, to purchase or subscribe for any securities of theCompany by any person in any jurisdiction, including India and the United States.

Disclaimer

3


Company Overview

Industry Snapshot

Business & Operations

The Road Ahead

Summary Financials

Annexure

4


Kwality Ltd. – Key Highlights

Overview

One of the Largest & fastest growing Player in the Private Dairy Sector in India

– Kwality Limited is one of the largest manufacturer and processor of dairy products in the private sector in India.

– Established in 1992 as backward integration unit of Kwality Ice Creams and acquired by the current promoters in 2002.

– Currently, Processing capacity of more than 3.4 mn litres of milk per day with Six (6) milk processing units in Palwal (Haryana),Saharanpur (UP), Bulandshaher (UP), Jarar (UP), Sitapur (UP) & Ajmer (Rajasthan).

Increasing Direct Procurement : Key to Success

– Currently, procuring ca. 22% of milk requirement directly from more than 325,000 farmers spread across ca. 4500 villages through24 MCCs - Company intends to increase this procurement mix from the current ca. 22% to ca. 50% directly from farmers in 3-4 yrs

– Ensuring consistent quality and taste which are important parameters for success in value added products

– Currently, operating 24 Milk Chilling Centres (MCCs) in U.P. Rajasthan and Haryana which the Company intends to expand toachieve the above objective to improve the procurement mix

Transforming Business

– Company’s primary focus is to transform from a traditional B2B to B2C Company. Strategically looking to change the currentbusiness mix from 60%:40% in Q1’FY17 (Institutional : Retail) to 70%:30% in favour of retail by 2020

– Product Portfolio Expansion – Evolving from a Commoditised Player to a Branded Player in the dairy industry by adding ValueAdded Products like flavoured milk, cheese, UHT Milk, table butter, cream, paneer, yoghurts, amongst others in various variantsand other dairy products

– Signed Bollywood actor Mr. Akshay Kumar as Brand Ambassador. Focusing on Brand Development with investments being plannedin ATL/BTL and customer engagement channels

– Strengthening and enhancing of its retail distribution network

– Strategic partnership with different Agencies Like McCANN & Cheil India for Creative, Adfactors for PR, Digital Quotient for SocialMedia, Zenith Optimedia for Media Planning, Ernst & Young for IT and Akshay Kumar as brand Ambassador.

– Involved E&Y for IT transformation

Strengthening Human Capital

– Building upon Management with recruits from cooperatives, leading FMCG companies, and large corporates

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Kwality Limited - Growth Path till date . . .

2010 2012 2016

SALES (Rs. Mn)*

EBITDA (Rs. Mn)*

Farmers Network – No. of Farmers(Direct Procurement)

Processing Capacity(Mn Kg)

PRODUCTS

Pasteurised/Standardised Milk

Ghee

Skimmed Milk

SMP

Curd

Other Milk Powder

Butter Bulk


Ghee

Skimmed Milk

SMP

Curd

Other Milk Powder

Pouched Milk

Pouched Curd

Butter Bulk


Ghee

Skimmed Milk

SMP

Curd

Other Milk Powder

Pouched Milk

Pouched Chaach

Pouched Curd

Sterilized Flavoured Milk

Butter Bulk

664 891 1244

10,541 57,53623,947

576 3,785

* Standalone Numbers

75,000 325,000N.A

~5.4x Growth

~6.6x Growth

1,653

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Company was incorporated as Kwality Dairy (India) Limited (Kwality)1992

MOU signed with Gujarat Co-operative Milk Marketing Federation Limited (GCMMF) for processing and packing milk to be sold under AMUL brand

2003

Strategic alliance with Britannia Industries for manufacturing and packing of Curd products2007

Backward integration initiative by setting up first Milk Chilling Center (MCC) at Fatehabad, Haryana. Launched own brand “Dairy Best” to deliver premium quality Ghee, Dairy Whitener & other dairy products. Agreement with Pashupati Dairies for Milk Processing on Job work basis at Saharanpur plant License granted by the National Research Development Corp for know how and process of manufacturing of low cholesterol Pure

Ghee

2010

Launch of Livlite (85% Low Cholesterol Ghee) with Bipasha Basu as Brand Ambassador. Set up 100% wholly owned subsidiary in the Free Trade Zone of Dubai Penetrated new markets both nationally & internationally. Added new institutional clients such as the Indian Railways and other Private Sector companies Set up its second manufacturing facility for expansion in FDP range of products at Haryana. Took on lease processing facility in Ajmer (Rajasthan), Sitapur (UP) & Jarar (UP).

2011

Company became public listed on Bombay Stock Exchange (BSE).1995

KDIL taken over by current promoters together with its manufacturing facility at Haryana.2002

Key Milestones

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Key Milestones

Acquired the processing facilities from Varshey Bandhu, Dibai, UP. Started marketing of UHT milk under “Dairy Best” brand. Change in the name of Company to Kwality Limited.

2013

Started trial of value added products like Flavoured milk, flavoured lassi, yogurt etc. Embarked on the expansion plan to increase capacities of existing plants and also to add capabilities for new value added products

like various variants of cheese, UHT milk, paneer, Table butter in tubs, cream in tetra packs etc. Started process of setting Company Milk Chilling centres Acquired two milk processing plants on lease

2014

Started streamlining the Marketing and Branding initiatives. Signed renowned Bollywood actor Mr. Akshay Kumar as Brand Ambassador Appointed Cheil India & McCann as Creative Partners, Adfactors for PR, Zenith Optimedia for Media Releases, Digital Quotient for

Social Media. Appointed Mr. S.K. Bhalla, an Dairy Industry Veteran as whole time Director on the Board of the Company Involved Ernst & Young for IT Transformation in company. Became first Dairy Company to grant ESOP’s to all its employees across levels

2015

Started marketing of pouched milk, curd & paneer under “Dairy Best” brand.2012

Acquired ‘KDIL’s Kwality’ Brand for the entire range of Dairy Products. Leading Private Equity Firm Kohlberg Kravis & Roberts (KKR) agrees to provide capital of up to INR 5,200 Mn through structured Debt Executed Ad-for-Equity deal with HT and ToI for branding and advertising of ‘KDIL’s Kwality’ Expansion at Softa (Haryana) plant for new value added products like UHT Milk, Cheese, Table Butter in tubs etc. is near to

completion.

2016

8


Company Overview

Industry Snapshot


The Road Ahead

Summary Financials

Annexure

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Brief Overview of the Indian Dairy Industry

Source: FAOSTAT

Trends in Milk Production and Per Capita Availability: 1960 to 2015

• India is the largest milk producing nation in the world - Production of ca. 147 mn metric tonnes in 2014-15

• Consumption in India stood at ca. 138 mn metric tonnes during this period and as per the Planning Commission ofIndia, the domestic demand for milk is expected to be ca.192 mn metric tonnes by 2021-22

• Milk production growing at a CAGR of ca. 4-5% and consumption growing at CAGR of ca. 5-6%

• Present per capita availability of milk in India is 290 grams/day — higher than the average for the developingcountries in the Asia-Pacific region, against the world average of 284 grams

• About 80% of milk produced is still handled by the unorganized sector and the remaining 20% is equally shared byCo-operatives and Private Dairies

• India is the world’s largest producer, consumer of Milk and has the maximum number of Milching Animals.

• Total dairy market is estimated to be Rs. 5,796 Bn in 2014-15.

20 22 3256

8197

108 112 116 122 128 133 140 147

0

50

100

150

200

250

300

0

50

100

150

200

1960-61 1970-17 1980-81 1991-92 2000-01 2005-06 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Production (million tonnes) Per capita availablity grams/day

Source: IMARC Report

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Dairy Industry : Growing Organized Market

Indian Organised Dairy market size Rs. 1,233 bn in 2015 comprisingof Cooperative and Private Players

This segment is expected to grow at a CAGR of over 19.6% till2019-20E

Organized market is growing at a healthy rate

Government Initiatives

Shift from the Unorganised to

Organized Sector

Entry of Private Sector

Players

Strong Co-operative

Movement

Increasing Urbanization

&Rising Disposable

Income

• Increase in consumer base – GrowingPopulation with growing nuclear families

• Exposure to Western consumption pattern -increased consumer interest in high protein diet

• Increasing awareness and availability of dairyproducts through channels such as organisedretail and food service segments

• Introduction of new types of dairy products• Increased consciousness about quality of food

products• Shift of consumers from unbranded to branded

products.

Supported byINDIA ORGANISED DAIRY INDUSTRY – KEY GROWTH DRIVERS

17.2% 17.7% 18.5% 19.5% 20.4%26.2%

82.8% 82.3% 81.5% 80.5% 79.6%73.8%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2010 2011 2012 2013 2014 2020 (E)

Organised UnorganisedSource: IMARC Report

Source: IMARC Report

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63,877

18,565 12,950 37,972

2,19,979

65,098

37,630

1,32,089

-

50,000

1,00,000

1,50,000

2,00,000

2,50,000

Delhi Rajasthan Uttar Pradesh Haryana

2005 2014

102.86

121.06 128.00

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

2001 2011 2015(E)

India - A Widening Market

Source: Census of India, 2001 & 2011 and News Reports

Population Growth with growing Urban Population Per Capita Income

Kwality’s Target Market – Better Positioned in terms of % Growth

24,143.0

74,380.0

-

10,000.0

20,000.0

30,000.0

40,000.0

50,000.0

60,000.0

70,000.0

80,000.0

2005 2014

CAGR – 14.73% 14.96% 12.58% 14.86%

Rajasthan 2001 2011

Total Population (Crs) 5.65 6.85

Growth(%) 28.33 21.31

Urban (% of Total Popln.) 23% 25%

Uttar Pradesh 2001 2011


Growth(%) 25.8 20.23


Delhi 2001 2011

Total Population (Crs) 1.38 1.67,

Growth(%) 46.31 21.21


Haryana 2001 2011


Growth(%) 28.06 19.9


Per Capital Income* Growth (Year 2005 to 2014)

Urban Population % (27.82%)

Urban Population % (31.15%)

Favourable Demographics

In Crs.

*Per Capita Net State Domestic Product at Factor CostSource: RBI

Rs.

Rs.

Source: Census of India, 2001 & 2011 and News Reports

Source: RBI

Kwality’s Major Presence

– Delhi/NCR– Rajasthan– Haryana– Uttar Pradesh

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Organized Dairy Market - Transformation

Source: Rabobank 2013

Liquid Milk66%

Milk Powder5%

Ghee (Clarified butter)

8%

Dahi (Yoghurt)

2%

Butter3%

Cheese (Processed and

Mozzarella)2%

Ice cream4%

Others0%

Dairy whitner2%

Paneer1%

Baby foods4%

UHT products

2%

Flavoured Milk1%

Other21%

Liquid Milk60%

Milk Powder3%

Ghee (Clarified butter)

6%

Dahi (Yoghurt)4%

Butter2%

Cheese (Processed and

Mozzarella)3%

Ice cream8%

Others2%

Dairy whitner1%

Paneer1%

Baby foods5%

UHT products3%

Flavoured Milk2%

Other31%

Value added products have gained importance due to a change indemographic and dietary patterns

The market share of value added products is expected to increase from21% to 31% from 2012-13 to 2019-20 and the VAPs market is expected togrow at a CAGR of 23%

Factors driving this growth : (a) Increasing young population - Value addedmilk products like cheese finds usage in convenience foods like pizza, pasta,and burgers. (b) Aggressive growth plans of QSR players - demand for milk,condensed milk and cream is high from coffee chains

Value added products in the Organized market is growing at a healthy rate

Liquid Milk Value Added Products

Traditional VAP’s:Butter Milk, Cottage Cheese,

Butter, Ice-cream

Non-Traditional VAP’s:Flavoured Milk, Low Fat &

Flavoured Yogurt, UHT Milk, Flavoured Butter

Market: 2012-13 – USD 10 Bn Market: 2019-20 – USD 24 Bn

Organized Dairy Market - Landscape

Raw Milk

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Dairy Products – Huge Market Potential

Liquid Milk – Market (Sales) UHT Milk – Market (Sales)

Source: IMARC Report (Numbers rounded off)

Butter - Market (Sales) Cheese– Market (Sales)

1,501

2,621 3,021

4,006

6,068

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2014 2015(E)

2017(E)

2020(E)

10

26 33

53

104

-

20

40

60

80

100

120

2010 2014 2015(E)

2017(E)

2020(E)

91

168 195

259

382

-

100

200

300

400

500

2010 2014 2015(E)

2017(E)

2020(E)

5

12 14

21

36

-

5

10

15

20

25

30

35

40

2010 2014 2015(E)

2017(E)

2020(E)

Flavored Milk – Market (Sales) Curd – Market (Sales) Lassi - Market (Sales)Butter Milk (Chaach)–

Market (Sales)

5

13 16

25

48

-

10

20

30

40

50

60

2010 2014 2015 (E) 2017 (E) 2020 (E)

124

217 251

331

493

-

100

200

300

400

500

600

2010 2014 2015(E)

2017(E)

2020(E)

5

13 15

23

39

-

5

10

15

20

25

30

35

40

45

2010 2014 2015(E)

2017(E)

2020(E)

6

14 17

25

43

-

5

10

15

20

25

30

35

40

45

50

2010 2014 2015(E)

2017(E)

2020(E)

Rs. Bn Rs. Bn Rs. Bn Rs. Bn

Rs. Bn Rs. Bn Rs. Bn Rs. Bn

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Company Overview

Industry Snapshot


The Road Ahead

Summary Financials

Annexure

15


Business Description

Product Portfolio

• Kwality produces a range of quality milk and milk products

• Transforming itself into a complete dairy products with

introduction of variety of Value added Products

• In the last three years, the Company transformed itself and

has launched new products targeting the retail consumers viz.

consumer packs for Pure Ghee, Pure Cow Ghee, Low

Cholesterol Ghee, Pouched milk, pouched curd, dairy

whitener, chaach, etc.

Segment Ghee /Fat Milk Powder MilkCurd &

Chaach

Key

Products

Pure Ghee

Pure Cow

Ghee

Low

Cholesterol

Ghee

Butter Bulk

Skimmed

Milk

Powder

Whole Milk

Powder

Dairy

Whitener

Pouched

Milk in

Variants

Bulk Milk

Skimmed

Milk

Set Curd

Pouched

Curd

Chaach

Pure Cow gheeDesi ghee Low Cholesterol Ghee Flavoured MilkPaneer

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Business Description

Instant DairyWhitener

Pouched Milk

Curd & Chaach Lassi

Butter

Skimmed MilkPowder

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Kwality - Milk Procurement till date . . .

• Over the years, Kwality has developed a network of vendors to

source quality milk - one of the most important success factors in

the industry

• The Company has a strong reach in the rural regions of milk

producing states surrounding the National Capital Region (NCR)

• Currently sources ca. 78% of milk from large contractors (Vendors) in

the states of U.P., Rajasthan & Haryana and the rest from its own

procurement network comprising Milk Chilling Centers (MCC).

• Commenced its own procurement network from MCCs in 2010.

• Currently having 24 MCCs in the states of Rajasthan, Uttar Pradesh

and Haryana

• The company currently procures milk directly from ca. 3,25,000

farmers spread across ca. 4,500 villages.

Milk Procurement Strategy Annual Milk Procurement

Source: Company Management

102.5

165.2170.14

180.36

193.74

0

20

40

60

80

100

120

140

160

180

200

FY12 FY13 FY14 FY15 FY16

Milk

So

lids

In ‘0

00

to

nn

es

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Kwality - Procurement Models

Dairy Processing

Plant

Milk Chilling Centre

(MCC)

Village Level

Collection Centre

(VLCC)

Milk Producer

Member

Direct Procurement Channel Contractor Procurement Channel Hybrid Procurement Channel

Local Contractors

Milk Producer

Member

Dairy Processing

Plant

Ow

ned

/Lea

sed

by

the

Dai

ry C

om

pan

y

Local Contractors

Milk Producer

Member

Dairy Processing

Plant

Milk A

nalysers p

rovid

ed to

Co

ntracto

rs to en

sure q

uality

Collection twice a day with Equipment's (Automatic Milk Collection unit)

Collection once a day withoutEquipment's

Collection twice a day with Equipment's (Milk Analysers)

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Six World-Class Units, Capacity of 3.4 Mn Litres/Day

Streamlined Operations - Equipped with Robotic systems, cutting-edge technology for quality control systems and sophisticated R&D

facilities.

Close to Largest Milk Production Areas

Palwal, Haryana

Dibai, Sitapur, Saharanpur, and Jarar, in U.P.

Ajmer, Rajasthan

Rajasthan11%

U.P18%

Haryana5%

Others66%

Account for 34% of Total Production in

India

Manufacturing Facilities

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Quality Control and Certifications

Quality CertificationsQuality Control

The Company possesses a strong Research and Developmentinfrastructure which encompass a technological advanced equipmentand in-house testing labs with stringent quality control systems.

Supporting the strong infrastructure, the Company has a dedicated andexperienced team of professionals. The result is an enhanced focus ofproduct innovation, creating a strong pipeline of differentiatedproducts.

Further, to ensure supreme quality across the value chain from farm tocustomer, systemic fixes and process improvements are beingimplemented to make quality as the strongest vertical within theorganisation

We are committed to the qualitystandards and norms to ensuresafe and quality products forconsumers.

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Kwality Margin Enhancers

Kwality - Sales Mix . . . so Far

Growing Retail Sales

9% 10% 12% 19% 24%31% 32%

40%

91% 90% 88% 81% 76%69% 68%

60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 Q1 FY 17

Retail Insitutional

Coupled with Improving Branded Sales

Institutional Client Base

36%27% 27% 28%

36% 39% 37% 40%

64%73% 73% 72%

64% 61% 63% 60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 Q1 FY 17

Branded Unbranded

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.

Distribution Network – Growing Retail Penetration

Growing Retail Network

B2C12%

B2B88%

B2C40%

B2B60%

Strong Presence in Largest Consumption Markets

in India

Kwality’s Major Presence

– NCR (Delhi)– Rajasthan– Haryana– Uttar Pradesh

900 1,050

1,150

1,600

1,800 1,900

19,000

26,000

27,000

32,000

40,000

45,000

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

-

500

1,000

1,500

2,000

2,500

3,000

FY 12 FY 13 FY 14 FY 15 FY 16 H1 FY 17Distributors Points of Sale

Sales Mix

FY 12 Q1 FY 17B2C Expansion

On Standalone Sales

Implemented SBU Based Approach

Consumer Products

Division

Institutional Division

Pouched Milk, Curd, Chaach,

Paneer et al

Ghee, Milk powders, Bulk Milk

& Butter et al

Fresh Products Division

UHT, flavoured Milk, Cream,

packed Ghee, Table-Butter,

Cheese, Yoghurts et al

Sales & Distribution Strategy aligned with nature of

products and customers catered

23


Kwality – International Operations

Kwality has established its 100% subsidiary, Kwality Dairy Products, FZE (KDPF) at Jebel Ali Free Zone, Dubai tofocus on international trade.

KDPF has got trading license for trading of various milk based products.

KDPF import the Dairy Products from India, Australia, New Zealand and Eastern European Countries includingTurkey, Ireland, Holland, Poland and Ukraine, New Zealand and sell the products, both domestically andexport to GCC, Middle East, Far East, Bangladesh, China, Thailand, Africa etc.

Product portfolio consists of Pure Ghee, Cow Ghee, Livlite Ghee (85% Cholesterol Free), Skimmed MilkPowder, Whole Milk Powder, Butter, Dairy Creamer, Dairy Mix, Paneer and other dairy products.

During the FY 15-16, Company has achieved the sales Turnover of INR 6,902 mn with PAT of INR 294 mn(4.25%).

With the removal of ban on export of milk powder, Kwality has increased its focus on export of dairy productsfrom India. Kwality is emerged as one of the largest exporter of dairy products from India, exporting acrosscontinents like Asia, Africa & Australia and to more than 28 countries including Japan, UAE, Seychelles,Bangladesh, Sri Lanka, Jordan, Niger, Morocco etc.

Kwality has posted Export Turnover of Rs. 7,300 Mn during FY 2015-16.

Kwality Dairy Products FZE (KDPF)

Exports from India

24


Board of Directors

Dr. Rattan Sagar Khanna(Chairman & Independent Director)

Aged 69 years and currently associated with a no. of reputed institutions in Dairy Sector including,Deptt. Of Animal Husbandry, Sikkim, Namastey India Foods, Ganesh Scientific Research Foundation,CIAHDD, Gerson Lehrman Group, New York etc.

In past, served as a Consultant of Department of Animal Husbandry, Fisheries & Veterinary Services,CEO of Animal Feeds Business in Dabur Ayurveda Limited., Advisor to the GCMMF, GM in GCMMF,New Delhi, MD of Rajasthan Co-operative Dairy Federation, Resident Representative of NationalDairy Development Board, head (Projects) of Indian Dairy Corporation, Baroda etc.

Contributed about 100 researchers, reviews and sectoral articles.

Sanjay Dhingra (MD)

Significant experience of more than two decades in the business of FMCG products with variedexposure in manufacturing, trading and international marketing.

Business acumen combined with his grass root level exposure in the FMCG industry Instrumental in turning around the business post taking over in 2003 and establishing Kwality as a

dominant player in the dairy industry in the Country. Felicitated by, the then, Hon’ble Union Finance Minister Mr. Pranab Mukherjee for being a successful

self industrialist and for his immense contribution to the Dairy sector.

Sidhant Gupta (Director)

Management graduate with rich experience of more than a decade, in strategic businessdevelopment, liasoning & international trade.

Key member Instrumental in implementation of the growth strategy and ongoing expansion projectin the Company.

Played a pivotal role in expanding the company’s global footprint with tremendous growth andenhancement of the group’s value by launching new dairy products.

He has been instrumental in bringing about technological & managerial excellence in the company’soperations.

25


Board of DirectorsBoard of Directors

Dr S.K. Bhalla(Director)

P.HD by qualification, has more than 40 years of experience in Dairy Industry Has worked as Chief Executive “Maahi” Milk Producer Company Limited, COO of Mother Dairy Fruit & Vegetable

Private Limited, General Manager (QA) of GCMMF Ltd., President Operations of Dynamix Dairy Industries Ltd., SeniorManager in Tech. Div. of Nestle India Ltd., etc.

Also served as Federation Nominee on the Board of Surat District Co-operative Milk Producers Union Ltd., Surat,Banaskantha District Co-operative Milk Producers' Union Ltd., Palanpur and Kaira District Co-Operative MilkProducers Union Ltd., Anand.

Holds rich experience in planning and setting up of manufacturing plant, , Development of new products and theirmarket trials, Production related trouble shootings at various levels in manufacturing units, Co-ordination ofproduction planning with sales and marketing, etc

Manjit Dahiya(Director)

More than 26 years of experience in the Dairy Industry Expert in setting dairy plants, development of dairy products and implementing latest developments in dairy

industry. Responsible for handling technical issue at the Pant and milk chilling centers. Responsible for bringing lots of reforms in manufacturing of SMP, Ghee, Cheese, Paneer, Dairy Whitener and other

dairy products. He has expert knowledge in the products manufactured by Kwality Limited and its utilization

Ankita Mehrotra(Independent Director)

A fellow member of Institute of Chartered Accountants of India and a graduate in commerce. Brings with her the vast expertise in the field of implementation and design of systems, audit, and advisory services. Has business and financial expertise in financial accounting, taxation, auditing and management accounting. She is a partner of Chartered Accountancy firm Precious

26


Board Members

Backed by

Consistent Quality

Manufacturing Expansion

Human Capital Development

IT Development Branding & Marketing

New Products Development

Procurement

Distribution Network

Expansion / Development

Engagement of External Partners for Enhancement

of Integration

INTEGRATION

Kwality Organisation Setup Strategic Shift

Business Transformation Team

27


Key Management Profile

Nawal Sharma(President & Head Business Transformation)

25 years of rich experience across multiple industry including Business Transformation (Consulting), Telecom, BPO& FMCG and worked with companies like Reliance Communications, Bharti BT Internet etc.

Key professional experience cuts across all layers of organization management, i.e., business layer, process layer,organization layer & execution layer.

Rajesh Verma(VP- International Marketing)

Having 2 decades of experience in FMCG majors & blue chip companies such as Blowplast Industries, VIP Industries,HUL, Bata India.

Responsible for handling Sales & Marketing function including International Marketing.

Rajendra Singh(MCC State Head)

An MBA from IGNOU and M.Sc in Agricultural Botany from Meerut University He has more than 33 years of experience in the implementation of the world’s largest poverty alleviation

programme “Operation Flood”

Jayant Karmakar(CGM- Palwal)

A Graduate in Dairy Technology, having more than 23 years of experience in Dairy Industry. Expert in Strategic decisions, planning and budgets, Milk Procurement, Quality Processing, cost control etc.

Subhadeep Dasgupta(Group Brand Manager)

MBA in Marketing with over 8 years of experience. Resposible for brand development, marketing andcommunications to improve brand visibility and salience”

Before joining Kwality, he served as a Brand Head with Godfrey Phillips where he worked in various capacities in themarketing department, managing brand strategies, positioning, proposition development, new market expansionsand overall brand management

Adarsh Kumar Abrol(GM Works- Bulandsahar)

B.Sc Dairying (Dairy Technology) from Dairy Science College, National Dairy Research Institute, Karnal, Haryana He has more than 37 years of experience, an expert in manufacturing techniques of Condensed Milk, SMP and Desi

Ghee and also have good knowledge for erection of Condensing Plant, Tetra Pack Unit, Recombination Section,Packing & Sterilization Plant

Sanjeev Tomar(GM Production, Palwal)

Dairy Technologist by qualification having an experience of more than 16 years. He has worked on all Dairyproducts on commercial scale namely Market Milk, Aseptic Milk, Flavoured Milk , milk powders of all types etc.

Pawan Sharma(Vice President & Head-HR)

MBA in HR with experience of more than 26 years. Responsible for developing, implementing and maintaining HR strategies, policies and procedures and monitor as

well as to identify manpower requirements and make appropriate recommendation to management forimplementation.

28


Key Management Profile

Sachin Sachdeva(GM Procurement)

He has 16 years of experience in milk procurement as well as MCC operations.

Anil Katyal(Chief General Manager –Sales CPD II)

He is having more than 25 years of experience in Sales and Marketing in FMCG Companies including VRSFoods

Inderjeet Singh(Chief General Manager –Institutional Sales )

B.Com from Delhi University and has more than 30 years of experience in Dairy Industry including Milk Food,Cepham Milk Specialties, Parle Exports, HMM etc..

S. K. Gupta(Chief Financial Officer)

CA with more than 36 years of experience across various level in the field of Finance & Accounts. He hasoverall worked as Director Finance for more than 21 years in various corporates including PSU of CentralGovt. of India & represented the Board.

Naveen Sharma(Head – Purchase)

An MBA from Global Open University and MDP in Logistics and Supply chain from IIM Ahmedabad having anexperience of more than 15 years

Experience in Agro Chemical and FMCG Industry in areas of strategic sourcing, procurement, PackagingMaterials (from Flexible to Rigid), logistics, performance optimization (Business Solutions), supplierdevelopment, business negotiations & supply-chain management

Pradeep Srivastava(C.S. & Compliance Officer)

He is a Fellow member of Institute of Company Secretaries of India and in addition to it also holds a Bachelor’sdegree in Law and Science. Mr. Pradeep Srivastava is having more than 13 years of experience and an expertin Corporate Laws, Securities Laws, SEBI, RBI and other compliances.

Ramanuj Acharya(Deputy General Manager - Sales)

He is carrying around 26 years of rich experience into sales in FMCG Industry. He worked with prestigiousorganizations like Gandour India Foods, GM Pens (Reynolds), Cadbury India, BPL Soft Energy, Medimix & ParleAgro.

29


Corporate Social Responsibility

• Kwality has till date taken conscious steps towards raising the quality

& hygiene of raw milk obtained and also to improve the health and

life style of the farmer community

• Organizes various camps and village meetings regularly to discuss the

requirements of farmers

• Assist in issues pertaining to Vaccination, Cattle feed, increasing milk

yield and facilitating the loan requirements of farmers through

financial institutions.

• Educate farmers on the general quality of life improvement and

hygienic living standards along with other social issues

• Animal Health: Kwality deploys a team of veterinary doctors who are based in rural areas who look after the health of farmers’ animals and provide

necessary education

• Artificial Insemination (AI): Doctors deputed by KDIL also take care of AI needs of the farmers’ animals

• Cattle Feed: KDIL provides good quality and balanced cattle feed at cost price to take care of nutrition needs of the milk animals

• FMD vaccination: An annual FMD vaccination program at subsidized cost is organized for vaccination of animals to protect them against Foot and

Mouth disease

• Loaning for farmers: Kwality has tied up with various banks including Allahabad Bank, Central Bank of India, Bank of India, Syndicate Bank etc. to

provide loans to its farmer for not only buying animals but also tractors etc.

• Village Adoption programmes: Kwality is adopting villages where it takes initiative in educating women about cleanliness, primary health, providing

scholarship to girl child etc.

• Insurance: Providing insurance not only for the animals but also the farmers by providing them with medical & accidental insurance

Milk Procurement Team’s CSR Activities

30


Company Overview

Industry Snapshot


The Road Ahead

Summary Financials

Annexure

31


Capacity expansion and strengthen procurement network

Strong position in North

Widening Product mix with fresh milk products like Pouched Milk, Dahi, Chaach, et al

Initiating Business Transformation for B2C

Launch B2C

Marquee client base

Strengthen employee base across levels

Launch ESOP scheme across levels

B2B

B2C

31

Pe

rio

d 2

00

2-2

012

Strategy Milestones

Achieve ‘Critical Mass’Sustainable Business Growth

Achieving Critical Mass through B2B Model

Capacity Expansion

Expand Product Portfolio

Marquee client base

Penetrate new Markets - India & Abroad

Manufacture Low cholesterol Ghee

Consolidated Sales reached INR 24,163 Mn in FY12

Capacity – 2.4 Mnlitres/day

Established Subsidiary in Dubai

Clients: Added ITC, Hindustan Unilever, Railways among others

Launched ‘Livlite’ , our low-cholesterol ghee

B2B

Pe

rio

d 2

01

2-2

016

Strategy Milestones

Capacity of 3.4 Mnltrs/day across six plants in U.P, Haryana, and Rajasthan

Established network with ca.3 lac farmers across ca.4,500 villages

Launched Fresh Milk Products under B2C

MCC Count - 22

Standalone Sales reached INR 57,536 Mn in FY16; 32% Retail

Subsidiary Sales –INR 6,902 Mn

ESOP plan launch across levels in 2015

Embark on B2C Model

Leading Consumer Dairy CompanyB2B B2C

Vis

ion

20

20

Strategy Target

Strengthen direct Procurement, setup MCCs and increase network

Capacity expansion for value-added products

Product mix shift towards value-added products cheese, butter, UHT, yoghurt, flavoured Milk,Paneer, et al

Launch multiple variants of value-added products

Deleveraging with B2C business model

Build a Strong B2C brand

Strengthen Distribution

Enhanced focus on IT enablement

Enter New markets

Direct Procurement: MCC Count – 50+

Capacity addition - 9 lac+ litres/day for value-added products

Product mix shift towards branded/B2C products

Sales Mix – 70% Retail, balance B2B

Strong operating margins and cash flow, reduce leverage

Business automation through IT enablement

Deeper retail penetration in existing and new markets

PAT expansion with renewed Dividend Policy

Growth Strategy Roadmap – Vision 2020

32


Future Strategy

Future

Objective

• Company is currently selling a

diverse range of products including

Liquid Milk in pouches and

otherwise, Milk Powders, Ghee,

Curd, Chaach etc.

• Company’s key focus has been

on strengthening its

management expertise in line

with the expansion plan

• Planning to open another 25-30 MCCs in

next 3-4 years to ensure sustained

availability of quality milk

• Setting up MCCs with a capacity of more

than 20,000 LPD

• To further increase milk procurement

through Hybrid system

• To increase the facilities/ incentives to

farmers including veterinary doctors to look

after animal health and artificial

insemination need, subsidised animal feed

and annual FMD vaccination to ensure that

farmers is associated to Kwality and thus

increase the number of farmers under each

VCC

• Company plans to launch various

new products catering to the

increasing health needs of the

Indian Consumer including

flavoured milk

• Launch of milk powders for retail

consumers in small packages.

• Setting up manufacturing facilities

for products like variants of

cheese, yogurt , table butter,

paneer, cream in tetra pack,

flavoured milk, UHT milk, amongst

others. To launch 10-12 variants in

next 12-18 months

• Company has and is in the

process to build upon its

management team with recruits

from leading FMCG companies

and large corporates

• Recent senior level recruits

include – HR Head, Head –

Purchase, Head – Products,

Group Brand Manager

• To retain quality personnel,

various initiatives introduced

like ESOPs for all its employees

at all levels, Fast Track Growth

& Reward plans for performing

employees

• Involved Ernst & Young to

develop B2C aligned IT roadmap

Milk ProcurementNew Products &

Consumer Brands

Building upon Human

Capital

SMP – Skimmed Milk Powder; WMP – Whole Milk Powder

DIRECT PROCUREMENT PLANS

Current18%

25%

50%

Plans to Achieve the Targets

33


Future Strategy – Action Plan

To ensure consistent quality and taste which are important parameters for success in value addedproducts, the Company has embarked upon a massive expansion in milk procurement

Company intends to increase the procurement mix from the current ca. 22% to ca. 50% over next 3-4 yearsdirectly from farmers for which extensive surveys have already been done.

Total CAPEX envisaged by the Company for this exercise would be ca. Rs. 1,200 Mn

Various initiatives for development of direct Farmer Connect in order to achieve the desired results

Pro

ducti

on F

acilit

ies Kwality has undertaken an expansion plan at its plant location at Softa, Haryana with a total CAPEX of

Rs. 4,000 Mn

Expansion to increase our processing capacity by 9 lakh litres / day, taking up to 4.3 Mn litres/day

This enhancement in production is primarily to cater to value added products like flavoured milk, variantsof cheese, UHT milk, Butter in tubs, Cream in Tetrapacks, paneer, amongst others

Installing latest processing machines including robots which involve minimum human intervention

Company is currently in the process of testing few of these value added products like flavoured milk,variants of cheese, etc. for early launch.

Pro

cure

ment

34


Brand Strategy

• Integrate corporate & consumer branding under KDIL’s Kwality for synergies

• Roll out high margin value added products under KDIL’s Kwality with mother brand architecture

• Build a modern, youthful & trendy brand with focus on “Active performance” as against general goodness

of milk

• Roped in India’s leading Bollywood actor Akshay Kumar as brand ambassador to promote range of

products & get quick consumer mindshare.

• Engaged marketing partners who are best in their respective fields for seamless roll out of integrated

marketing program focussing on ATL, BTL & consumer engagement programs. This include McCANN &

Cheil India for creative, Zenith Optimedia for media planning, Adfactors for PR & Digital Quotient in

digital space.

Primary Focus Would be Towards Brand Development to Transform from a Traditional B2B to B2C Business Model

35


.

Recent Key Developments – KKR to provide upto

INR 520 Cr. For Expansion

• Capacity expansion by 9.0 lac litres/day for value-added product categories like Cheese, Paneer, UHT Milk, Flavored Milk, Table Butter, amongst others

• Brand building, advertisements, Sales Promotions, other marketing activities

•Developing robust IT Infrastructure

• Strengthening infrastructure for direct procurement

• Debt Consolidation

Debt Repayment

Procurement

Capacity Expansion

Brand Building & IT Infrastructure

UtilizationAreas

Capital Infusion through Structured Debt with tenure of six years

Leading Private Equity Firm

36


36KWALITY LIMITED

Recent Key Developments – Inked Ad-for-Equity

Deal with ToI and HT Media

Offers Advertisements and Promotions across BCCL and HT Media owned

media properties including English dailies, TV channels, Radio stations and a

host of internet platforms, among others

and all Online Platforms

…amongst others

37


Recent Key Developments - Stepping up Multiple

levers for B2C Strategy

.

Procurement Infrastructure

Marketing & Brand Building

IT

Human Capital

Added 2 MCCs in Q1FY17, conducted various farmer connect programs towards farmereducation, cattle management & health, schemes et al to strengthen network

Concluded Ad-for-Equity deal with HT Media and Times of India for brandbuilding/promotions across platforms owned by them

Involved E&Y India for IT transformation, recently concluded B2C aligned IT roadmap aimedtowards business automation, real-time business monitoring for faster decision-makingbacked by strong data analytics

Expansion of Sales & Marketing team Further strengthening our management team by inducting professionals with rich experience

from top notch companies

1

2

3

4

Leve

rs F

or

B2

C

Ramp-up of key functions to support our B2C strategy

38


Company Overview

Industry Snapshot


The Road Ahead

Summary Financials

Annexure

39


23,947

36,930

45,820

52,80657,536

0

10000

20000

30000

40000

50000

60000

70000

2012A 2013A 2014A 2015A 2016A

In R

s m

n

Total Income EBDITA and Margin%

1,653

2,111

2,753

3,296

3,785

6.9%

5.7%

6.0%

6.2%6.6%

0.0%

2.0%

4.0%

6.0%

8.0%

0

500

1000

1500

2000

2500

3000

3500

4000

2012A 2013A 2014A 2015A 2016A

In R

s m

n

1,578

2,008

2,623

6.6%

5.4% 5.7%

5.8%6.2%

0.0%

2.0%

4.0%

6.0%

8.0%

0

500

1000

1500

2000

2500

3000

2012A 2013A 2014A 2015A 2016A

In R

s m

n

3046 3,556

910 965

1,2661,409 1,442

3.8%

2.6%

2.8% 2.7% 2.5%

0.0%

2.0%

4.0%

6.0%

0

500

1000

1500

2000

2500

3000

2012A 2013A 2014A 2015A 2016A

In R

s m

n

PAT and Margin%EBIT and Margin%

Financial Snapshot (Standalone)

CAGR 25%

CAGR 23%

CAGR 23%CAGR 12%

Figures in INR Mn, except margins

40


24,163

39,304

50,150

58,91464,438

0

10000

20000

30000

40000

50000

60000

70000

2012A 2013A 2014A 2015A 2016A

In R

s m

n

CAGR 28%

Total Revenues EBITDA and Margin%

1,667

2,210

2,966

3,617

4,185

6.9%5.6% 5.9%

6.1%6.5%

0.0%

2.0%

4.0%

6.0%

8.0%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2012A 2013A 2014A 2015A 2016A

In R

s m

n

CAGR 26%

1,591

2,106

2,836

3,364

3,952

6.6%5.4%

5.7%

5.7%6.1%

0.0%

2.0%

4.0%

6.0%

8.0%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2012A 2013A 2014A 2015A 2016A

In R

s m

n

CAGR 26%

9231,056

1,449

1,665 1,7363.8%

2.7%

2.9% 2.8%2.7%

0.0%

1.0%

2.0%

3.0%

4.0%

0

500

1000

1500

2000

2012A 2013A 2014A 2015A 2016A

In R

s m

n

CAGR 17%

PAT and Margin%EBIT and Margin%

Financial Snapshot (Consolidated)

Figures in INR Mn, except margins

41


Company Overview

Industry Snapshot


The Road Ahead

Summary Financials

Annexure

42


Historical Financials (Standalone)

Income Statement (Rs in mn)

Particulars FY 12 FY 13 FY 14 FY 15 FY16

Total Income 23,947 36,930 45,820 52,806 57,536

Growth in Income(%) 49% 54% 24% 15% 9%

Total Expenditure 22,006 34,379 42,568 48,805 52,510

Gross Profit 1,941 2,551 3,252 4,001 5,026

Gross Profit (%) 8.1% 6.9% 7.1% 7.6% 8.7%

Operating Expenses 288 440 499 705 1,241

EBITDA 1,653 2,111 2,753 3,296 3,785

EBITDA% 6.9% 5.7% 6.0% 6.2% 6.6%

Interest Expense 651 923 1,118 1,341 1,473

Depreciation / Amortization 75 103 130 250 228

Profit Before Tax (PBT) 926 1,085 1,505 1,705 2083

PBT% 3.9% 2.9% 3.3% 3.2% 3.6%

Tax 17 119 239 295 641

Profit After Tax (PAT) 910 965 1,266 1,409 1442

PAT% 3.8% 2.6% 2.8% 2.7% 2.5%

43


Historical Financials (Standalone) (cont’d.)

Balance Sheet (Rs in mn)

YE March 2012A 2013A 2014A 2015A 2016A

Cash and equivalents 89 324 127 286 542

Inventory 987 987 1,675 2,646 1,426

Debtors 6,562 9,309 12,000 11,514 14,192

Other current assets 558 851 709 1,650 1,893

Current assets 8,197 11,471 14,511 16,095 18,053

Creditors 206 484 1,093 455 393

Other current liabilities 203 350 619 1,040 1,130

Current liabilities 410 833 1,712 1,495 1,523

Net current assets 7,787 10,637 12,798 14,600 16,530

Fixed assets (net) 641 815 1,211 1,791 2,580

Other non current assets 40 201 333 1,843 2,618

Total assets 8,468 11,654 14,343 18,235 21,729

Shareholders' funds 2,548 3,608 4,977 7,271 8,487

Deferred tax liabilities (net) 5 -12 -8 -15 -118

LT debt 429 504 406 1,578 3,032

ST debt 5,486 7,553 8,967 9,401 10,329

Total debt 5,916 8,057 9,373 10,978 13,360

Total liabilities 8,468 11,654 14,343 18,235 21,729

44


Historical Financials (Consolidated)

Income Statement (Rs in mn)

Particulars FY 12 FY 13 FY 14 FY 15 FY 16

Total Income 24,163 39,304 50,150 58,914 64,438

Growth in Income(%) - 63% 28% 18% 9%

Total Expenditure 22,204 36,623 46,634 54,552 58,958

Gross Profit 1,959 2,681 3,515 4,362 5,480

Gross Profit (%) 8.1% 6.8% 7.0% 7.4% 8.5%

Operating Expenses 292 471 549 745 1,295

EBITDA 1,667 2,210 2,966 3,617 4,185

EBITDA% 6.9% 5.6% 5.9% 6.1% 6.5%

Interest Expense 651 931 1,148 1,403 1,574

Depreciation / Amortization 75 104 130 254 234

Profit Before Tax (PBT) 940 1,176 1,688 1,960 2,377

PBT% 3.9% 3.0% 3.4% 3.3% 3.7%

Tax 17 119 239 295 641

Profit After Tax (PAT) 923 1,056 1,449 1,665 1,736

PAT% 3.8% 2.7% 2.9% 2.8% 2.7%

45


Historical Financials (Consolidated) (cont’d.)

Balance Sheet (Rs in mn)

YE March 2012A 2013A 2014A 2015A 2016ACash and equivalents 131 881 315 517 862 Inventory 1,001 1,033 1,874 2,910 1,706 Debtors 6,602 10,091 13,312 13,246 16,554 Other current assets 558 873 724 1,657 1,935 Current assets 8,292 12,878 16,224 18,330 21,056 Creditors 254 918 1,663 463 521 Other current liabilities 204 350 629 1,056 1,132 Current liabilities 458 1,268 2,291 1,519 1,653 Net current assets 7,834 11,611 13,933 16,811 19,403

Fixed assets (net) 641 817 1,278 1,857 2,652 Other non current assets 20 146 272 1,655 2,430

Total assets 8,496 12,573 15,482 20,323 24,485

Shareholders' funds 2,561 3,715 5,281 7,846 9,392

Deferred tax liabilities (net) 5 -12 -8 -15 -118 LT debt 444 557 529 1,606 3,065 ST debt 5,486 8,312 9,681 10,885 12,146 Total debt 5,930 8,870 10,210 12,491 15,211

Total liabilities 8,496 12,573 15,482 20,323 24,485

46


Akshay Kumar – Our Brand Ambassador

The Company has appointed Akshay Kumar as the Brand Ambassador for thecompany and its entire range of dairy products. The Bollywood superstarcomes on board for a period of two years.

Kwality Limited has been synonymous with health and nutrition. All itsproduct range has been specially created keeping in mind the health ofconsumers. Akshay Kumar is today the fittest Bollywood actor and thereforefits perfectly with our range of healthy dairy products. The product rangewill draw a lot of strength from his persona as there are direct synergies withthe Khiladi.

Speaking on being the Brand Ambassador for the brand “Kwality”, AkshayKumar said“I have always believed in endorsing only those brands which believe inmotivating their target audience to be fit, healthy, strong and agile. Kwalitywith its upcoming offerings reverberates similar views which helped memake the decision of associating with the brand quite easy. It always makesme happy, if, through my experience and work I can instill good habits inindividuals. Through this association I am hoping I will continue toaccomplish this”.

47


Thank You…

largest private dairy company in india

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