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Prabhat Dairy Ltd.

BSE:539351  |  NSE:PRABHATEQ  |  58888:  |  IND:FMCG Dairy Products  |  ISIN code:INE302M01033  |  SECT:FMCG

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You can view the entire text of Chairman's speech of Prabhat Dairy Ltd.
Director Report
Mar2017   Mar 2018

Dear Shareholders,

I present to you Prabhat Dairy''s performance report for fY 2018 with a feeling of both satisfaction and pride. Increased productivity, growth in sales, higher revenues and improved profitability summed up our report card, in spite of a challenging year which saw milk prices declining due to global oversupply.

It is noteworthy that this performance has been propelled by healthy volume growth that we saw across our wide product portfolio, especially in pouch milk, cheese and curd.

This endorses the growing acceptance of our brand, the quality of our products and the depth of our strategic approach.

Driven by strong Government support

While our products and brands continue to see strong traction, what excites us the most is the strong support the dairy farming industry receives from the Government of India (GoI). Supporting over 60 Million women who are dependent on it for livelihood, it is an indispensable part of the economy. This is evident in Government regularly coming-up with pro-rural and pro-farmer measures.

In its Union Budget FY 2018-19, an allocation of Rs. 100 Billion has been proposed to the Dairy Farming Infrastructure and Fisheries as well as extending Kisan Credit Card to the farmers engaged. This will facilitate them to improve efficiency and have access to credit, which will assist in growing business. Further, plans are on anvil to incentivize milk exports, add milk to mid-day meal rations, and reduce GSTs and increase import duty on certain products. These measures if implemented will provide the much-needed boost to the industry.

In Maharashtra, the state government has undertaken historical decisions to assist dairy farmers earn higher prices and ensure protection of milk federations. It has announced a conditional subsidy of Rs. 5 per liter to milk cooperatives and private milk collectors for procuring milk at a minimum support price of Rs. 25 per liter from milk producers. It has also proposed to set-up a Milk Price Stabilization Fund to minimize impact of price fluctuations.

I believe, these moves are in the right direction to strengthen the foundation of this industry.

Strengthening farmer relations

Sustenance of our farmer relations is critical to our business strategy and to the actualization of our vision for scaling growth over the next two years. It is aligned to the Company''s larger purpose and philosophy of nurturing a partnership approach to steer the progress and prosperity of the farmers from whom we are sourcing quality milk.

In line with this, we are continuously scaling our farmer engagement through various proactive interventions and initiatives.

The goodness of milk, we believe, begins with the procurement process, which we are constantly working to strengthen. Our Fodder Management Program is aimed at supporting farmers by helping them reduce production costs and increase profits. We are also engaged in continually strengthening our technology platforms to create a bigger and better eco-system for the socioeconomic progress of our farming partners, whom we look at as the bedrock of our integrated business value chain.

We intend to explore innovative schemes and initiatives to nurture this inclusive partnership approach and strive to empower over one lakh small farmers with whom we are working at the grassroots.

Building scale

At Prabhat Dairy, we believe that farmer empowerment is a vital engine to scale-up our operations to cater to the burgeoning industry growth potential. As per current estimates, India is expected to emerge as the largest dairy producer by 2020. Value-added products, which are driving a significant part of our growth, are expected to grow at 15-30% CAGR, over 2016-20, at the back of the rapidly evolving consumer buying patterns led by an evolving middle-class.

Changing lifestyle, driven by urbanization and a growing working population, along with increasing consumer awareness about quality and nutrition, are pushing demand for organized dairy players at an unprecedented pace.

The rising penetration of organized retail, offering a wider shelf space for dairy products, is another factor driving the industry growth.

Further augmenting the demand matrix is the enhanced focus on health and nutrition, which is leading to a marked shift from aerated drinks to milk beverages - a product line into which we have already successfully forayed. With the beverage category contributing 8-9% of the Indian FMCG market (US$ 49 Billion in 2016, Source: IBEF) and growing at 20-23%, we see immense growth potential emanating from this segment in the coming years.

Outlook

Notwithstanding the market volatility, the overall outlook for the industry thus remains positive. The opportunity landscape, as evident, is a fairly large one, and we, at Prabhat Dairy, are more than ready to harness the same, with our consumer business, in particular, well positioned for scalable growth. Our increased focus on efficiencies and logistics, expanding distribution network, and growing product portfolio, equips us well to leverage the opportunity to the collective advantage of all our stakeholders and to achieve our Vision for 2020.

Together, I am confident we shall scale new heights as we move forward to establish ourselves even more firmly as a trusted and reputed leader in India''s dairy industry.

Sarangdhar R Nirmal

Chairman & Managing Director

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