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CREDIT A NALYSIS & RESEARCH LIMITED 1

Rating

CARE has assigned a ‘CARE AA+’ [Double A Plus] rating

to the Long-term Bank Facilities of Mother Dairy Fruit

and Vegetable Private Ltd (MDFVL) amounting

Rs.250.00 cr. This rating is applicable for facilities having

tenure for more than one year. Facilities with this rating

are considered to offer high safety for timely servicing

of debt obligations. Such facilities carry very low credit

risk. CARE assigns ‘+’ or ‘-’ signs to be shown after theassigned rating (wherever necessary) to indicate the

relative position within the band covered by the rating

symbol.

Also, CARE has assigned a ‘PR 1+’ [PR One Plus] rating

to the Short-term Bank Facilities of MDFVL amounting

Rs.660.00 cr. This rating is applicable for facilities having

tenure upto one year. Facilities with this rating would

have strong capacity for timely payment of short-term

debt obligations and carry lowest credit risk.

The ratings are supported by strong parentage and

comfort from National Dairy Development Board (NDDB)in the form of managerial and technical support. The

ratings factor in the integrated nature of operations of

MDFVL, established track record with wide product

range, strong and established brand name and wide

marketing and distribution network. However, these

strengths are partially offset by the inherent low

profitabil i ty margins of the business, seasonal

requirement of credit resulting in relatively high

utilization levels at the end of the financial year and

competition from other established players and the

unorganized sector.

Going forward, prudent working capital and cash-flowmanagement and any challenges in supply of raw

material (including effect of fall in milk yield and supply

chain issues) affecting business operations would

remain the key rating sensitivities.

Background

MDFVL, a wholly-owned subsidiary of NDDB was

incorporated in March 2000. NDDB provides implicit

comfort to MDFVL in the form of need-based technical

and managerial support. The management vests with

the Board of Directors comprising six directors and

headed by Ms. Amrita Hirubhai Patel. Mr.Sanjeev

Khanna is the Managing Director and Mr. Deepak Tikku

is the Director in-charge of the company. The day-to-

day operations are looked after by Mr. Harish Chandra

Virmani, Chief Finance Officer.

NDDB was set up in 1964 as a registered society underthe Societies Act 1860 with the underlying objective of

improving the prospects of the dairy sector in India,

empowering milk producers across the villages and to

promote other commodity-based cooperatives, agro-

allied industries and veterinary biologicals on nation-

wide basis. Later in 1987, NDDB was merged with the

Indian Dairy Corporation through the NDDB Act 1987 to

receive and monetize commodities from abroad.

Initially, Mother Dairy, Delhi functioned as a division of

NDDB for procurement, processing and marketing of

milk, milk products, fruits and vegetables till it was hived

off as a separate company viz MDFVL in April 2000.

However, till FY06 its profile remained that of providing

strategic and functional support to various group

companies.

Mother Dairy Food Processing Ltd (MDFPL) and Mother

Dairy India Ltd (MDIL) were amalgamated w.e.f April 1,

2006 with MDFVL and Dhara Vegetable Oil and Foods

Company Ltd (DOFCO) was amalgamated w.e.f April 1,

2007 with MDFVL. Subsequent to this MDFVL’s

operations comprise procurement, processing,

manufacturing, marketing and distribution of milk and

milk products. MDFVL markets its milk and dairyproducts (liquid milk, curd, ice creams, cheese, butter

etc) under ‘Mother Dairy’ brand, ‘Safal’ range of fresh

and frozen fruits & vegetables, fruit juices, pulp,

concentrates and ‘Dhara’ range of blended edible oils.

MDFVL is an IS/ISO-9002, IS-15000 Hazard Analysis

Crit ical Control Points (HACCP) and IS-14001

Environment Management System (EMS) certified

organization.

MOTHER DAIRY FRUIT AND VEGETABLE PVT. LIMITED

Long-term Bank Facilities CARE AA+

Short-term Bank Facilities PR1+

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CAREVIEW 2

Operations

MDFVL’s l ine of operations comprises sourcing

(procurement of milk, vegetables and fruits), quality

testing, processing, packaging, marketing etc. The

processing of milk and fresh fruits and vegetables isbased on microprocessor technology and Individual

Quick Freezing (IQF) technology, respectively. In

addit ion, MDFVL also outsources production/

procurement of milk (Poly-pack milk) and dairy products

and trades in fresh fruits and vegetable blended edible

oil sourced from grower cooperatives, authorized

vendors and unions.

MDFVL purchases a significant part of its requirement

of liquid milk from Dairy Cooperatives at the district level

through its affiliated Dairy Cooperative Societies (DCS)

in villages, twice a day and also through its own

procurement network under New Generation

Cooperatives. The milk is processed by the various

district level plants and supplied daily to MDFVL at its

different plants in and around Delhi and NCR in milk

tankers.

During winter months (November-February), the surplus

milk is converted into white butter and skimmed milk

powder and is stocked for consumption during the

summer months. The peak stocking is in March and then

it is gradually used up in the summer months (April-

October).

Fresh Fruits & vegetables (F&V) are sourced from

farmers/growers, associations/cooperatives, suppliers

and the whole F&V operations are being carried out at

MDFVPL’s plant at Mangolpuri, New Delhi and Safal

market, Bangalore.

MDFVL has two 100% Export Oriented Units (EOUs)

for fruit processing of 120 MT and 250 MT per day fruit

handing capacity in Mumbai and Bangalore,

respectively. Crude oil and oil seeds are procured from

oilseeds grower cooperatives.

Over the last two years, majority of sales has been onaccount of domestic sales of milk and dairy products

accounting for over three-fourth of total sales turnover,

balance being contributed by horticulture products, edible

oil and exports of juices, fruit pulp and concentrates.

Exports are primarily made to U.S.A, U.K, Middle East,

Holland, Korea, Canada, Japan, Iran, Singapore,

Germany and Russia by a dedicated marketing team

based in Rotterdam, Netherlands.

MDFVL markets more than 2.8 million litres of milk daily

in Delhi, NCR and the surrounding areas of Western

UP and Haryana, Mumbai and Hyderabad. It accounts

for a market share of 66% in the branded sector in Delhi

where it sells 2.6 million litres of milk daily.

MDFVL is the market leader in the ice cream segment in

Delhi and the NCR (approximately 62% market share and

14% market share of the domestic organized ice cream

business) and has expanded its presence in other markets

such as Jaipur, Ludhiana, Amritsar, Jalandhar, Chandigarh,

Mohali, Lucknow, Kanpur, Mumbai and Kolkata etc.

MDFVL’s SAFAL brand markets fresh and frozen fruits

and vegetables products through a chain of 400-plus

own shops and more than 20,000 retail outlets across

the country, supported by modern handling and

processing facilities having handling capacity of

2,00,000 MT annually and having an IQF facility of

around 75 MT per day at Mongolpuri, New Delhi. At

present, SAFAL is the market leader in the frozen peas

category with over 60% market share nationally.

MDFVL capitalizes on its well-established sales and

distribution network for its domestic sales comprising

distribution network of over 2,00,000 retailers/distributors

including 1375 exclusive outlets spread across Delhi,

NCR, Western UP, Haryana, Mumbai and Hyderabad.

Financials

From FY07, MDFVL commenced its integrated commercial

operations comprising procurement, processing,

manufacturing, marketing of milk, dairy products and

other products resulting in enhanced scale of operations

and addition of value-added products in its product line.

Total income of the company increased to Rs.2,776 cr

and the company recorded cash profit of around Rs.30

cr during FY08 result ing from improved sales

realizations for its products on account of strong

domestic demand. MDFVL earned a non-operating income

of around Rs.11.42 cr and Rs. 25.88 cr in FY07 and FY08,

respectively, comprising interest income, revenue grantsreceived from NDDB and rent received etc.

Increase in equity capital as on March 31, 2008 was on

account of amalgamation of Dhara Vegetable Oil and

Foods Company Ltd (DOFCO) with MDFVL. The high

overall gearing as at the end of FY07 and FY08 was on

account of high utilization of short-term/working capital

loan on account of commencement of integrated

commercial operations of MDFVL.

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low. Also, because of the seasonal nature of requirement

for working capital during the winter months (October-

February), the utilization of short-term loan/cash-credit

remains very high as at the end of each financial year.

Industry Review

India is the world’s largest milk producer with 104.9

million tonnes of milk production in 2008 (contributing

15% of the total global milk production) and per capita

availability of 246 gms per day. This growth in milk

production has been due to demand-side development

and supply-side promotions in the form of increased

demand for value-added products by consumers and

extensive dairy development programs, respectively.

Milk production, supply and marketing in India is highly

decentralized. The co-operative sector played a critical

role in channeling this milk production in the rural areas

besides providing quality and value-added dairy

products to the urban and semi-urban consumers

resulting into economic prosperity for rural farmers.

Major strengths of the Indian dairy industry include

favorable demand outlook, low price elasticity, high

flexibi l i ty in terms of product mix and abundant

availability of raw milk. The major weaknesses of the

dairy industry include perishable nature of the product,

lack of control over milk yield from cattle, improper

logistics and distribution along with the increasing

competition from the unorganized sector. While newproduct innovations and the export markets present

favorable opportunities to the sector, sale of milk in loose

form from unorganized sector poses a major threat to

the organized dairy sector.

MDFVL maintains a leading position in milk and dairy

products in the key markets on account of its established

processing and manufacturing capacity, integrated

nature of operations and wide distribution network.

Increase in domestic demand for milk products and

export potential for fruit pulp and other agro products

augurs well for the prospects of the company.

Disclaimer

CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bankfacilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to beaccurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is notresponsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bankfacilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.

August 2009

Financial Results

(Rs. cr)

Y.E. / as on 31st March 2007 2008

Working Results

Gross sales 2,178 2,723Total income 2,193 2,776

PBILDT (8) 45

Interest 14 40

Depreciation 23 24

PBT (34) 7

PAT (after deferred tax) (33) 6

Financial Position

Equity share capital 150 250

Net-worth 103 273

Total capital employed 524 1,284

Key Ratios

Growth Growth in Total income (%) N.M. 26.58

Growth in PAT N.M. NM

Profitability

PBILDT/Total operating income (%) -0.36 1.62

PAT/Total income (%) -1.48 0.21

ROCE (%) -5.74 5.20

Average cost of borrowing (%) 6.68 5.52

Solvency

Overall gearing ratio (times) 4.07 3.71

Interest coverage (times) -2.20 0.53

Term debt/Gross cash accruals NM 13.37

Liquidity Current ratio (times) 1.19 1.48

Quick ratio (times) 0.56 0.88

Turnover

Average collection period (days) 1 2

Average creditors (days) 9 14

Average inventory days 26 54

NM – Not meaningful

Liquidity position as indicated by current ratio was

comfortable at 1.48 times as on March 31, 2008. The

sales are mostly on cash basis thus debtor days are

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CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:

HEAD OFFICE: MUMBAI

Mr. D.R. Dogra Mr. Rajesh MokashiManaging Director Dy. Managing Director

Cell : +91-98204 16002 Cell : +91-98204 16001

E-mail : [email protected] E-mail: [email protected]

Mr. Ankur Sachdeva

Head - Business Development

Cell : +91-9819698985

E-mail: [email protected]

4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway,

Sion (East), Mumbai 400 022 Tel.: (022) 67543456 Fax: (022) 67543457

Website: www.careratings.com

Mr.Mehul Pandya

Regional Manager

32 TITANIUM

Prahaladnagar Corporate Road,

Satellite,

Ahmedabad - 380 015.

Tel - 079 4026 5656

Mobile - 98242 56265


Mr.Ashwini Jani

Regional Manager

Unit No. O-509/C, Spencer Plaza,

5th Floor, No. 769,

Anna Salai,

Chennai 600 002

Tel: 044 2849 7812/2849 0811

Mobile - 91766 47599

E-mail :[email protected]

Mr. Sukanta NagRegional Manager

3rd Floor, Prasad Chambers

(Shagun Mall Building)

10A, Shakespeare Sarani

Kolkata - 700 071.

Tel - 033 2283 1800/1803

Mobile - 98311 70075

E- mail: [email protected]

OFFICES

Mr.Sundara Vathanan

Regional Manager

Unit No. 8, 1st Floor, Commander’s

Place No. 6, Rajaram Mohan Roy Road

(Opp. PF Office), Richmond Circle,

Bangalore - 560 025.

Tel - 080 2211 7140/41

Mobile - 98803 60878


Mr. Rahul Patni

Regional Manager

401, Ashoka Scintilla

3-6-520, Himayat Nagar

Hyderabad - 500 029

Tel - 040 4010 2030

Mobile - 91600 04563


Ms. Swati AgrawalRegional Manager

710 Surya Kiran,

19 K.G. Road,

New Delhi - 110 001.

Tel - 011 2331 8701/2371 6199

Mobile - 98117 45677

E-mail :[email protected]

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