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Heritage Foods Ltd.

BSE: 519552 Sector: Agri and agri inputs
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OPEN 1339.65
CLOSE 1335.45
52-Week high 1355.00
52-Week low 631.65
P/E 51.81
Mkt Cap.(Rs cr) 3,004
Buy Price 1294.70
Buy Qty 550.00
Sell Price 0.00
Sell Qty 0.00

Heritage Foods Ltd. (HERITGFOOD) - Director Report

Company director report

To the members

Your Directors have great pleasure in presenting the 24th Annual Report ofthe Company together with the Standalone & Consolidated Audited statement of accountsfor the Financial Year nded March 31 2016.

Financial Results (Standalone)

(Rs. in lakhs)
Particular FY 2015-16 FY 2014-15
Revenue from Operations (Gross) 238162.13 207402.61
Less: xcise Duty 103.80 105.96
Total Revenue from operations 238058.33 207296.65
Add: Other Income 654.96 702.66
Total Income 238713.29 207999.31
Total xpenditure 224980.99 199093.36
Profit /(Loss) before Finance Cost Depreciation & amortization and Tax 13732.30 8905.95
Finance cost 1545.89 1593.01
Depreciation & Amortization 3451.21 3399.03
Profit /(Loss) before xceptional & xtraordinary Item and Tax 8735.20 3913.91
- xceptional Items 136.95 -
Profit /(Loss) before Tax 8598.25 3913.91
Tax xpenses
- Current & prior period tax 3068.44 1168.91
- Deferred Tax (13.34) (76.02)
Net Profit /(Loss) for the Year 5543.15 2821.02

The above are standalone figures as the subsidiary companies are yet to commencebusiness. Hence consolidated figures are not given.

Performance of the Company

Your Company during the year under review arned revenue from operations (Gross) of '238162.13 Lakhs achieved an increase of 14.83% over the previous year. The BITDA was of '13732.30 (5.77% on total revenue) as against ' 8905.95 (4.29%on total revenue) in theprevious year. The operating profit after depreciation was amounted to ' 10144.14 (4.26%to revenue) as against ' 5506.92 (2.65% of revenue) in the previous year.


Your Directors have pleasure in recommending a dividend of ' 3.00/- (30%) per quityshare of ' 10/- ach for the financial year nded March 31 2016 amounting to ' 837.65lakhs (' 695.97 Lakhs dividend and ' 141.68 lakhs tax on dividend). The dividend payout issubject to approval of members at the nsuing Annual General Meeting. Dividend (includingdividend tax) as a percentage of net profit after tax is 15.11% as compared to 29.69% inthe previous year.

The Register of Members and Share Transfer Books will remain closed from ThursdayAugust 11 2016 to Friday August 19 2016 (both days inclusive) for the purpose of paymentof the final dividend for the financial year nded March 31 2016 and the Annual GeneralMeeting. The Annual General Meeting is scheduled to be held on Friday August 19 2016.

The dividend payout for the year under review has been formulated in accordance withshareholders' aspirations and the Company's policy to pay sustainable dividend linked tolong term growth objectives of the Company to be met by internal cash accruals.

Dividend record for the last 10 years:

Sl. No. Year of Declaration of Dividend Dividend % Amount Declared per share (Face Value of ' 10/- ach)
1 2005-06 30% ' 3.00
2 2006-07 30% ' 3.00
3 2007-08 18% ' 1.80
4 2008-09 Nil Nil
5 2009-10 18% ' 1.80
6 2010-11 12% ' 1.20
7 2011-12 20% ' 2.00
8 2012-13 30% ' 3.00
9 2013-14 30% ' 3.00
10 2014-15 30% ' 3.00

Transfer of Un-Claimed Dividends

Pursuant to Section 124(5) of the Companies Act 2013 [Section 205C (2) of theCompanies Act 1956] read with the Investor ducation and Protection Fund (awareness andprotection of Investors) Rules 2001 as amended from time to time the unclaimed/unpaiddividend amount of ' 530250/- (Rupees Five Lakh Thirty Thousand Two Hundred Fifty Only)for the year 2007-08 was transferred to the Investor ducation and Protection Fund duringthe financial year 2015-16.

Transfer to Reserves

Your Company proposes to transfer ' 1000 Lakhs to General Reserve. An amount of '3705.50 Lakhs is proposed to be retained in the Surplus.

Share Capital

The paid up quity Share Capital as at March 312016 stood at ' 231990000 dividedinto 23199000 quity shares of ' 10/- ach. During the year under review the Company hasnot issued shares with differential voting rights nor has granted any stock options orissued sweat quity share to its mployees or directors. As on March 31 2016 none of theDirectors or the Company holds instruments convertible into quity shares of the Company.

Fixed Deposits

Your Company has not accepted any deposits from the public and as such no amount ofprincipal or interest was outstanding as at the Balance Sheet date.

Particulars of Loans Guarantees or Investments

Loans guarantees and investments covered under Section 186 of the Companies Act 2013form part of the notes to the financial statements provided in this Annual Report.

Particulars of Contract or Arrangements Made With Related Parties

All related party transactions that were ntered into during the financial year were atarm's length basis and were in the ordinary course of business and that the provisions ofSection 188 of the Companies Act 2013 are not attracted. Thus the disclosure in formAOC-2 is not required. Further there are no materially significant related partytransactions during the year under review with Promoters Directors Key ManagerialPersonnel and their relatives which may have potential conflict with interest of thecompany at large.

The related party transactions if any are placed before the audit committee as also tothe Board for approval. A statement giving details of all related party transactions areplaced before the Audit committee and Board for review and approval on a quarterly basis.The details of the related party transactions during the year are part of the notes onAccounts forming part of the Annual Report.

Material changes and commitments affecting financial position between the nd of thefinancial year and date of report

There are no material changes and commitments affecting financial position of thecompany between March 31 and the date of Board's Report.

Variation in Market Capitalization

As at March 31

Particulars 2016 2015 Increase / (decrease) in %
Market capitalization (' in Crore) 1185.47 764.17 55.13
Price arnings ratio 21.39 27.08 (21.01)
Percentage increase in the market price of shares in comparison with the last public offer price* 10120

Note: Data bases on share prices quoted on BSE * Last public offer price in Indiahas been adjusted for bonus issues

Management's Discussion and Analysis

In terms of the provisions of SEBI (Listing Obligation & Disclosure Requirements)Regulation 2015 the Management's Discussion and Analysis is set out in this AnnualReport.

Business Review

Your Company has five Divisions in operation in different States in India.

Dairy Division:

The dairy segment in India which has been growing at a scorching 22% annually in thelast five fiscals (2012-16) compared with 17% for the whole industry.

It will do ven better over the next three years as rising disposable income andincreasing quality consciousness lead to greater consumer preference for branded milk andmilk products.

The organised dairy segment revenue is ' 75000 crore in fiscal 2016 which was 19% ofthe total ' 4.3 lakh crore for the ntire dairy industry. As the consumer shiftaccelerates the revenue share from organised segment could rise to 25% by fiscal 2018.

On their part dairies have been sharpening focus on value-added products investing inbrand-building and scaling up operations particularly in processing and milk- collectioninfrastructure. Management of logistics costs and consistent procurement is crucial toprofitability and cash flows in the business.

India the leading producer of milk and milk products is also the largest consumerwith supply barely matching demand. According to NDDB and CRISIL Research stimates thecountry produces 3800 lakh litre per day (LLPD) of milk accounting for a fifth of theglobal output. About 40% of this is retained by producers (farmers) for householdconsumption & another 41% share is with the unorganised segment. The remaining 19% isprocured processed and sold by organised dairies. Given the rising demand for brandedproducts and investments being made by organised sector players CRISIL believes the shareof organised segment will increase to about 25% by fiscal 2018.

In term of volume the dairy industry grew 4% annually during the last five years ndedfiscal 2016 while the organised sector grew at twice as fast. With changing consumerpreference the volume of milk processed from organised sector is xpected to grow 13%annually by fiscal 2018 way ahead of a 5% annual growth for the industry at large.

Growth in value terms was much higher at 17% annually signalling better realisation.This was driven by value- added products which grew 23% annually compared with 15% forliquid milk.

The small and medium-sized organised players that derive a bulk of their revenues fromthe liquid milk segment have faced intensifying competition from larger players who arexpanding their footprint. In contrast increased focus on value-added products andinvestments in processing facilities have supported steady cash flows for the largeorganised players.

Your Dairy division of the Company is one of the leading private dairy players in Indiawith a chilling capacity of 16.8 lakhs liters per day processing capacity 15.3 lakhsliters per day and packaging capacity of 10.6 laksh liters per day. It produces andmarkets a full line of Dairy products

including fresh milk curd butter milk lassi ice-cream paneer table butter milkpowder flavored milk Doodh Peda UHT milk and dairy whitener tc. The Dairy division hasa significant presence in the states of Andhra Pradesh Delhi Haryana Karnataka KeralaMaharashrta Odisha Rajasthan Tamilnadu and Telangana.

Increasing presence of Corporate's in the processed milk market

Of the total milk procured for processing about 65 per cent is pasteurized and sold inliquid form packaged in pouches tetra packs or glass and PET bottles. mergence of the'cooperatives model' aided growth of the milk processing segment. While co-operativescommand a majority market share corporates are gradually gaining ground on the back ofshift in the consumer taste and preference towards toned milk flavoured milk and valueadded products. While the co-operatives have an advantage of subsidies in terms ofprocurement the corporates are attracting farmers by offering relatively higher pricesfor milk procurement and providing other value added services such as healthcarefacilities for animals quality fodder creating awareness amongst farmers tc to boostthe supply of milk to their processing plants.

Consumption of processed milk is xpected to continue the growth momentum and recordabout 5 per cent CAGR until 2016-17 to reach 55 billion litres.

Market size of processed milk segment to xpand at a CAGR of 12-13 per cent.

While demand for processed milk grew by 5.3 per cent CAGR during 2009-10 to 2015-16realisations rose by about 9-10 per cent CAGR. Higher realisations could be attributed torise in milk prices and growth in consumption of flavoured milk and tetra pack milk.

During the financial year 2015-16 Dairy Division has increased milk Chilling capacityby 100000 LPD by commissioning of 16 units which includes Bulk Mini Chilling units MiniChilling units chilling centres and Franchisee Bulk Mini Chilling units. The Turnover hasgrown by 13.69% from ' 155585.71 Lakhs to ' 176880.13 Lakhs.

Retail Division:

The Indian retail industry has merged as one of the most dynamic and fast-pacedindustries due to the ntry of several new players. It accounts for over 10 per cent of thecountry's Gross Domestic Product (GDP) and around 8 per cent of the mployment. India isthe world's fifth-largest global destination in the retail space.

The number of food and grocery supermarkets are xpected to increase from 500 in 2006 toabout 8500 by 2017. The retail space supply in India is projected to grow from 6.3million sqft to 7.6 million sqft over 2016-17.

In the coming years about 70 per cent of world's growth is likely to come from mergingmarkets with 40 per cent contribution from India alone. These forecasts and industryprospects suggest that merging markets are likely to gain investor interest in the future.

One of the biggest opportunities and challenges that characterise the Indian retailsector is its structure. While it has matured over the years it is still highlyfragmented with an stimated 15 million outlets. Its overall size is stimated to be INR 41trillion in 2015-16 with a CAGR of 15 per cent over the last five years which is muchhigher than the growth of the Indian GDP in the same period. Going forward the overallretail sector growth is likely to witness a CAGR of 12-13 per cent which would be worthINR 55 trillion in 2018-19.

E-commerce is xpanding steadily in the country. Customers have the ver increasingchoice of products at the lowest rates. -commerce is probably creating the biggestrevolution in the retail industry and this trend would continue in the years to come.

E-commerce as a retail channel has seen phenomenal growth over the last couple ofyears. It is driven by demand factors such as substantial rise in internet penetrationincreasing speed of broadband connections increasing use of smart phones tc. in theurban areas and by supply factors such as increased proliferation of venturecapitalists/private quity-funded -commerce startups. India has about one million onlinetraders - small and large that sell their products through various -commerce portals.

Your Retail Division of the Company is unique chain of retail stores designed to meetthe needs of the modern Indian consumer. For us retail business is all about creating anngaging xperience for customers while offering great deals that make them feel privilegedand cared for. Not a single opportunity is missed to delight the customers. The Retaildivision of your Company is having 110 stores operational with 60 stores operating inHyderabad Telangana 16 in Bangalore Karnataka and 34 in Chennai Tamil Nadu as on March312016. The Company has also initiated -commerce through Heritage fresh online as a pilotin one store now and planning to activate all the stores during 2016-17.

During the Financial year 2015-16 Retail Division turnover has grown by 18% from '49397 Lakhs to ' 58286.49 Lakhs. The Institutional sales segment achieved sale of '4053.53 Lakhs in FY 2015-16 against ' 3239.45 Lakhs in FY 2014-15 with 25.13% growth.

Agri Division:

Agriculture plays a vital role in India's conomy. Over 58 per cent of the ruralhouseholds depend on agriculture as their principal means of livelihood. Agriculturealong with fisheries and forestry is one of the largest contributors to the GrossDomestic Product (GDP).

Over the recent past multiple factors have worked together to facilitate growth in theagriculture sector in India. These include growth in household income and consumptionxpansion in the food processing sector and increase in agricultural xports. Rising privateparticipation in Indian agriculture growing organic farming and use of informationtechnology are some of the key trends in the agriculture industry.

The Agri Division of your Company was started with an aim of sourcing fresh Fruits andVegetables from Farmers and nsuring stable and nhanced income for them bydisintermediating the supply chain. The team of Agriculturists closely work with Farmersto transform agricultural lands into productive farms in terms of output per unit of landand nergy. Company has stablished a couple of advanced fully Integrated Pack Houses tohandle fresh products. Apart from acting as a supply chain arm for Heritage Fresh StoresAgri division also supplies animal feed to Dairy Farmers.

The Agri division of your Company during the year under review apart from the sourcingthe fruits & vegetables started the Veterinary care business with an aim to providethe quality feed to increase the productivity of the animals.

Agri Division of your Company had achieved the turnover of ' 9567.72 Lakhs and handled60198 MT including Custom Ripening with respect to Value & Volume. There is animprovement in Volume of 12% over the financial year 2014-15.

Bakery Division:

The Bakery division of your Company armed with world- class Bakery quipment and ColdStorage facilities supplies high quality Bakery Products to leading multinational chainstop star Hotels as well as to Heritage Fresh Stores. The product range includes breadscakes pastries desserts savories and cookies. The division is also quipped to handle awider range of Bakery Products and is open to contract manufacturing and private labelopportunities.

During the Financial year 2015-16 Bakery Division turnover has grown by 37.88% from '588.92 Lakhs to ' 812.03 Lakhs.

Renewable nergy Division:

The Renewable nergy Division of your Company strongly recognizes the responsibilitytowards protecting the nvironment. As a forward-looking nterprise it is stronglycommitted to xtending the 'Green' footprint. In line with this thinking the Division hasset up with 2.34 MW Solar Power Plant which was commissioned at Adavi Masjid VillageMulugu Mandal Medak Dist Telangana and commissioned 2.1MW Wind Power Project atVajrakarur Anantapur Dist Andhra Pradesh for captive consumption of Dairy Division ofthe Company. The above plants are xpected to supply 3.75 million units of clean and greennergy annually and xpected to displace nearly 3300 MT of CO annually.

Renewable nergy Division of your Company had achieved the turnover of ' 304.30 Lakhsduring the year under review.

Subsidiary / Associate Companies

Your Company is having two Subsidiaries Company's namely M/s. Heritage Foods RetailLimited (CIN:U15400TG2008PLC062054) & M/s. Heritage Conpro Limited(CIN:U52100TG2011PLC072132) and one Associate Company M/s SKIL Raigam Power (India)Limited (CIN:U40102TG2009PLC063671).

During the year the Board of Directors reviewed the activities of the subsidiariesassociate Companies and noted that these companies are yet to start the commercialproductions. However in accordance with Section 129(3) of the Companies Act 2013 and SEBI(Listing Obligation & Disclosure Requirements) Regulation 2015 the Company hasprepared consolidated financial statements of all its Subsidiaries & Associates inaccordance with relevant Accounting Standards Viz. AS-21 AS-23 & AS-27 issued by theInstitute of Chartered Accountants of India and form part of the Annual Report. Further astatement containing the salient features of the financial statement of the Subsidiaries& Associate Companies in the prescribed format AOC-1 is appended in financialstatement of the report. The statement also provides the details of financial positions ofach of the subsidiaries & Associate.

In accordance with Section 136 of the Companies Act 2013 the audited financialstatements including the consolidated financial statements and related information of theCompany and audited accounts of ach of its Subsidiaries & Associate are available onthe website of the Company i.e. . These documents will also beavailable for inspection during the business hours at our registered office in HyderabadIndia.

During the year Company has not made any investment in the Subsidiaries &Associate Companies.


Your Company continues the journey of delivering value to consumers/customers throughsignificant investments in quality programs. While sustaining xisting xternal benchmarksand certifications your Company have added new certifications and further nhanced theprograms and initiatives to renew the commitment to the culture of quality.

Your Company adheres to international quality standard certifications such as ISO22000:2005 (OHSAS) ISO 18001:2007 ISO 14001:2004 (ENMS) ISO 50001:2011 and HALALCertification HFC 15-101 & 102. Your Company has also received an independentauditor's assurance report on compliance to ISO 14001 & 18001 (EMS & OHSAS) 2ndCycle Re-registration and same was submitted to certification body (SGS Hyderabad).

The Quality department of your Company handles large change management initiatives todrive quality and productivity improvements across the Company using various techniques.


The Heritage brand is a key intangible asset of your Company. The branding initiativeis designed to reposition the Company as the next-generation company. Marketing reach ofyour Company xtends nationally through advertisements (such as hoarding wall paintvehicle brandings Newspaper ads and radio ads tc.) public relations and digitalmarketing initiatives. Your Company also organizes several vents in various localities tocreate awareness about the products of the Company.

Awards & Recognitions

During the financial year 2015-16 the Company has received the following awards andrecognition.

• Two dairy packing stations of your Company had won the Prestigious Nationalnergy Conservation Awards

(NECA) in Dairy Sector for the year 2015 at All India Level. Gokul Dairy PlantTirupathi Andhra Pradesh has been awarded the 1st Prize NECA - 2015 and theUppal Dairy Plant Hyderabad Telangana has been awarded the 2nd Prize NECA -2015 by the Ministry of Power Government of India during December 2015. This is the 5thtime that the Company has been recognised with this award (previously the Company won theaward 1st prize in the years-2014 2012 & 2008 2nd prize in the year-2010).

• The Retail Division of your Company was awarded most prestigious 'COCA COLAGolden Spoon Award' 2016 for being the IMAGES Most Admired Food & Grocery Retailer ofthe Year - Regional Chain' at India Food Forum Mumbai during the month of January 2016

• Your Dairy Division of the Company has been awarded in four categories at the"The Great Indian Ice Cream Contest 2016 - Season 5" conducted by Indian DairyAssociation and DuPont Nutrition & Health on February 11 2016 in Gurgaon Delhi.

* GOLD Award in Kool Kids i.e 1st prize on All India level.

* The Best in Class in Kool Kids i.e Award for xcellent product.

* Silver Award for VANILLA i.e 2nd prize on All India level.

* Silver Award for CHOCOLATE i.e 2nd prize on All India level.

Human Resources and Industrial Relations

Your Company takes pride in the commitment competence and dedication shown by itsmployees in all areas of business. To nsure good human resources management your Companyfocus on all aspects of the mployee lifecycle. This provides a holistic xperience for themployee as well. During their tenure at the Company mployees are motivated throughvarious skill- development and ngagement programs. Your Company has a structured inductionprocess at all locations and management development programs to upgrade skill of managers.Objective appraisal systems based on Key Result Areas are in place for senior managementmembers.

Your Company is committed to nurturing nhancing and retaining top talent throughsuperior Learning & Development Programmes. This is a part of Corporate HR functionand is a critical pillar to support the organization's growth and its sustainability inlong run.

The total strength of your Company at the nd of financial year 2015-16 was 5077 withan increase of 833 as compared with the nd of the previous financial year.

Particulars of mployees

The table containing the names and other particulars of mployees in accordance with theprovisions of Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is providedin Annexure-1A to the Board's report. A statement containing the names of very mployeemployed throughout the financial year and in receipt of remuneration of ' 60 lakhor more PA or mployed for part of the year and in receipt of ' 5 lakh or more in amonth under Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is nclosed as Annexure-1B to the Board's report.

Corporate Governance

Corporate governance is an thically driven business process that is committed to valuesaimed at nhancing an organization's brand and reputation. This is nsured by taking thicalbusiness decisions and conducting business with a firm commitment to values while meetingstakeholders' xpectations. It is imperative that your company affairs are managed in afair and transparent manner. This is vital to gain and retain the trust of thestakeholders.

Your Company complies with the Securities and xchange Board of India (SEBI)'sRegulations on corporate governance. Your Company has documented internal policies oncorporate governance. Company Corporate governance report for financial year 2015-16 formspart of this Annual Report. All Corporate policies are available in Company website^Corporate^Policies

Auditors' certificate on Corporate Governance

As required by SEBI (Listing Obligation & Disclosure Requirements) Regulation2015 the auditors' certificate on corporate governance is forming part of the AnnualReport.

Board Diversity

Your Company recognizes and mbraces the importance of a diverse board in its success.Company believes that a truly diverse board will leverage differences in thoughtperspective knowledge skill and industry xperience cultural and geographicalbackground age and gender which will help the Company retain its competitive advantage.The Board has adopted the Board Diversity Policy which sets out the approach to diversityof the Board of Directors. The Policy is available in the Company websitewww.heritagefoods.incorporate policies BD

Meetings of the Board

The Board met six times during the financial year the details of which are given inthe Corporate Governance Report that forms part of this Annual Report. The intervening gapbetween any two meetings was within the period prescribed by the Companies Act 2013 andSEBI (Listing Obligation & Disclosure Requirements) Regulation 2015.

Policy on Director's Appointment and Remuneration

The current policy is to have an appropriate mix of xecutive and Non-executive &Independent and Women Directors to maintain the independence of the Board and separateits functions of governance and management. As on March 31 2016 the Board consists of 8members two of whom are women xecutive/Whole- time directors and six are Non-Executivedirectors as on March 31 2016. The Board periodically valuates the need for change in itscomposition and size.

The policy of your Company on directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters provided under Sub-section (3) of Section 178 of the Companies Act2013 and SEBI (Listing Obligation & Disclosure Requirements) Regulation 2015 adoptedby the Board. It is affirmed that the remuneration paid to the directors is as per theterms laid out in the nomination and remuneration policy of the Company.

Declaration by Independent Directors

Your Company has received necessary declaration from ach independent director underSection 149 of the Companies Act 2013 that he/she meets the criteria of independencelaid down in Section 149 of the Companies Act 2013 and SEBI (Listing Obligation &Disclosure Requirements) Regulation 2015.

Board valuation

SEBI (Listing Obligation & Disclosure Requirements) Regulation 2015 mandates thatthe Board shall monitor and review the Board valuation framework. The Companies Act 2013states that a formal annual valuation needs to be made by the Board of its own performanceand that of its committees and individual directors. Schedule IV

of the Companies Act 2013 states that the performance valuation of independentdirectors shall be done by the ntire Board of Directors xcluding the director beingvaluated.

The valuation of all the directors and the Board as a whole was conducted based on thecriteria and framework as suggested by Nomination & Remuneration Committee adopted bythe Board. The Board approved the valuation results as collated by the nomination andremuneration committee.

None of the independent directors are due for re-appointment.

Training of Independent Directors

Every new independent director of the Board attends an orientation program and have tovisit the Company manufacturing facilities and other locations. To familiarize the newinductees with the strategy operations and functions of your Company the xecutivedirectors / senior managerial personnel make presentations to the inductees about theCompany's strategy operations product and service offerings markets organizationstructure quality and risk management tc.


Dr. V Nagaraja Naidu (DIN: 00003730) Non-Executive Director of the Company retire byrotation and being ligible offer himself for re-appointment at the nsuing Annual GeneralMeeting as per the provisions of the Article of Association of the Company and Section 152of the Companies Act 2013 and rules made thereof and SEBI (Listing Obligation &Disclosure Requirements) Regulation 2015.

During the year Mr. Rajesh Thakur Ahuja (DIN: 00371406) was appointed as Non-ExecutiveIndependent Director w.e.f. March 23 2016 in accordance with Section 149152161(1) readwith Schedule IV and other applicable provisions of the Companies Act 2013 rules madethereof.

Retirements and Resignations

During the year Mr. N. P. Ramakrishna (DIN: 00003751) Non-Executive Director of theCompany retired by rotation and being ligible for re-appointment but he xpressed hisintention not to seek re-appointment. The vacancy in the Board caused by his retirementshall not be filled up for the time being. The members of the Board place on record theirdeep sense of appreciation for services rendered by Mr. N P Ramakrishna during his tenureas member of the Board.

Mr. K Durga Prasad Rao (DIN:06888949) Whole-time Director of the Company had resignedfrom the Board w.e.f. November 1 2015 due to his personal reasons and other commitments.The Board placed on record the invaluable contribution made by him towards the progressof the company from the date of appointment until his resignation.

Mr. M Siva Rama Vara Prasad (DIN: 00170919) NonExecutive Independent Director of theCompany had resigned from the Board w.e.f. May 12 2016 due to his personal reasons andother commitments. The Board placed on record the invaluable contribution made by himtowards the progress of the Company from the date of appointment until his resignation.

Key Managerial Personnel

During the year under review the Company having the following persons as KeyManagerial Personnel.

Name DIN/M. No Designation
Mrs. N Bhuvaneswari 00003741 Vice Chairperson & Managing Director
Mrs. N Brahmani 02338940 Executive Director
Mr. A Prabhakara Naidu FCA 200974 Chief Financial Officer
Mr. Umakanta Barik FCS 6317 Company Secretary

Committees of the Board

Currently the Board has Six committees: the Audit Committee Nomination andRemuneration Committee Stakeholders Relationship Committee Corporate SocialResponsibility Committee Risk Management Committee and Management Committee.

A detailed note on the Board and its committees is provided under the CorporateGovernance Report section in this Annual Report. The composition of the committees andcompliances as per the applicable provisions of the Act and Rules are as follows:

Name of the Committee Composition of the Committee Highlights of duties responsibilities and activities
Audit committee Mr. D Seetharamaiah (Chairperson) • All recommendations made by the audit committee during the year were accepted by the Board.
Mr. N Sri Vishnu Raju Mr. M Siva Rama Vara Prasad# • Reviewing with the management the quarterly financial statements before submission to the Board for approval.
Dr .V Nagaraja Naidu Mr. N Lokesh • Approval or any subsequent modification of transactions of the Company with related parties.
Mr. Rajesh Thakur Ahuja$ • Reviewing with the management the performance of statutory auditors and internal auditors adequacy of internal control systems tc.
Nomination and Mr. N Sri Vishnu Raju • The committee oversees and administers xecutive compensation
Remuneration (Chairperson) operating under a written charter adopted by our Board of Directors.
Committee Mr. D Seetharamaiah Mr. M Siva Rama Vara Prasad# • The nomination and remuneration committee has framed the nomination and remuneration policy.
Mr. N Lokesh
Mr. Rajesh Thakur Ahuja$
Stakeholders Dr. V Nagaraja Naidu • The committee reviews and nsures redressal of investor grievances.
Relationship Committee (Chariperson) Mr. D Seetharamaiah Mr. N Sri Vishnu Raju Mrs. N Bhuvaneswari • The committee noted that all the grievances of the investors have been resolved during the year.
Corporate Social Responsibility Committee Mr. D Seetharamaiah (Chariperson) Mr. N Sri Vishn u Ra ju Mrs. N Bhuvaneswari • To formulate and recommend to the Board a Corporate Social Responsibility (CSR) Policy indicating activities to be undertaken by the Company in compliance with provisions of the Companies Act 2013 and rules made there under.
• To monitor the implementation of the CSR Policy of the Company from time to time
Risk Management Committee Mr. M Siva Rama Vara Prasad# (Chairperson) Mr. Rajesh Thakur Ahuja$ • The purpose of the committee is to assist the Board in fulfilling its corporate governance with regard to the identification valuation & mitigation of operational strategic and nvironmental risks fficiently and ffectively.
Chairperson Mr. D Seetharamaiah Mr. N Sri Vishn u Ra ju Mrs. N Bhuvaneswari Mr. K Durga Prasada Rao* • The Company has developed and implemented a risk management framework that includes identification of lements of risk if any which in the opinion of the Board may threaten the xistence of the Company.
Management Committee Mr. D Seetharamaiah (Chariperson) • Setting the strategic direction to guide and direct the activities of the organization;
Mr. N Sri Vishn u Ra ju Mr. N Lokesh • nsuring the ffective management of the organization and its activities; and
Mrs. N Bhuvaneswari • Monitoring the activities of the organization to nsure they are in keeping with the founding principles objects and values.


The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandatedthe formulation of certain policies for all listed companies. All the corporate policiesare available in the Company website ( policies). Thepolicies are reviewed periodically by the Board and updated based on need and newcompliance requirement.

In addition to its Code of Conduct and thics key policies that have been adopted bythe Company are as follows:

Name of the policy Brief description Web link
Whistleblower Policy (Policy on vigil mechanism) The Company has adopted the whistleblower mechanism for directors and mployees to report concerns about unethical behaviour actual or suspected fraud or violation of the Company's code of conduct and thics. It also provides for adequate safeguards against victimization of mployees who avail of the mechanism and also provide for direct access to the Chairperson of the Audit Committee. There has been no change to the Whistleblower Policy adopted by the Company during fiscal 2016. http:// heritagefoods. in/images/HFL% 20Whistle%20 Blower%20Policy. pdf
Insider Trading Policy and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information The Company has adopted a Code of Conduct to Regulate Monitor & Report Trading by Insiders and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information as per the SEBI (Prohibition of Insider Trading) Regulation 2015 with a view to regulate trading in securities by the Directors and designated mployees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Promoters Directors and the designated mployees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed and other certain situations. All Board Directors and the designated mployees have confirmed compliance with the Code. http:// images/COC.pdf http:// images/COFD.pdf
Nomination and Remuneration Policy This policy formulates the criteria for determining qualifications competencies positive attributes and independence for the appointment of a director (executive / non-executive) and also the criteria for determining the remuneration of the directors key managerial personnel and senior management of the Company. This policy also lays down criteria for selection and appointment of Board Members. http:// images/BD.pdf
Corporate Social Responsibility Policy The policy outlines the Company's strategy to bring about a positive impact on society through programs relating to hunger poverty ducation healthcare nvironment and lowering its resource footprint. http:// images/HFL_CSR.pdf
Policy for Determining Material Subsidiaries The policy is used to determine the material subsidiaries and material non- listed Indian subsidiaries of the Company and to provide the governance framework for them. http:// images/Subsidiary_ Policy.pdf
Related Party Transaction Policy The policy regulates all transactions between the Company and its related parties http:// images/RPT Policy. pdf
Policy on Preservation of Documents The policy deals with the preservation of corporate records of the Company and all its subsidiaries. http:// images/PD.pdf

Auditors & Auditors Report Statutory Auditors

At the Annual General Meeting held on September 26 2014 M/s. Raju & PrasadChartered Accountants (F No: 003475S) Hyderabad were appointed as statutory auditors ofthe Company to hold office till the conclusion of the 25th Annual General Meeting to beheld in the calendar year 2017. In terms of the first provision to Section 139 of theCompanies Act 2013 the appointment of the auditors shall be placed for ratification atvery Annual General Meeting. Accordingly the appointment of M/s. Raju & PrasadChartered Accountants (FRN: 003475S) as statutory auditors of the Company is placed forratification by the shareholders. In this regard the Company has received a certificatefrom the auditors to the ffect that if they are reappointed it would be in accordancewith the provisions of Section 141 of the Companies Act 2013.

The notes on Standalone & Consolidated Financial statement referred to in theStandalone & Consolidated Auditor's Report are self-explanatory and do not call forany further comments.

Secretarial Auditor:

M/s. Savita Jyoti Practicing Company Secretary (CP No:1796) was appointed to conductthe Secretarial Audit of the Company for the financial year 2015-16 as required underSection 204 of the Companies Act 2013 and Rules made thereunder. The secretarial auditreport for financial year 2015-16 issued by M/s. SavitaJyoti Practicing Company Secretaryin form MR-3 is provided in the Annexure-2 to the Board's report.

The Secretarial Auditor's Report is self-explanatory and do not call for any furthercomments.

The Board has appointed M/s. Savita Jyoti (CP.No. 1796) Practicing CompanySecretaries as Secretarial Auditor of the Company for the financial year 2016-17 as perthe provisions of the Companies Act 2013 and Rules made thereof and SEBI (ListingObligation & Disclosure Requirements) Regulation 2015.

Significant of Material Orders Passed by the Regulators

There is no order passed by the regulators or Courts during the year under review.

Extracts of Annual Return

In accordance with Section 134(3)(a) of the Companies Act 2013 an xtract of the annualreturn is prescribed in form MGT-9 is provided in Annexure-3 to this report.

Listing Agreement

The Securities and xchange Board of India (SEBI) on September 2 2015 issued SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 with the aim toconsolidate and streamline the provisions of the Listing Agreement for different segmentsof capital markets to nsure better nforceability. The said regulations were ffective fromDecember 1 2015. Accordingly all listed ntities were required to nter into the ListingAgreement within six months from the ffective date. Your Company ntered into ListingAgreement with BSE Limited and the National Stock xchange of India Limited during December2015.

Internal financial control and its adequacy

The Board has adopted policies and procedures for nsuring the orderly and fficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and rrors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialdisclosures.

Internal Audit & Control Systems

Your Company has a well-defined and documented internal control system which isadequately monitored. Checks & balances and control systems have been stablished tonsure that assets are safe guarded utilized with proper authorization and recorded in thebooks of account. The Internal control systems are improved and modified continuously tomeet the changes in business conditions statutory and accounting requirements.

These are supplemented by internal audit of all divisions of your Company carried outby reputed firms of Chartered Accountants across India. Your Company has an AuditCommittee consisting of Five Directors in whom all are Non xecutive and three areindependent Directors. The Audit Committee of the Board of Directors and StatutoryAuditors are periodically apprised of the internal audit findings and corrective actionstaken. The Audit Committee of the Board of Directors reviews the adequacy and ffectivenessof internal control system and suggests improvements if any for strengthening them. YourCompany has a robust Management Information System which is an integral part of thecontrol mechanism.

The Board of Directors on the recommendation of the Audit Committee has appointedInternal Auditors for the financial year 2016-17 as per the provision of Section 138 ofthe Companies Act 2013 and Rules made thereof and as per the SEBI (LO&DR) Regulation2015

Corporate Social Responsibility (CSR)

Your Company has been an arly adopter of corporate social responsibility (CSR)initiatives. Along with sustained conomic performance nvironmental and social stewardshipis a key factor for holistic business growth.

CSR activities as per the provisions of the Companies Act 2013 and rules madethereof may be undertaken by the Company or through a registered trust or a registeredsociety. The CSR Committee of the Board valuated the various options to implement the CSRactivities and decided to transfer the mandated CSR amount to the NTR Memorial TrustHyderabad to carry out the activities such as promoting ducation nhancing the vocationalskills & supply of clean drinking water tc. as part of the CSR activities of theCompany. As the NTR Memorial Trust is operating since 1997 towards the improvement ofhealth ducation of the needy people in the society and running the school for the poorpeople and lot more other initiatives for the up-liftment of the backward and needypopulation in the society. The Company works with NTR Memorial Trust Hyderabad towardspromoting ducation nhancing vocational skills and supply of clean water apart from itsown trust's namely Heritage Farmers Welfare Trust and Heritage mployee Welfare Trust.

These projects are in accordance with Schedule VII of the Companies Act 2013 and theCompany's CSR Policy. The Report on CSR activities as required under Companies (CorporateSocial Responsibility Policy) Rules 2014 is set out as Annexure-4 forming part of theBoard's Report.

i. Heritage Farmer Welfare Trust (HFWT)

Apart from the CSR activities under the Companies Act 2013 your Company continues tovoluntarily support the following social initiatives through Heritage Farmers WelfareTrust (HFWT).

• Veterinary care and cattle management practices through Heritage MobileVeterinary Clinic (equipped with necessary tools and trained human resources forproviding door-step veterinary services to the Milch Animals and mpowering cattle ownerswith advanced technology and knowledge on best cattle management and feeding practices.The Mobile veterinary vans reach needy places for ducational video film in the vening andfree health camp on the next day morning in a village.

• xtending Insurance coverage for accidental death of farmer members Incentivefor fodder development & reward for Meritorious Students.

• The HFWT impact during the year through Mobile Veterinary clinic as follows:

No of Cattle Treated No of Milk Collection Centers Covered No of Cattle Health Camps Organized
168022 2568 2178
No of Artificial Inseminations No of Video Film Shows
1513 2120

ii. Heritage mployee Welfare Trust (HEWT)

Heritage mployees Welfare Trust is a trust formed by Heritage Foods Limited for thewelfare of mployees in the field of Health Medical Service ducation FacilitiesFinancial Needs common development needs and major objectives of the trust are asfollows: -

• To xtend financial assistance to the needy mployees and their dependents topursue medical treatment higher ducation social functions and other needed assistance.

• Providing non-statutory Medical Insurance Packages to members and theirdependents.

• To address any other mployee needs (Includes mployees their family members andother dependents)

Energy Conservation Technology Absorption & Foreign xchange arnings & Outgo

The particulars as prescribed under Sub-section (3)(m) of Section 134 of the CompaniesAct 2013 read with the Companies (Accounts) Rules 2014 are provided in the Annexure-5 tothe Board Report.

Risk Management

Your Company have constituted a Risk Management Committee pursuant to Section 134 (3)(n) of the Companies Act 2013 & Regulation 21 of SEBI (Listing Obligation &Disclosure Requirements) Regulation 2015 which has been ntrusted with the responsibilityto assist the Board in (a) Overseeing and approving the Company's nterprise riskmanagement framework; and (b) Overseeing that all the risks that the organization facessuch as strategic financial credit market liquidity security property IT legalregulatory reputational and other risks have been identified and assessed and there is anadequate risk management infrastructure in place capable of addressing those risks.

The Committee had formulated a Risk Management Policy for dealing with different kindsof risks which it faces in day to day operations. Risk Management Policy of the Companyoutlines different kinds of risks and risk mitigating measures to be adopted by the Board.The Risk Management Procedure shall be reviewed by the Risk Management Committee and Boardof Directors on a halfyearly basis.

The policy is available in the Company website:^corporate^policies^RMPolicy

Policy on Sexual Harassment

Your Company has in place an Anti Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All mployees (permanent contractualtemporary trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed offduring the year 2015-16

No of complaints received : Nil

No of complaints disposed off : Nil

Director's Responsibility Statement as required under Section 134 (3)(c) of theCompanies Act 2013.

The financial statements are prepared in accordance with the Generally AcceptedAccounting Principles (GAAP) under the historical cost convention on accrual basis xceptthe sale proceeds received under REC Mechanism of the Renewable nergy. GAAP comprisesmandatory accounting standards as prescribed under Section 133 of the Companies Act 2013('the Act') read with Rule 7 of the Companies (Accounts) Rules 2014 the provisions ofthe Act (to the xtent notified) and guidelines issued by the Securities and xchange Boardof India (SEBI). There are no material departures from prescribed accounting standards inthe adoption of these standards.

The Directors confirm that:

• In the preparation of the annual accounts for the financial year 2015-16applicable accounting standards have been followed along with proper xplanation relatingto material departures.

• They have selected such accounting policies and applied them consistently andmade judgments and stimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the nd of the financial year 2015-16 and ofthe profit and loss of the Company for that period.

• They have taken Proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities

• They have prepared the annual accounts of the company on a going concern basis.

• They have laid down internal financial controls to be followed by the companyand that such internal financial controls are adequate and were operating ffectively; and

• They have devised proper systems to nsure compliance with the provisions of allapplicable laws and that such systems were adequate and operating ffectively.

Green Initiatives

The Company started a sustainability initiative with the aim of going green andminimizing our impact on the nvironment.

Electronic copies of the Annual Report 2015-16 and Notice of the 24th AnnualGeneral Meeting will be sent to all members whose mail addresses are registered with theCompany / Depository Participant(s). For members who have not registered their mailaddresses physical copies of the Annual Report 2015-16 and the Notice of the 24thAnnual General Meeting will be sent in the permitted mode. Members requiring physicalcopies can send a request to the Company.


The Board takes this opportunity to thank all customers farmers vendors investorsbankers and Statutory Authorities for their continued support during the year. The Boardalso wishes to place on record its sincere appreciation of the ffort/ contribution made byits mployees at all levels. The Company's consistent growth was made possible by theirhard work solidarity cooperation and support and look forward to their continued supportin the future.

For and on behalf of





Registered Office:

#6-3-541/C Punjagutta

Hyderabad - 500 082

CIN : L15209TG1992PLC014332

Ph : 040-23391221/2

E-mail : Date : May 23 2016

Annexure-1 (A & B)

A. Information as per Rule 5(1) of Chapter XIII Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 Remuneration paid to whole-timedirectors

Name of the Director Title Remuneration in FY2015-16 (Rs. in Lakhs)* Remuneration in FY2014-15 (Rs. in Lakhs)* No. of Stock options / RSUs granted in FY 2015-16 % increase/(Decrease) of remuneration inFY 2015-16as compared to FY 2014-15 Excl. WTD Ratio of remuneration to MRE Incl.WTD Ratio of remuneration to MRE
Mrs. N Bhuvaneswari Vice Chairperson & Managing Director 478.13 219.45 - 117.88 498.06 498.06
Mrs. N Brahmani Executive Director 382.51 175.56 - 117.88 398.45 398.45
Mr. K Durga Prasad Rao * Whole-time Director 27.75 24.00 - 15.63 28.91 28.91

MRE : Median Remuneration of mployees

* Remuneration including salary Perks & Commission

# Mr. Durga Prasada Rao has resigned from the Board w.e.f. November 12015.

Remuneration/Sitting Fee paid to Non-Executive Directors

Name of the Director Sitting Fee in FY 2015-16 (Rs. in Lakhs) Sitting Fee in FY 2014-15 (Rs. in Lakhs) Number of stock options/RSUs granted in FY 2015-16 % increase /(decrease) of remuneration in FY2015-16as compared to FY 2014-15
Mr. D Seetharamaiah 3.70 2.75 - 34.55
Mr. N Sri Vishnu Raju 1.50 2.55 - (41.18)
Mr. M Siva Rama Vara PrasadA 2.10 1.40 - 50.00
Mr. Rajesh Thakur Ahuja * - - - 0
Dr. V Nagaraja Naidu 2.60 1.40 - 85.71
Mr. N P Rama Krishna * 0.40 0.80 - (50.00)
Mr. N Lokesh 1.90 1.50 - 26.67


A Mr. M Siva Rama Vara Prasad has resigned from the Board w.e.f. May 12 2016

* Mr. Rajesh Thakur Ahuja appointed as Director on March 23 2016.

# Mr. N P Rama Krishna has resigned from the Board w.e.f. September 24 2015

Remuneration of other Key Managerial Personnel (KMP)

Name of the KMP Title Remuneration Remuneration No. of stock % increase / Excl. WTD Incl.WTD
in FY 2015-16 (Rs. in Lakhs) in FY 2014-15 (Rs. in Lakhs) options /RSUs granted in FY 2015-16 (decrease) of remuneration inFY2015-16as compared to FY 2014-15 Ratio of remuneration to MRE Ratio of remuneration toMREand WTD
Mr. A Prabhakara Naidu Chief FinancialOfficer 39.20 35.00 - 12.00 40.83 40.83
Mr. Umakanta Barik Company Secretary 19.47 17.39 - 12.00 20.28 20.28

The Median Remuneration of mployees (MRE) xcluding Whole-time Directors (WTDs) was Rs.96000 and Rs. 96000/- in financial year 2015-16 and financial year 2014-15 respectively.There is no change in MRE (excluding WTDs) in financial year 2015-16 as compared tofinancial year 2014-15.

The Median Remuneration of mployees (MRE) including Whole-time Directors (WTDs) was Rs.96000 and Rs. 96000/- in financial year 2015-16 and financial year 2014-15 respectively.There is no change in MRE (including WTDs) in financial year 2015-16 as compared tofinancial year 2014-15.

The number of permanent mployees on the rolls of the Company as of March 312016 was5077

The revenue growth of the Company during financial year 2015-16 over previous financialyear was 14.84%

The aggregate remuneration of mployees xcluding WTD increased in FY 2015-16 over theprevious financial year was 25.11 %

The aggregate remuneration of mployees including WTD increased in FY 2015-16 over theprevious financial year was 29.75%

The aggregate remuneration of KMP increased in FY 2015-16 over the previous financialyear was 105.48%

Comparison of the remuneration of the ach KMP against the performance of the Company

Name of the Official Designation % lncrease/(Decrease) of remuneration in FY 2015-16 as compared to FY 2014-15
Mrs. N Bhuvaneswari Vice Chairperson & Managing Director 117.88
Mrs. N Brahmani Executive Director 117.88
Mr. A Prabhakara Naidu Chief Financial Officer 12.00
Mr. Umakanta Barik Company Secretary 12.00

This was based on the recommendation of the nomination and remuneration committee torevise the remuneration as per industry benchmarks.

Turnover has increased by 14.84% as compared to the previous year i.e. from Rs. 207297Lakhs to Rs. 238058 Lakhs.

EBITDA has increased by 54.94% as compared to the last year i.e. from Rs. 8808 Lakhs toRs. 13647 Lakhs.

Profit after Tax (PAT) has increased by 96.49 % as compared to the last year i.e. fromRs. 2821 Lakhs to Rs. 5543 Lakhs.

The PS of the Company for the year nded March 312016 is Rs. 23.89 as compared toprevious year was Rs. 12.16.

Market capitalization increased by 55.13% to Rs. 1185.47 Crores as of March 312016from Rs. 764.17 Crores as of March 31 2015. The Price arnings Ratio was 21.39 as of March31 2016 from 27.08 as of March 31 2015. The closing price of the Company's quity shareson the NSE and BSE as of March 312016 was Rs. 512.65 and Rs. 511.00 respectively.

During Financial Year 2015-16 no mployee received remuneration in xcess of thehighest-paid director.

B. Information as per Rule 5(2) of Chapter XIII the Companies (Appointment &Remuneration of Managerial Personnel) Rules 2014

i. Details of mployes mployed throughout the financial year was in receipt ofremuneration for that year which in the aggregate was not less than sixty lakh rupees

Employee name Designation Educational qualification Age Experience (in years) Date of joining Gross Remuneration Paid (Rs. in Lakhs) Previous mployment and designation
Dr. M Samba Siva Rao President M.Sc. Ph.D. 59 31 23/01/2006 189.22* Joint Secretary Ministry of Commerce and Industry Government of India (IAS Retired)

* Remuneration includes Salary & Performance incentive

ii. Details of mployees mployed of the part of the financial year was in receipt ofremuneration for any part of that year at a rate which in the aggregate was not lessthan five lakh rupees per month: NIL

For and on behalf of




DIN: 00005016

Registered Office:

#6-3-541/C Punjagutta

Flyderabad - 500 082

CIN : L15209TG1992PLC014332

Ph : 040-23391221/2

E-mail :

Date : May 232016