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Parag Milk Foods Ltd.

BSE: 539889 Sector: Agri and agri inputs
BSE 00:00 | 28 Jun 75.55 -2.30






NSE 00:00 | 28 Jun 75.60 -2.35






OPEN 78.45
VOLUME 11311
52-Week high 159.85
52-Week low 69.00
P/E 14.31
Mkt Cap.(Rs cr) 721
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 78.45
CLOSE 77.85
VOLUME 11311
52-Week high 159.85
52-Week low 69.00
P/E 14.31
Mkt Cap.(Rs cr) 721
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Parag Milk Foods Ltd. (PARAGMILK) - Director Report

Company director report

Dear Members

The Board of Directors are pleased to present the Twenty Seventh Annual Report on thebusiness and operations of the Company together with the Audited Financial Statements(standalone and consolidated) for the financial year ended March 31 2019.

Financial Highlights

The summarized financial performance of the Company (Standalone & Consolidated) forthe Financial Year 2018-2019 is summarized as under:

(Rs in Million)



FY 2018-19 FY 2017-18 FY 2018-19 FY 2017-18
Revenue from Operations 23461.31 19181.18 23956.64 19545.06
Other Income 40.49 56.30 102.63 119.98
Total Income 23501.80 19237.48 24059.27 19665.04
Earnings before Interest Depreciation and Tax 2215.50 1933.46 2337.59 2052.86
Less Depreciation 481.37 487.56 501.85 505.95
Less:- Interest 356.68 369.67 357.88 357.33
Profit before Tax before exceptional items 1377.45 1076.23 1477.86 1189.58
Exceptional Items - - - -
Profit from ordinary activities before tax 1377.45 1076.23 1477.86 1189.58
Less:- Tax expenses 236.92 291.43 270.67 319.02
Profit After Tax (PAT) 1140.53 784.80 1207.19 870.56
Dividend on equity shares (including tax on dividend) 101.40 76.06 101.40 76.06
Earnings per Share
Basic 13.59 9.36 14.39 10.38
Diluted 13.56 9.33 14.36 10.35

• Final proposed dividend for 2018-19: Rs 1.00 per equity share of Rs 10 each

The financial statements of the Company for the year ended March 312019 have beenprepared in accordance with Indian Accounting Standards (Ind AS) notified under theCompanies (Indian Accounting Standards) Rules 2015 read with Section 133 of CompaniesAct 2013 (hereinafter referred to as the "Act") and other relevantprovisions of the Act. In preparation of the annual accounts there are no material changesfrom the prescribed norms stipulated by the Accounting Standards. Accounting policies havebeen consistently applied except where a revision requires a change in the accountingpolicy hitherto in use. Management evaluates all recently issued or revised accountingstandards on an ongoing basis. The Company discloses consolidated and standalone financialresults on a quarterly basis which are subjected to limited review and publishesconsolidated and standalone audited financial results on an annual basis.

Financial Performance

The Company reported growth in revenue from operations of 22.3% over the Previous Year.At Standalone level the Revenue from operations for FY 2018-19 stood at Rs23461.31Million as compared with Rs 19181.18 Million in the Previous Year 2017-18. TheProfit before Tax for FY 2018-19 stood at Rs 1377.45 Million as against Rs 1076.23Million in the Previous Year 2017-18. The Profit after Tax for FY 2018-19 stood at Rs1140.53 Million against Rs 784.80 Million reported in the Previous Year 2017-18.

The Consolidated Revenue from operations for FY 2018-19 was Rs 23956.64 Million ascompared to Rs 19545.06 Million in the Previous Year 2017-18 registering a growth of22.6%. The Consolidated Profit before Tax for FY 2018-19 stood at Rs 1477.86 Million ascompared to Rs 1189.58 Million in the Previous Year 2017-18.The Consolidated Profit aftertax for FY 2018-19 stood at '1207.19 Million as compared to Rs 870.56 Million in thePrevious Year 2017-18.


Based on the Company's performance the Board of Directors recommend a final dividendof '1.00/- per equity share i.e. 10% of face value of Rs 10/- each for the financial yearended March 31 2019. The dividend if approved by the Members in the ensuing AnnualGeneral Meeting (AGM) will be payable to those Shareholders whose names appear in theRegister of Members of the Company as on September 23 2019. The register of members &share transfer books will remain closed from Tuesday September 24 2019 to MondaySeptember 30 2019 (both days inclusive). The AGM of the Company is scheduled to be heldon September 30 2019.

The total dividend on equity shares including dividend distribution tax wouldaggregate Rs 101.40 Million.

Transfer to General Reserve

The Board of Directors of the Company has decided not to transfer any amount to theReserves for the year under review.

Share Capital

The Company's paid-up Equity Share Capital continues to stand at Rs 841145820/- madeup of 84114582 Equity Shares of Rs 10/- each. During the year the Company has notissued any shares or convertible securities or shares with differential voting rightsoptions or sweat equity or warrants.

However the Company has granted 166015 options to the eligible employees of theCompany from the ESOP Trust maintained by the Company at a fair market value of Rs 258.90(Two Hundred Fifty Eight Rupees and Ninety Paise) per option (based on the closing marketprice of Rs 258.90 of the Company's shares on NSE as on October 31 2018) under therenamed scheme Parag Milk Foods Limited - Employee Stock Option Scheme 2018 - "ESOS2018" the other terms and conditions will remain the same as stated in erstwhileESOS 2015.)

As on March 31 2019 none of the Directors of the Company hold instruments convertibleinto Equity Shares of the Company.

Business Overview

Parag Milk Foods is not just any dairy company. We are a 100% cow's milk company withan integrated business model and strong R & D capabilities. As Innovation is the DNAof Parag it has allowed us to remain ahead of curve in every chain of the business rightfrom our dairy farming to milk procurement to product development processingdistribution as well as branding and marketing. Our manufacturing units have beenstrategically located at Manchar in Maharashtra Palamaner in Andhra Pradesh and Sonipatin Haryana with the capacity of 2.9 Million liters per day. We have been investing in theexpansion and modernization of our three existing manufacturing plants. Our well acceptedor recognized brands like Gowardhan Go Topp UP Pride of cows Avvatar Milkrich andslurp backed by distinctive marketing campaigns and well - engineered promotion anddistribution strategies have allowed us to become well established Dairy FMCG company.Our promise to deliver fresh and innovative products to consumers has been the drivingforce behind our success over two decades. The special relationship that consumers enjoywith each of our products is testimony to the quality and purity with which they are made.

Consumers preference is the heart of our every offering. Each of our categories - GheeCheese Fresh products Health & Nutrition Beverages & UHT Powders RTE - sweetsinclude a portfolio of products that serves consumers across the length and breadth ofIndia. With seven brands spanning seven distinct categories the company is part of thedaily life of millions of consumers. Our portfolio includes leading brands such asGowardhan Go Pride of cows Milkrich Topp UP Avvatar and Slurp. Our products areavailable across India. We have a clear and compelling strategy that focuses onInnovation.

We have a strong R&D research team which is dedicatedly working towards creatingand producing new innovations and products in the F&B and nutrition category.

To match the taste and preferences of the Southern part of India we recently launcheda new variant Gowardhan Swarna ghee. It is rich in aroma and flavour.

To satiate the consumers' changing preferences while at the same time to providenutrition we have introduced ‘Kesar Dahi' - a premium product under the brandGowardhan. It is a flavored curd made from rich and natural kesar (saffron) is an efforttowards expanding the dahi portfolio. Gowardhan Kesar Dahi is made from 100% cow's milkand has an authentic saffron taste to meet consumer's evolving taste and needs. It isnatural as it does not contain added preservatives or artificial colours.

We entered in to the ready-to-eat Indian desserts market by introducing Gulab Jamun andRasgulla under the brand Gowardhan. They are made from Gowardhan Ghee and cow milk. Wehave introduced these two products on a small scale which we will gradually scale upacross India. The product has been launched across India with the main markets for GulabJamun being West North and South India and those for Rasgulla being North and EastIndia. We also plan to introduce Mysore Pak Sonpapdi etc. in the future. We are excitedto bring this range of desserts to the market.

The evolving fitness and sports culture in India has increased the demand for sportsnutrition supplements. Avvatar entered into the above category as it is the first 100%vegetarian whey protein made in India. Avvatar's products are quality tested at everystage and have been certified by Informed-Sport UK- a global leader in sports nutritioncertification. Hence it is considered the best Indian whey protein product. This categoryis going to be one of our prime area of focus going forward.

We have launched a new variant "Avvatar Advanced Mass Gainer" to expand thebasket of product offerings in order to cater to the varied consumer utility taste andconvenience. Earlier we had introduced Avvtar whey protein which had garnered hugeconsumer acceptance. It is the 1st Mass Gainer in India to be certified by Informed Sportsfrom a WADA approved lab in UK confirming that it is free of banned substances making ita perfect product for both consumers and athletes alike. It is specially designed forIndian consumers after understanding Indian dietary patterns. It has no added sugar whichensures that all the required calories comes from good quality proteins and carbohydrates.

We have also designed a product called "Avvatar Advanced Muscle Gainer" whichsupports lean muscle gain with controlled fat levels. The product is available in a richchocolate flavour with pack sizes of 3.3 lbs 6 lbs and 10 lbs. The science behind theproduct is a protein-carbohydrate matrix which is a combination of both complex and simplecarbohydrates along with proteins so that while the body's immediate need for energy ismet by the simple carbohydrates the complex carbohydrates provide a sustained release ofenergy sparing the protein for muscle repair and growth. This method is more suitable forlong term muscle gain unlike the traditional methods that make the body go through theextreme of gaining unhealthy fat first through bulking up temporarily and then having tocut down again.

The brand also includes ‘Rapid' a Whey based energy drink. This is a high growthmarket that offers a massive opportunity for future growth as more Indians turn towardsfitness.

After experiencing a successful launch of the Avvatar Advanced Muscle Gainer and MassGainer we also entered into whey isolate category with the launch of ‘AvvatarISORICH'. The first truly ‘Made in India' whey protein Isolate Avvatar ISORICH isspecially designed to support the lean muscle gains by replenishing high protein needsrequired by the body. It has been specially formulated to meet the requirements of theIndian consumers based on Indian dietary patterns and body types and is best suited forlactose intolerant strict calorie and carbohydrate watchers. Each serving delivers 29gmof pure whey protein isolate which is one of the highest in the category. ISORICH isavailable in two exciting flavours - cardamom and chocolate. The product is sugar freesoya free and gluten free.

We have also appointed Mr. Sunit Jadhav as Avvatar Brand Ambassador who is an Indianbodybuilder and recently won Mr. Asia title in heavy weight category. He is the well knownface in the fraternity and played in the victorious Maharashtra shri six times in a row.He is associated with the brand because he believes in the Avvatar's philosophy of#Reconstructyourself

To strengthen our health and nutrition category last year we have introduced ‘Go'Protein Power. As we have committed to deliver products for mass as well as nicheconsumers we have kept our promise in health and nutrition segment as well. Avvatar isthe sport nutrition which can be consumed by fitness freaks athletes gym goers etcwhereas Go Protein power is the protein supplement which can be consumed by all agegroups. Go Protein Power is a 100% vegetarian protein. It contains easily digestibleprotein made from cow's milk which helps in building lean muscle as well as repairs muscleand tissue. It is quality tested at every stage and hence poised to be of high qualityand purity.

We have collaborated with Swedish research organisation ColoPlus AB to launch acolostrum-based nutrition product in India called Go Colo Power. We acquired the patentrights for this technology from Coloplus AB which is a research and development companythat develops colostrum-based therapeutic food. Colostrum is the first pre-milk fluid ofthe cow after the calf is born and considered to be a good source of many vitamins andminerals. We have set up a mechanism to source colostrum milk from farmers whichotherwise goes waste and will offer them higher returns. The product is being made atManchar plant in Maharashtra. Go Colo Power is available in powder form and can beconsumed by mixing into various food items such as porridge soups etc. The highcolostrum values help fight diseases that reduce the body's immunity. We will leverage onits distribution channel including modern-trade stores chemists channel and e-commerce.

To strengthen our footprint in Northern and North - East region we acquired the DanoneFoods and Beverages India Pvt. Ltd the local entity of French dairy firm Danone SA.facilities at Sonipat Haryana. It contributed Rs 65-70 crore to our total turnover duringthe last fiscal. We are currently processing about 60000 litres per day of milk atSonipat which is being sourced from Maharashtra Haryana and Rajasthan. The process ofsetting up milk procurement network in this region is ongoing and will help us growfurther.

Our premium milk brand ‘Pride of Cows' is now available in Delhi. We have tied upwith Indigo Cargo services for airlifting the products to Delhi on a daily basis and weensure that the milk is maintained at 4 degrees Celsius temperature throughout untildelivery. Pride of Cows has drawn a huge appreciation from our discerning clientele thatvalues fresh organic produce that helps them live a rich wholesome life.

Along with the range we strongly believe in reach as well. Our distribution modelwhich is based on the theory of constraint since last year allowed us to improve thedistribution reach with lower stocks outs reducing non - moving inventory and betterrationalisation of inventory at retailers dealers and at the company level. Our retailtouchpoints have increase to 3.5 lakh in FY 2018-19 from the 2.5 lakh in FY 2017-18.Availability levels for our products at the depot and distributor level have been steadiedat ~95% while ensuring freshness and timely replenishment smaller orders quick problemresolution and improved depot and inventory norms are helping us to serve our customerswith greater consistency and efficiency. Plans are to take this model across the country.

Export Market

PMFL enjoys a strong presence and brand recall across several geographies through itsexports across UAE Singapore Oman Kuwait Mauritius New Zealand Congo Hong KongPhilippines Sri Lanka Bangladesh Maldives USA etc. We have also exported sizablevolumes of dairy commodities to Saudi Arabia Afghanistan Pakistan Peru ThailandTurkey Syria and others. Export sales amounted to Rs 761.9 Million.

Material Changes Affecting The Company

There are no material changes and commitments affecting the financial position of theCompany which occurred after the end of the financial year i.e. March 31 2019 till thedate of this report.

Performance of Subsidiary Company

As on March 31 2019 the Company has one Wholly Owned Subsidiary called BhagyalaxmiDairy Farms Private Limited (BDFPL) which is located at Manchar Pune. BDFPL which isfully automated cow farm housing over 2100 Holstein breed cows with superior qualityyield. BDFPL was established with the aim to educate farmers about best practice ofbreeding feeding animal management and improving productivity.

Parag Milk Foods formed an R& D Centre called Bhagyalaxmi Dairy Farms in 2005 withthe objective of providing scientific knowledge of feeding breeding milking andprocessing. We can proudly say that we are the pioneers to introduce safe and pure milk inIndia as per global standards. At Bhagyalaxmi Dairy Farms we host more than 2100 HF cowswhich are known for high quality and quantity of milk. We love to pamper and nurture ourcows because we believe that happy cows gives better milk. We have developed the finestcow comfort technology at our farm which includes rubber mats to lie on fans and foggersto get cooled under it brushes to groom their body clean RO treated water calm soothingmusic and insulated roof of cow sheds to reduce heat stress.

Along with our cow comfort technology our panel of expert nutritionist plan awholesome meal according to cows age and stage of lactation to ensure the right balance ofminerals and vitamins. We called this "total meal ration" to keep our cows ingood health with the objective of getting nutritive milk which is full of love andgoodness. Our wholesome meal consists of alfa soya maize seasonal vegetables andgreens. We are continuously improvising in our stringent quality policy so that our milkis free of any antibiotic residue. We are the first dairy farm in the country which hasimplemented naturopathy by using homeopathy and ayurveda to treat our cows. This therapydoes not keep any residue behind in the milk. Thus a step forward towards SAFE MILK. Wehave the finest international technology for milking process with our 50-point automatedrotary milking parlor. Our strict pre milking procedure ensures milk is hygienicallyproduced and every cow goes through a thorough health check thrice in a day. On perfectingour practices to achieve Safe and pure milk we introduced first ever premium and ‘byinvitation only' brand "Pride of Cows "in India in 2011.

Pride of cows is milked from only HF cows owned by BDFPL processed in a controlledenvironment and delivered within 8-10 hours of milking process. Hence benefits of Prideof Cows milk in a nutshell are antibiotic free untouched by human hands no additives orpreservatives low bacterial count pasteurized and bottled in tamper proof PETtechnology.

Pride of Cows caters its premium service across four major metros in India MumbaiDelhi Surat and Pune. We deliver Farm fresh milk to more than 45000 consumers at theirdoorstep within 8-10 hrs of milking. We aim to have our brand footprints across fortyairports in India. Not only in India we also have our footprints globally in Singapore.

The farm which started as an R & D center with the objective of creating bestmilking practices among farmers today it is also known as the "Zero wastagefarm" where we give back to society by reducing reusing and recycling. Our farm isrunning on the electricity generated from biogas and supporting green gas emission. Fromthe cow dung & urine we have produced a range of organic fertilizers for our farmers.With experience we know the requirement of cow nutrition and have thus created a range ofcattle feed. We extend our services by providing dairy farming workshops for our farmers.Pride of Cows PET bottles are collected from our consumers and recycled to make productslike T shirts bags and shoes our customer feels proud to be associated with us in thisgood cause.

BDFPL's total revenue Stood at Rs 726.54 Million in FY 18-19 in comparison to Rs 832.45Million in FY 17-18. BDFPL made profit after tax of Rs 66.64 Million for FY 18-19 incomparison to Rs 85.78 Million in FY 17-18.

Pursuant to the provisions of Section 129 of the Act read with Rule 5 of the Companies(Accounts) Rules 2014 a separate statement containing the salient features of thefinancial statements of the subsidiary Company in the prescribed format Form AOC-1 isappended as Annexure ‘I' to this report.

The Company has no associate companies within the meaning of Section 2(6) of the ActPursuant to the provisions of Section 136 of the Act the financial statements of thesubsidiary are uploaded on the website of the Company and shall beavailable for inspection by any Member at the registered Office of the Company on allworking days (Monday to Friday) during business hours till the date of the Annual GeneralMeeting. Any Member desirous of having a copy of the Financial Statements of thesubsidiary company can obtain the same from the Company by making a written request inthis regard.

Pursuant to the Listing Regulations the Company has formulated a policy fordetermining its "material subsidiaries". The said policy is uploaded on thewebsite of the Company -

Consolidated Financial Statements

In accordance with the provisions of sub -section (3) of Section 129 of the Act readwith the Rules framed thereunder and the provisions of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (hereinafter referred to as the "SEBIListing Regulations") the audited consolidated financial statements of theCompany including the financial details of the Subsidiary company form part of thisAnnual Report. The Consolidated financial Statements have been prepared in accordance withthe Accounting Standards prescribed under Section 133 of the Act.

Directors and Key Managerial Personnel

In accordance with the provisions of Section 152 of the Act and other applicableprovisions if any of the Act read with the Companies (Appointment and Qualification ofDirectors) Rules 2014 (including any statutory modifications(s) or re-enactment(s)thereof for the time being in force) and the Articles of Association of the Company Mr.Devendra Prakash Shah (DIN: 01127319) Whole time Director retires by rotation at theforthcoming Annual General Meeting and being eligible offers himself for re-appointment.The Board recommends his re-appointment for the consideration of the Members of theCompany at the ensuing Annual General Meeting.

The Independent Directors of the Company viz. Mr. Narendra Ambwani and Ms. RadhikaPereira were appointed as Independent Directors with effect from May 26 2015 and Mr.Nitin Dhavalikar was appointed as an Independent Director with effect from July 28 2015to hold office for a term of five consecutive years in line with the provisions ofSection 149 and other applicable provisions of the Act including the rules made thereunderand the Listing Regulations.

The Nomination and Remuneration Committee and the Board of Directors in their meetingheld have recommended and approved the re-appointment of Mr. Narendra Ambwani Mr. NitinDhavalikar and Ms. Radhika Pereira as Independent Director for a second consecutive termperiod of 5(Five) years subject to approval of Members at this ensuing Annual GeneralMeeting of the Company.

In compliance with terms of Regulation 36(3) of the Listing Regulations brief resumeexpertise and other details of the directors proposed to be re-appointed are given in theNotice convening the ensuing Annual General Meeting. None of the Directors aredisqualified for appointment / re-appointment under Section 164 of the Act. None of theDirectors is related inter-se to each other.

All Independent Directors of the Company have given declarations that they meet thecriteria of independence as laid down under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations. In the opinion of the Board the Independent Directorsfulfil the conditions of independence specified in Section 149(6) of the Act andRegulation 16(1) (b) of the Listing Regulations. The Independent Directors have alsoconfirmed that they have complied with the Code for Independent Directors prescribed inSchedule IV to the Act and Company's Code of Conduct for Directors and Senior ManagementPersonnel.

Key Managerial Personnel (Kmp)

Pursuant to the provisions of Section 2(51) and Section 203 of the Act read with Ruesframed thereunder the following person were Key Managerial Personnel of the Company as onMarch 31 2019

1. Mr. Devendra Prakash Shah Whole time Director

2. Mr. Pritam Prakash Shah Managing Director

3. Mr. Vimal Agarwal Chief Financial Officer

4. Ms. Rachana Sanganeria Company Secretary & Compliance Officer

Meetings of the Board of Directors and Its Committees

The Board of Directors of the Company met 5 (five) times during the year. The detailsof composition of the Board and its Committees their meetings held during the year underreview and the attendance of the Directors / Committee Members at the respective meetingsare provided in the Corporate Governance Report which forms part of this Annual Report.

During the year under review the Board accepted all the recommendations made by theAudit Committee. The Board evaluates the recommendations made by Audit Committee and seeksfurther information as they may require. There were no instances where the Board has notaccepted any recommendation of Audit Committee.

Committees of the Board

The Board of Directors has the following Committees:

1. Audit Committee

2. Nomination and Remuneration Committee;

3. Stakeholders' Relationship Committee;

4. Corporate Social Responsibility Committee;

5. Finance Committee

The details of the Committees along with their composition number of meetings held andattendance at the meetings are provided in the Corporate Governance Report.

Audit Committee

The Audit Committee met four times during the year the details of the meetingscomposition of the Audit Committee and terms of reference of the Committee are given inthe Corporate Governance Report which forms a part of this Report.

Performance Evaluation of Board

During the year the Board carried out an annual evaluation of its performance as wellas of the working of its committees and individual Directors including Chairman of theBoard.

This exercise was carried out through a structured questionnaire prepared separatelyfor the Board committees Chairman and individual Directors. Independent Directorscarried out the Chairman's performance evaluation at a separate meeting. The questionnaireand evaluation process was reviewed in the context of amendments to the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 brought about by the Kotak Committee recommendations which require the Board toconfirm fulfilment of the independence criteria by Independent Directors and theirindependence from management. The questionnaire for Board evaluation is prepared takinginto consideration various aspects such as effectiveness and composition of Boardproviding of strategic direction by Board performance management of Board riskmanagement core governance and compliance Board's functioning quality quantity andtimeliness of the information flow between Board members and management etc. Performanceof the committees is evaluated based on their effectiveness in carrying out theirrespective mandates. Peer assessment of Directors based on parameters such asparticipation and contribution to Board deliberations ability to guide the Company in keymatters knowledge and understanding of relevant areas were received by the Board forindividual feedback. The Board acknowledged the key improvement areas emerging throughthis exercise and action plans to be taken. All the Directors were satisfied with theevaluation process.

Familiarization Programmes for the Independent Directors.

The Company believes that a Board which is well informed / familiarised with theCompany and its affairs can contribute significantly to effectively discharge its role oftrusteeship in a manner that fulfils stakeholders' aspirations and societal expectations.

In pursuit of this the Board members are provided with necessary documents reportsand internal policies to enable them to familiarise with the Company's procedures andpractices. Periodic presentations are made at the Board and Committee meetings to updatethem on the changes / developments in the domestic / global corporate and industryscenario including those pertaining to statutes / legislations & economic environmentand on matters affecting the Company to enable them to take well-informed and timelydecisions. Detailed presentations are made by Department heads to update the Directors onthe various operations or products of the Company.

The familiarisation programme for Independent Directors in terms of provisions ofRegulation 46(2)(i) of Listing Regulations is uploaded on the website of the Company

Nomination and Remuneration Policy

The Board of Directors has framed a Nomination and Remuneration policy which lays downa framework in relation to remuneration of Directors Key Managerial Personnel and SeniorManagement of the Company. This policy also lays down criteria for selection andappointment of Board Members.

Appointment and Remuneration of Directors is in accordance with the said policyformulated pursuant to Section 178 of the Companies Act 2013 and Regulation 19 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2019 and the policy isavailable on the website of the Company viz.

Directors' Responsibility Statement

Pursuant to the requirements under Section 134(5) of the Companies Act 2013 withrespect to the Director's Responsibility Statements the Board of Directors of the Companyhereby confirms:

a. that in the preparation of the annual accounts for the Financial Year ended March31 2019 the applicable accounting standards have been followed along with properexplanation relating to material departures;

b. that the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of theFinancial Year and of the profit and loss of the Company for the Financial Year endedMarch 31 2019.

c. that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

d. that the directors had prepared the annual accounts for the Financial Year endedMarch 31 2019 on a going concern basis;

e. the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

f. that the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

Disclosure Regarding Issue of Employee Stock Options

The Company had instituted the ESOP Trust in the name of "Parag Milk FoodsEmployees Stock Option Trust" and the "Parag Milk Foods Limited-Employee StockOption Scheme 2015" (ESOS 2015) during the Pre-IPO period. The ESOS 2015 is inaccordance with the Securities and Exchange Board of India (Share Based Employee Benefits)Regulations 2014 and the relevant provisions of the Act along with the Rules madethereunder including any amendments made there to or notifications thereof.

During the year under review from the 227000 options granted & vested from theESOP Trust 50985 Options were exercised by the employees pursuant to Parag Milk FoodsLimited-Employee Stock Option Scheme 2015" (ESOS 2015) the said ESOS 2015 wasratified by the shareholders of the Company in the 26th Annual General Meeting held onSeptember 19 2018.

The scheme was renamed to "Parag Milk Foods Limited- Employee Stock Option Scheme2018"- ESOS 2018 maintaining all the terms and conditions of the erstwhile ESOS2015. The Nomination & Remuneration Committee on November 01 2018 from the remainingshares in the ESOP Trust approved grant of 166015 options to the eligible employees atFair Market Value of the shares of the Company at Rs 258.90 (Two Hundred Fifty EightRupees and ninety paise) per option (based on the closing market price of Rs 258.90 of theCompany's shares in NSE on October 31 2018) under the Parag Milk Foods Limited -EmployeeStock Option Scheme 2018- "ESOS 2018" (erstwhile ESOS 2015).The said optionscarry the right to apply for equivalent number of equity shares of the Company of the facevalue of Rs 10/- each

As per Regulation 14 of Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 read with Securities and Exchange Board of India circulardated June 16 2015 the details of the ESOS are uploaded on the Company's website.

The Company has received a certificate from M/s. Haribhakti & Co. LLP charteredAccountants that ESOS 2018 (erstwhile ESOS 2015) has been implemented in accordance withSEBI regulations and the resolution passed by Members in the General Meeting. Thecertificate will be placed at the ensuing Annual General Meeting for inspection byMembers.

Details required to be provided under Section 62 of the Act and Rule 12(9) ofCompanies (Share Capital and Debenture Rules 2014) and SEBI (Share Based EmployeeBenefits) Regulations 2014 are set out as Annexure ‘II' to this Report

Internal Financial Control Systems and Their Adequacy

The Company has an effective internal control and risk mitigation system which isconstantly assessed and strengthened with new/revised standard operating procedures. TheCompany's internal control system is commensurate with its size scale and complexities ofits operations. The internal and operational audit is entrusted to M/s. KPMG (In India).The main thrust of internal audit is to test and review controls appraisal of risks andbusiness processes besides bench marking controls with best practices in the industry.

The Audit Committee of the Board of Directors actively reviews the adequacy andeffectiveness of the internal control systems and suggests improvements to strengthen thesame.

The Audit Committee of the Board of Directors Statutory Auditors and the BusinessHeads are periodically apprised of the internal audit findings and corrective actionstaken. Audit Committee plays a key role in providing assurance to the Board of Directors.Significant audit observations and corrective actions taken by the management arepresented to the Audit Committee of the Board. To maintain its objectivity andindependence the Internal Audit function reports to the Chairman of the Audit Committee.

Risk Management Framework

The Company has a robust Risk Management framework to identify measure manage andmitigate business risks and opportunities. This framework seeks to create transparencyminimize adverse impact on the business strategy and enhance the Company's competitiveadvantage. This risk framework thus helps in managing market credit and operational risksand quantifies potential impact at a Company level. The Audit Committee reviews theserisks on periodical basis and ensures that the mitigation plan is in place. The Companyalso has a mechanism in place to inform the Board Members about risk assessmentminimization procedures and periodical review thereof.

The risks faced by the Company and the various measures taken by the Company aredetailed in Management Discussion and Analysis section.

Vigil Mechanism / Whistle Blower Policy

In compliance with the provisions of Section 177 of the Act and Regulation 22 of theSEBI Listing Regulations the Company has established a vigil mechanism to provide aframework for promoting responsible and secure whistle blowing and to provide a channel tothe employee(s) Directors and other stakeholders to report to the management concernsabout unethical behavior actual or suspected fraud or violation of the code of conduct orpolicy/ies of the Company as adopted/framed from time to time.

The details of said vigil mechanism are given in Corporate Governance Report whichforms part of this Annual Report. The Whistle Blower Policy has been uploaded on theCompany's website i.e.

Corporate Social Responsibility (Csr)

The Company has constituted a Corporate Social Responsibility Committee ("CSRCommittee") in accordance with Section 135 of the Companies Act 2013. During theyear the Board of Directors of on the recommendations of the CSR Committee haveundertaken the projects in accordance with Schedule VII of the Act and the Company's CSRPolicy.

The Report as required under Rule 9 of Companies (Corporate Social ResponsibilityPolicy) Rules 2014 is annexed as Annexure ‘III' and forms an integralpart of this Report. The Policy has been uploaded on the Company'swebsite

Related Party Transactions

All transactions entered with Related Parties for the year under review were on arm'slength basis and in the ordinary course of business. All Related Party Transactions areplaced before the Audit Committee for approval. The Audit Committee grants omnibusapproval on an annual basis for the transactions that are in the ordinary course of thebusiness and repetitive in nature. All transactions pursuant to the Omnibus approval areplaced before the Audit Committee and the Board for review and approval on a quarterlybasis.

There are no material related party transactions entered into during the Financial Yearby the Company. The disclosure of related party transactions as required under Section134(3)(h) of the Companies Act 2013 in Form AOC 2 is not applicable to the Company.Members may refer to Note no. 43 to the financial statement which sets out related partydisclosures pursuant to IND AS-24.

The policy on Related Party Transactions as formulated by the Board of Directors isavailable on the Company's website i.e.

Particulars of Loans Granted Guarantee Provided and Investments Made Pursuant to theProvisions of Section 186 of the Companies Act 2013

Details of loans granted guarantees provided and investments made by the Company underthe provisions of Section 186 of the Companies Act 2013 are provided in the Notes toFinancial Statements of the Company forming part of this Report.

Buy Back

The Company has not bought back any of its securities during the Financial Year endedMarch 31 2019.


The Company has not accepted any deposits within the meaning of Section 73 of theCompanies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014 andhence there are no unpaid / unclaimed deposits nor is there any default in repaymentthereof.

Prevention of Sexual Harassment of Women At Workplace

The Company has always believed in providing a safe and harassment free workplace forevery women working in Company's premises through various interventions and practices.The Company always endeavors to create and provide an environment that is free fromdiscrimination and harassment including sexual harassment.

The Company has in place policy on prevention prohibition and redressal of sexualharassment at workplace which is in line with the requirements of the Sexual Harassmentof Women at Workplace (Prevention Prohibition and Redressal) Act 2013. All employees(permanent contractual temporary trainees) are covered under this Policy.

During the Financial Year 2018-19 the Company has not received any complaint on sexualharassment.

Corporate Governance

The Report on Corporate Governance as stipulated in the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part ofthe Annual Report. The requisite Certificate from M/s. N.L. Bhatia & AssociatesPracticing Company Secretaries confirming compliance with the conditions of CorporateGovernance as stipulated under the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 is annexed hereto and formspart of this Report.

Management Discussion and Analysis

The Management Discussion and Analysis Report on the operations of the Company asrequired under the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is provided in a separate section and forms an integral part of this Report.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The Company in its regular course of business is vigilant to conserve the resources andcontinuously implements measures required to save energy.

The business activities of the Company are not specific to any technology requirements.In the course of operations processes are formed and implemented to achieve operationalefficiencies in the Company and in its subsidiary which assist in maintaining productquality and cost control.

Particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under clause (m) of sub-section(3)of Section 134 of the Companies Act 2013 read with Rule 8 of the Companies (Accounts)Rules 2014 are provided in the prescribed format and is enclosed as Annexure ‘IV'.

Extract of Annual Return

Pursuant to the provisions of sub-section (3) of Section 92 and sub-section (3) ofSection 134 of the Act and the Companies (Management and Administration ) Rules 2014 theextract of the Annual Return as on March 31 2019 in prescribed Form MGT-9 is annexed tothis Report as Annexure ‘V'.

Particulars of Employees and Related Disclosures

Disclosure with respect to the remuneration of Directors and employees as requiredunder Section 197 of the Companies Act 2013 read with Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are provided under Annexure‘VI' which is annexed to this Report.

In terms of the provisions of first proviso to Section 136(1) of the Companies Act2013 information pursuant to Section 197 of the Companies Act 2013 read with Rule 5(2)and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is excluded from the Annual Report being sent to the Members of the Company and isavailable for inspection by the Members at the Registered Office of the Company duringbusiness hours on working days up to the date of the forthcoming Annual General Meeting.If any Member is interested in obtaining a copy thereof such Member may write to theCompany Secretary and the same shall be provided.

The full Annual Report including aforesaid information is being sent electronically toall those Members who have registered their email addresses and is also available on thewebsite of the Company.

Significant / Material Orders Passed by the Regulators

There were no significant and material orders passed by the Regulators/Courts thatwould impact the going concern status of the Company and its future operations.

Compliance with Secretarial Standards

During the year under review the Company has complied with the applicable SecretarialStandards i.e. SS-1 and SS-2 relating to "Meetings of the Board of Directors"and "General Meetings" respectively issued by The Institute of CompanySecretaries of India.

Statutory Auditors

M/s. Haribhakti & Co. LLP Chartered Accountants Pune (Firm Registration No.103523W / W100048) were appointed as the Statutory Auditors of the Company for a period offive years at the Annual General Meeting of the Company held on 26th June 2015. Inaccordance with the Companies Amendment Act 2017 enforced on 7th May 2018 by theMinistry of Corporate Affairs the appointment of Statutory Auditors is not required to beratified at every Annual General Meeting. In view of the same the matter for ratificationof appointment of Statutory Auditors of the Company has not been included in the noticecalling the forthcoming AGM.

The notes on financial statements referred to in the Auditors Report areself-explanatory and do not call for any further comments and explanations. The Auditors'Report does not contain any qualification reservation or adverse remark. The Auditorshave not reported any fraud under Section 143 (12) of the Act and therefore no detail arerequired to be disclosed under Section 134(3)(ca) of the Act.

Cost Auditors

As per the requirement of Central Government and pursuant to Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 asamended from time to time the Company has been carrying out audit of cost records everyyear.

The Board of Directors on the recommendation of the Audit Committee has re-appointedM/s. Harshad Deshpande & Associates Cost Accountants Pune (Firm Registration Number:00378) as the Cost Auditors to audit the cost records of the Company for the FinancialYear 2019-20. As required under the Companies Act 2013 a resolution seeking members'approval for the remuneration payable to the Cost Auditor forms part of the Noticeconvening the Annual General Meeting for their ratification.

The Company has received consent from M/s. Harshad Deshpande & Associates CostAccountants to act as Cost Auditors of the Company for FY 2019-20 along with certificateconfirming their independence and arm's length relationship.

During the year 2018-19 the Cost Accountants had not reported any matter under Section143 (12) of the Act therefore no detail is required to be disclosed under Section134(3)(ca) of the Act

Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company had appointed M/s. N. L.Bhatia & Associates a firm of Company Secretaries in Practice to undertake theSecretarial Audit of the Company for the financial year 2018-19. The Secretarial AuditReport in Form MR-3 is annexed as Annexure ‘VII' to this Report.

There has been no qualification reservation or adverse remark or disclaimer in theirReport. During the year 2019 the Secretarial Auditors had not reported any matter underSection 143 (12) of the Act therefore no detail is required to be disclosed under Section134 (3)(ca) of the Act.

Annual Secretarial Compliance Report

The Company has undertaken an audit for the financial year 2018-19 for all applicablecompliances as per Securities and Exchange Board of India Regulations andCirculars/Guidelines issued thereunder.

The Annual Secretarial Compliance Report has been submitted to the stock exchangeswithin 60 days of the end of the financial year.


The Board of Directors place on record their deep appreciation to employees at alllevels for their hard work dedication and commitment. The enthusiasm and unstintingefforts of the employees have enabled the Company to remain an industry leader.

The Board places on record its appreciation for the support and co-operation theCompany has been receiving from its suppliers distributors retailers business partnersand others associated with it as its trading partners. The Company looks upon them aspartners in its progress and has shared with them the rewards of growth. It will be theCompany's endeavor to build and nurture strong links with the trade based on mutuality ofbenefits respect for and co-operation with each other consistent with consumerinterests.

The Board of Directors also take this opportunity to thank all Farmers ConsumersEmployees Shareholders Clients Vendors Banks Government and Regulatory Authoritiesand Stock Exchanges for their continued support.

For and on behalf of the
Board of Directors
Devendra Shah
Place: Mumbai Chairman
Date : May 11 2019 DIN:01127319