Dear Shareholders The year under review has been an eventful one forPrabhat Dairy Limited one of significant changes and renewed vigor. We are proud tobe amongst the largest organized players in milk procurement and dairy processing.
Over the years we have successfully reconciled milk aggregationthrough a widening supply chain and direct engagement with farmers for milk procurement.On this we successfully built our institutional and consumer businesses. Our ability tocontinuously introspect and rapidly execute the requisite changes truly makes us a pioneerin our own right.
Evolution of dairy business in India
We remain proud to be a company aiming at rural prosperity and beingtheir partners in progress. The sector plays an important role in strengtheningIndia's economy and contributes 8% to the GDP. Within a span of three decades Indiahas transformed from being a country of acute milk shortage to the world's leadingmilk producer accounting for 13% of the world's total milk production. It is alsothe world's largest consumer of dairy products.
The milk processing market is growing year-on-year and is projected tobe upwards of US$ 53.17 billion by 2020. The industry as a whole has undergone severalmajor changes in recent years. Strong producer prices a promising outlook for dairyconsumption and government incentives have been attracting robust investments to the dairyprocessing sector. Players have increasingly adopted the latest technologies to superviseproductivity of milching animals and dairy farmers to monitor milk supplies.
Increasing urbanization rising incomes and proliferation of food andgrocery retail outlets across cities led to an increasing accessibility and demand forprocessed milk products in India. However the dairy industry is increasingly gettingperturbed by competitiveness cost of production and reduced productivity of animals. Toincrease competitiveness of the industry it is imperative to take efforts to reduce thecost of production. The industry is in dire need of increasing the productivity ofanimals better healthcare and breeding facilities and proper management of dairy animals.All this will lead to reduction in the cost of milk production.
However despite some of these challenges growth in India's milkprocessing industry looks promising. With social economic and financial capitalsconverging and with growing consumer base the sector is expected to report fastergrowth. International players too have been expanding their footprint in India with newproduct launches further contributing to the industry's development.
Sale of subsidiary company and Slump sale of dairy business
During the year significant changes took place within our business. Wesold off our subsidiary Sunfresh Agro Industries to French multinational GroupeLactalis' local arm Tirumala Milk Products Pvt. Ltd. via a share purchase agreementthen the dairy business undertaking of our Company was sold on slump sale basis toSunfresh Agro Industries who became the subsidiary of Tirumala Milk Products PrivateLimited. The transaction was expected to be completed by the first quarter of FY 2019-20and it finally got completed in April 2019. The French company is making this acquisitionthrough its wholly-owned Indian subsidiary Tirumala Milk Products by way of a slump sale.The association with Lactalis has offered us a business platform for accelerated growthmomentum in becoming one of the largest private dairy businesses in India. With this dealLactalis has increased its presence now in Western and Southern India.
Benefits to stakeholders
Lactalis is reputed as one of the world's largest dairy playersproducing cheese milk and butter and has a presence in more than 120 countries. Ourcustomers and business partners will be dealing with the best dairy company in the world.The farmers too will gain exposure to better technology and best practices in dairyfarming. They will also gain access to the global network of Lactalis and join hands witha more sustainable buying partner. The acquisition by Lactalis also represents ameaningful opportunity for our employees as they will be transferred to Lactalis. Theshareholders will also be associated with one of the global leaders in dairy products. Wehave obtained shareholders' nod to sell off the dairy business.
Being the preferred choice for Lactalis
What made Lactalis choose our company is the fact that we are a companywith a solid procurement network and a world-class integrated milk and dairy products.Through a network and strong supply partnership of more than 1 Lakh farmers inMaharashtra we collect around 10 Lakh liters of milk per day. With two state-of-the-artmanufacturing facilities we have extended ourselves from being a backended milkprocessing company into a consumer-facing organization. While we maintained our leadershipin the ingredient business we also marched ahead towards the consumer businessleveraging our milk procurement and brand excellence.
Going forward we are set to launch a separate cattle feed animalnutrition and animal genetics business. Right now this is a small business but we intendto make this big over the next 2-3 years.
Before I conclude let me thank all of you for your continued supportand encouragement. We are committed to grow and create more value for all our stakeholderswith a renewed sense of optimism confidence and ambition.
|Best Wishes |
|Sarangdhar R. Nirmal |
|Chairman & Managing Director |