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Umang Dairies Ltd.

BSE: 500231 Sector: Agri and agri inputs
BSE 15:33 | 22 Mar 56.35 -1.65






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OPEN 59.60
52-Week high 97.60
52-Week low 44.05
P/E 13.35
Mkt Cap.(Rs cr) 124
Buy Price 56.00
Buy Qty 2.00
Sell Price 58.00
Sell Qty 25.00
OPEN 59.60
CLOSE 58.00
52-Week high 97.60
52-Week low 44.05
P/E 13.35
Mkt Cap.(Rs cr) 124
Buy Price 56.00
Buy Qty 2.00
Sell Price 58.00
Sell Qty 25.00

Umang Dairies Ltd. (UMANGDAIRY) - Director Report

Company director report

To the Members

The Directors have pleasure in presenting the 25th Annual Report and Audited Accountsof the Company for the year ended 31st March 2018.


(' in Lakhs)

2017-18 2016-17
Revenue from Operations 24576 21076
Profit before Finance Cost and Depreciation (PBIDT) 1343 733
Profit before Depreciation and Tax (PBDT) 969 588
Profit before Tax (PBT) 610 249
Profit after Tax (PAT) 527 165
Surplus brought forward 2958 3211
Total amount available for appropriation 3485 3376
Capital Redemption Reserve 151 108
General Reserve 50 45
Dividend (Incl. Tax) - 265
Surplus carried forward 3284 2958


The Directors are pleased to recommend a dividend of 5% on equity shares.


The Revenue from Operations increased to Rs 24576 Lakhs during the year as compared toRs 21076 Lakhs in the previous year clocking a growth of 16.61%. The capacityutilization for the year stood at 48% compared to 29% in the previous year. The Company iscontinuing to invest behind retail distribution expansion and up-gradation of distributioninfrastructure. This will help in driving sales and distribution for the consumerproducts.

Company has been able to retain its market share in Dairy Creamer segment with itsbrands JK WHITE MAGIK JK DAIRY TOP & MILK STAR. JK Dairy Top continues to maintainits leadership in the mid segment of dairy creamers. Single serve sachets of 3gm and 5 gmof White Magik have found greater acceptance by Hospitality HORECA segment andInstitutional buyers.

The Company has also developed a market for Bulk products including SMP and Ghee. Theseproducts are being sold in retail and consumer markets.

Company continued its focus in Pre-Mix powders for tea and coffee vending machines.Company continued its good business and relations with institutional clients like CocaCola Walmart etc.

Significant effort was also made during the year to increase efficiency at plant byfocusing on utility costs and manpower productivity to gain efficiency resulting in betterprofitability.

For the year 2017-18 the milk prices remained volatile and high throughout the year.For year 2018-19 we expect Milk prices to be soft which will reduce the prices of rawmaterial significantly. This is also likely to create excess availability of powders andghee in the industry effectively pushing down prices for the commodities.


Your Company operates and manages a facility owned by another Company to process andpack Liquid Milk in poly pouches for Mother Dairy under a long term agreement. Capacityutilization for the year was at 88%.

The Curd Chhach facility started during the year stabilized production and we were ableto supply the finished goods to Mother Dairy of required quality and capacity. We expectthe capacity utilization of this plan to be as per budgeted volumes for 2018-19.


Company wishes to become a significant player in Dairy & Foods space. The Companyhas set up a small plant for Paneer manufacturing which is under stabilization process andexpected to start commercial production from Q1 onwards 2018-19.

Besides modernization of Plant and R&D facilities Company is planning to expandproduction facility of Drying Plant by removing the bottlenecks and modification in thedryer. The Company is planning to invest resources behind expanding distribution of therecently launched products of Cow Ghee Canned Paneer UHT Milk to gain Market Share.

Company is also working on developing new value added products which are underdifferent stages of development at R&D.


Company is sanguine about the fact that to sustain a value added product portfolio itis highly imperative to have captive milk bank where milk is collected direct from thefarmers. As it is Company is one of the few ones who have more than two decades oldvillage level collection system under which milk is collected from nearly 525 villagescomprising of about 18500 farmers.

The company will continue its efforts to expand the Village level collection system inthe vicinity to ensure quality milk supplies. We also have a panel of contractors who cansupply good quality milk at short notice as and when required.


Umang Dairies Ltd has FSSAI License in addition to this all our Milk Chilling Centersand Warehouses are also covered under FSSAI.

The company has always focused on Good Manufacturing Practices(GMP) and HygienicPractices as part of its culture. All incoming Milk Consignments are being screened forAdulteration as per the Guideline of FSSAI to maintain purity of Milk and resultantproducts.

Recently National Dairy Development Board (NDDB) has awarded most coveted QualityMarks for Packing Operation of Poly Pack Milk under Mother Dairy Brand.

Our units have been successfully audited for quality and GMP practices by companieslike Coke Nuflower Walmart Spar on GMP & Food Safety for Business Continuation.

industry scenario


India is the world's largest producer and consumer of dairy. The dairy industry inIndia was worth INR 500000 Crore in 2016. India is also globally the largest milkproducing country since 1997. In India the co-operatives and private dairies have accessto only 20% of the milk produced. Approximately 34% of the milk is sold in theunorganized market while 46% is consumed locally. This is in comparison to most of thedeveloped nations where almost 90% of the surplus milk passes through the organizedsector.

Utilizing the benefits of an integrated sales and distribution system and employingdiversified sourcing is the way forward in the sector. The value added dairy industrysegment is expected to attract investments and entry of new players in the coming years.Players are emphasizing on offering the consumer better quality differentiated products.Consumers are looking for more and more healthy dairy options.

This trend is expected to continue in the coming years. As per research agenciesduring the period 2015-2020 the organised segment is expected to grow at a CAGR of 19.6%as compared to 13.3% for the unorganised segment. This would result in the organisedsegment accounting for 26% of the total market by 2020.

The number of registered units manufacturing dairy products in India has increased byabout 23% between 2010-11 and 2014-15.



i. Increasing preference for a healthy lifestyle is expected to nudge the Indian dairyindustry to grow at a compounded 15% annually till 2020.

ii. It is expected that the value-added product market will increase the share of theorganized dairy industry over 26% by 2020 as compared to 22% in 2016.

iii. In the quest for gaining visibility stakeholders in the dairy industry have beeninvesting in packaging to create brand loyalty and awareness.

iv. Over the last few years several well established Indian companies andmultinationals have made efforts to move in into the sector. This has resulted in a slewof new and innovative products being launched at the upper-end of the spectrum.

v. Private organized players are aggressively investing in the market and gainingshare. Their revenues are growing at a compound annual growth rate of ~15% between fiscals2013 and 2018 compared with the sector's growth of ~12%.


i. The high stock of SMP & Fat in the industry is a cause of great concern as thiswill lead to a price decrease in the coming months leading to losses for the industry.

ii. There is a trend of adulterated ghee being sold in some markets at very low priceswhich may have serious implications on consumer health if it goes unchecked.

iii. Only about 20% of the milk produced is channelled for organised marketing and therest remains in the ambit of unorganised supply chains.

iv. Un-chilled and unpasteurised milk can produce disease-causing germs and bacteria.FSSAI (Food Safety and Standards Authority of India) pointed out in a survey that 70% ofthe Urban and 31% of rural supplies don't meet the required quality standards.


India has seen a substantial increase in the per capita income and growth in disposableincome has significantly improved the purchasing power over the past decade. Rapidurbanization has led to a major increase in the demand for packaged/processed foodsfavorably impacting the dairy industry in the country. In the era of digitization andincreased access to actionable information the Indian populace is becoming health andproduct quality conscious which has led to the improved variety of food productsavailable in the country. The ever-increasing demand for value-added milk products hasalso increased the demand for milk production.

The key to success in the dairy industry in India has been largely based on thecapacity of the player to gain a share of a consumers' monthly basket. Hence industrytrend has been to focus on providing a gamut of products across price ranges. Whilepasteurized milk is a volume driven market value-added products such as cheeseprobiotics and flavored milk-based drinks along with flavored yogurts have picked upsales.

Value-added products require high-end infrastructure for manufacture storage andlogistics and are being eyed by several investors. In the quest for gaining visibilitystakeholders in the dairy industry have been investing in packaging to create brandloyalty and awareness. Innovative technologies of packaging are coming into the picturefor milk and especially value-added products because of an overall tropical condition ofthe subcontinent.

Your company is also actively exploring entering some of these segments to gain betterconnect with the consumers.

The government is creating strategies for additional milk processing infrastructurewhich will help to double the income of dairy farmers by 2022.

The government is actively participating in the investment space by the means ofvarious schemes such as National Dairy Plan Phase I (NDP I) National Programme for DairyDevelopment (NPDD) and the Dairy Entrepreneurship Development Scheme (DEDS). Thegovernment has also allowed 100% FDI for the food processing industry to boost the growthof dairy processing and value-added dairy products.

The expected growth rate for the dairy sector between the periods of 2018 to 2020 isexpected to be 15%. Investments worth INR 15000 Crore is expected to flow into the dairyindustry in India in next couple of years. It is estimated that currently about 80players account for 60% of the dairy capacity in India. The organized dairy sectoraccounts for about INR 75000 Crore in terms of revenue.


With significant increase in milk cost during the last two years farmers are findingdairy farming a lucrative profession. This is translating into farmers having a largerherd of animals as well as high milk yield bovines. Pressure on land resources isincreasing. There is no way to increase the availability of land for fodder production.Answer lies in the usage of high yield fodder crop techniques and simultaneously replacinglow yield breed animals by high yield ones.

Recently the prices of milk came down in western & southern markets of India.Further the co-operatives are holding large stocks of SMP's which may create morecompetition in the Industry.


The Company recognizes the contribution and importance of its employees in today'shighly competitive environment and has been systematically developing their skills andempowering its employees. People are encouraged to take on new roles and expand theirhorizons. Training needs at different levels are identified through Performance AppraisalSystem. Need based training programs are regularly organized for all level of employees.In order to encourage leadership and problem solving qualities among workmen the Companyhas helped to established Quality Circles. A number of job rotations are done to enhanceemployees' skills as well as to enrich their work experience.

Industrial Relations remained cordial throughout the year under review.


Internal audit by corporate audit team consisting of Chartered Accountants as well asan external firm of Chartered Accountants is in place and carries out their job atpredetermined frequency. Their task is to audit internal control systems financialtransactions and statutory compliances. Findings/ audit reports along with the actiontaken reports are reviewed by the Audit Committee. The Audit Committee also reviews theeffectiveness of Company's internal controls and regularly monitors implementation ofaudit recommendations.

The Company has in place adequate internal controls commensurate with the size andnature of its operations.


An extract of the Annual Return as on 31st March 2018 in the prescribed form MGT -9 isattached as Annexure-1 to this Report and forms part of it.

particulars OF LOANS Guarantees OR Investments

The particulars of loans guarantees or securities and investments covered under theprovisions of Section 186 of the Companies Act 2013 are given in the financialstatements.

related party TRANSACTIONS

During the financial year ended 31st March 2018 all the contracts or arrangements ortransactions entered into by the Company with the Related Parties were in the ordinarycourse of business and on arm's length basis and were in compliance with the applicableprovisions of the Companies Act 2013 and SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015.

Further the Company has not entered into any contract or arrangement or transactionwith the Related Parties which could be considered material in accordance with the Policyof the Company on materiality of Related Party Transactions. In view of the abovedisclosure in FORM AOC-2 is not applicable.


Smt. Sharda Devi Singhania retires by rotation and being eligible offers herself forre-appointment at the ensuing AGM.

All the Independent Directors of the Company have given requisite declarations thatthey meet the criteria of independence as provided in Section 149(6) of the Companies Act2013 and also Regulation 16(1)(b) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

Shri N. C. Baheti ceased to be Manager under Companies Act 2013 on 10th May 2017.


The Company has framed Corporate Social Responsibility (CSR) Policy in accordance withthe provisions of the Companies Act 2013 and rules made thereunder.

A detailed report on Company's CSR activities along with the annual report on the CSRactivities undertaken by the Company during the financial year under review in theprescribed format is annexed to this Report as Annexure-2.


(a) Statutory Auditors and their Report

M/s Singhi & Co. Chartered Accountants have been appointed as Auditors of theCompany to hold the office from the conclusion of the 24th Annual General Meeting held on27th September 2017 until the conclusion of the 29th Annual General Meeting to be held inyear 2022 subject to ratification of the appointment by the members at the respectiveAGMs. Accordingly matter relating to the appointment of the Auditors will be placed forratification by members at the forthcoming AGM. The observations of the Auditors in theirreport on Accounts and the Financial Statements read with the relevant notes are selfexplanatory.

(b) Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors appointed Shri Namo Narain Agarwal Company Secretary in Practice as SecretarialAuditor to carry out Secretarial Audit of the Company for the financial year 2017-18. TheReport given by him for the said financial year in the prescribed format is annexed tothis Report as Annexure-3. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

(c) Cost Auditor and Cost Audit Report

The Cost audit for the year ended 31st March 2018 is being conducted by M/s SanjayKumar Garg & Associates Cost Accountants and the report will be submitted to theMinistry of Corporate Affairs Government of India.


The Company was forced to temporarily shut down its plant at Gajraula w.e.f. 28thApril 2017 since the Hon'ble National Green Tribunal ("NGT") ordered closureof certain units of Gajraula including that of the Company for suspected disposal ofeffluents. Upon submission NGT later passed an order permitting the operations w.e.f.16th May 2017 at our plant at Gajraula.

The Company is equipped with a state-of-the-art effluent treatment plant with RO andhas a "zero liquid discharge" operation status.

There were no other significant and material orders passed by the Regulators or Courtsor Tribunals which would impact the going concern status of the Company and its futureoperations.

The Company is environmentally conscious and operates its plant in Gajraula (U.P.)with zero discharge and is in compliance with all applicable environmental norms and lawsincluding previous consents from NGT and State Pollution Control Board.


The details as required under Section 134(3)(m) read with the Companies (Accounts)Rules 2014 is annexed to this Report as Annexure-4 and forms part of it.

particulars of remuneration

Disclosure of the ratio of the remuneration of each director to the median employee'sremuneration and other requisite details pursuant to Section 197 (12) of the CompaniesAct 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed to this Report as Annexure-5. FurtherParticulars of Employees pursuant to Rule 5(2) & (3) of the above Rules form part ofthis Report However in terms of provisions of Section 136 of the said Act the Reportand Accounts are being sent to all the members of the Company and others entitled theretoexcluding the said particulars of employees. Any member interested in obtaining suchparticulars may write to the Company Secretary. The said information is available forinspection at the Registered Office of the Company during working hours.

corporate governance

Corporate Governance - including details pertaining to Board Meetings Nomination andRemuneration Policy Performance Evaluation Risk Management Audit Committee and VigilMechanism:

Your Company reaffirms its commitment to the highest standards of corporate governancepractices. Pursuant to Regulation 34 (3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 a Management Discussion and Analysis

Corporate Governance Report and Auditors Certificate regarding compliance of conditionsof Corporate Governance are made a part of this Report.

The Corporate Governance Report which forms part of this Report also covers thefollowing:

a) Particulars of the Four Board Meetings held during the financial year under review.

b) Policy on Nomination and Remuneration of Directors Key Managerial Personnel andSenior Management including inter alia the criteria for performance evaluation ofDirectors.

c) The manner in which formal annual evaluation has been made by the Board of its ownperformance and that of its Committees and individual Directors.

d) The details with respect to composition of Audit Committee and establishment ofVigil Mechanism.

e) Details regarding Risk Management.


The Company has not taken any deposits from the public.


As required under Section 134(3)(c) of the Companies Act 2013 your Directors statethat:-

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures if any ;

(b) the accounting policies have been selected and applied consistently and judgmentsand estimates made are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year and of the profit of theCompany for that period;

(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the said Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the annual accounts have been prepared on a going concern basis;

(e) the internal financial controls to be followed by the Company have been laid downand that such internal financial controls are adequate and were operating effectively; and

(f) the proper systems have been devised to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.


Management Discussion and Analysis Report contains forward looking statements which maybe identified by the use of words in that direction or connoting the same. All statementsthat address expectations or projections about the future including but not limited tostatements about the Company's strategy for growth product development market positionexpenditures and financial results are forward looking statements.

These are based on certain assumptions and expectations of future events. The Companycannot guarantee that these assumptions and expectations are accurate or will be realized.The Company's actual results performance or achievement could thus differ materially fromthose projected in any such forward looking statements. The Company assumes noresponsibility to publicly amend modify or revise such forward looking statements on thebasis of any subsequent development information or events.


The Directors wish to thank its Customers Shareholders Banks Dealers Suppliers andGovernment Authorities for their continued support.

The Board also places on record its sincere appreciation of the hard work put in bythe employees at all levels during the period under report. On behalf of the Board ofDirectors

Place : New Delhi



R.C. Periwal


Date : 3rd May 2018