Initiating Coverage. Initiating Coverage. BUY CMP (Rs) Dairy Prabhat Dairy Ltd. Renovating & Innovating

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1 Initiating Coverage Religare Investment Call Nilkamal Prabhat Ltd. Ltd. Prabhat Ltd. BUY CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 10) Market Cap (Rs Cr) 3M Avg Volume 52 week H/L % 35,160 10, PRABHAT PRABHAT ,749 1,65, /99 Renovating & Innovating Prabhat Ltd (PDL) incorporated in 1988, as a specialty dairy ingredient company and has now emerged as an integrated milk and dairy products company in India. It caters to both institutional as well as retail customers. PDL products are sold under the brands like Prabhat, Prabhat Milk Magic, and Prabhat Flava. Company's key strength lies in its integrated business model, state-of-the-art manufacturing facilities at Ahmednagar and Navi Mumbai, brand expansion, increasing procurement and distribution reach by retaining its product quality standards. Investment rationale Prabhat Ltd (PDL) has presence both in B2B and B2C segments with revenue contribution in the ratio 70:30 respectively. Going ahead it is planning to transform its business from B2B to B2C in 30:70 ratio by PDL is focusing to develop its B2C segment with its strong integrated business model, increasing procurement of milk from farmers and expanding its product portfolio through retail chains. Shareholding Pattern (%) Sep-17 Dec-17 Mar-18 Promoter Public Others -- The company has set up two manufacturing facilities which have a combine capacity to handle around 1.5 Mn Litres milk per day. PDL follows direct procurement model and handles on an average around 1.0 Mn liter milk per day of which around 70% is directly sourced from farmers and the registered milk vendors. It plans is to increase direct procurement to 80% by PDL s, revenue has grown at CAGR of 23.9% from FY12-FY17, its EBIDTA and PAT have also grown at CAGR of 21.3% and 49.5% in the same period. 1 Year relative price performance Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Prabhat Nifty 50 Feb-18 Mar-18 Apr-18 Outlook & Valuation Prabhat Ltd has an integrated business model and its focus remains on increasing direct procurement from farmers. Additionally, with increasing demand for value added products, PDL plans to expand its product portfolio in B2C and value added segment. At the same time it is promoting, advertising and creating strong distribution network in tier 1, 2 & 3 cities plus creating brand recall value in modern retail outlets. Further, PDL s financials are expected to improve, where we expect revenue to grow at CAGR of 12.5%, while EBIDTA and PAT are expected to grow at CAGR of 13.8% and 35.9% in FY17-FY20E. Besides these, PDL plans to reduce debt and improve working capital cycle, which will improve return ratios i.e. ROE & ROCE to 8.3% and 10.6% by FY20E. At CMP of INR 179, we recommend BUY' rating on the stock with a price target of INR 230. Research Analyst Nirvi Ashar, nirvi.ashar@religare.com May 02, 2018 Financial Summary (Consolidated) Particulars (Rs cr) FY FY18E FY19E FY20E Net revenue 1, , , ,008.4 EBITDA EBITDAM (%) 9.0% 8.9% 9.1% 9.3% APAT APATM (%) 2.0% 2.9% 3.1% 3.5% EPS (Rs) PE (x) RoE (%) 4.1% 6.3% 6.9% 8.3%

2 Prabhat Ltd. Shiting focus from traditional products to value added products. Investment Rationale Robust growth will be witnessed in dairy sector: sector remains one of the major sectors in overall food industry both in domestic and international markets. In the past, the sector was dominated by traditional milk based products such as butter, curd, etc. However changing dietary pattern, rising disposal income, availability of options, etc. lead to shifting focus from traditional products to value added products like cheese, paneer, UHT milk, skimmed milk, whiteners, condensed milk, yogurt, ice creams, etc. which has helped the dairy sector to move to a different level. Global dairy sector: During the last 10 years, the annual growth rate in Indian dairy industry was 4.8% as compared to the global growth rate of 2.3%. The growth was primarily driven by population growth, rising disposable income, urbanization and westernization in developing countries such as India and China. By 2021, it is expected that developing countries would produce and supply more milk than developed countries. In 2016, world milk production reached around 816 Mn tons. Among all the countries in the world, EU ranks first in production of milk, with a share of 29%. India ranks second with share of 27% and has a small distance to cover (of around 10 Mn tons) to be number one. At third place there is USA with 17% share, followed by other countries like China, Pakistan, Brazil, Turkey, etc. Country wise Milk Production (Mn Tons) Country wise Market share (%) India's share in global milk production is around 27% EU India USA China Pakistan Brazil New Turkey Zealand Pakistan 7% New Zealand 4% Turkey 3% Brazil 6% China 7% EU 29% USA 17% India 27% Cow's contribution in world milk production is highest (~83%) among other animals. Cow s contribution is highest at 83%, in world milk production of 816 Mn tons, followed by buffalo with 13% share and goat, sheep and others together contribute around 4%. Among all countries, USA s, contribution is highest in cow milk production with 25% share followed by India with 17% share. Other countries like China, Brazil, Germany Russia, etc. each contribute less than 10% share in cow milk production. Animal Contribution in world milk production Top Cow milk producing countries (%) Buffalo 13% Goat Sheep 2% 1% Others 1% New Zealand 5% France 7% Turkey 5% UK 4% USA 25% Russia 8% Cow 83% Germany 9% Brazil 10% China 10% India 17%

3 Prabhat Ltd. Market Size of Indian sector is expected to double by 2022 and reach Rs 10,000 Bn at CAGR of 20% Indian sector: India has been amongst world's largest producer of milk from the past three decades and contributes 27% of the world's total milk production. India has been an agricultural based country, where milk continues to be an important part of an Indian diet. Market size of the Indian sector was around INR 5,000 Bn in 2016 with 13% growth from and its size is expected to double by 2022 and reach around Rs 10,000 Bn at CAGR of 20%. The factors which would contribute to this growth are growing demand for milk and value added products, rising disposable income, increasing share of organized segment, health awareness, shift to organized sector, etc. India s Total Milk Production % 5.3% 3.8% 4.3% 3.8% 4.7% 5.0% 5.7% 4.0% 4.6% 4.0% 3.5% 6.2% 7.0% 5.5% 5.4% 6.0% 5.0% 4.0% % 3.0% 2.0% Indian milk production is expected to reach 191Mn tons by FY20E at CAGR of 5.3% Over the years, India has emerged as one of the world's largest milk producers. Milk production in was around 55.6 Mn tons which increased to 128 Mn tons in at CAGR of 4.3%. India's production stood at 156 Mn tons in with growth of 6.3% yoy vis-a-vis 146 Mn tons in Going ahead by FY20E, milk production will reach 189 Mn tons at CAGR of 5.3% from FY17-FY20E. Milk per capita availability in India Production (Million Tonnes) Growth % 5.0% 4.3% 3.5% 2.8% 2.0% 1.3% 0.5% -0.3% 2.2% 3.7% 1.5% 2.5% 2.9% 1.4% 2.3% 0.4% 3.4% 3.6% 2.3% 2.9% 3.1% 4.9% % 4.0% India's per capita availability of milk to grow at around 3.8% and reach 390 Gms/day. Per Capita Availibilty (gms/day) Growth % Source : ISF; RBL Research In India, top 10 states account for more than 80% of country s milk production which includes Uttar Pradesh, Rajasthan, Andhra Pradesh, Gujarat, Punjab, Maharashtra, Madhya Pradesh and Tamil Nadu. India's per capita availability for milk was 178 Gms/day in which increased to 290 Gms/Day in at CAGR of 2.5% and it is expected to reach 390 Gms/day by 2020 at CAGR of 3.9% from E. In , per capita availability of milk was at 337 Gms/Day with growth of 4.7% yoy and consumption was just at 97Gms/day. However, globally per capita availability of milk was 299 Gms/day and at the same time consumption is 280Gms/day in Further when we compare India with global peer's, India's per capita availability is higher but in terms of per capita consumption, global peers leads India.

4 Prabhat Ltd. India and Global - Per Capita Availability and Consumption of milk (Gms/day) India Global Peers Source : ISF; RBL Research Structure of Indian Industry Indian Market Share of organized sector is likely to increase to 50% by 2022 compared to 25% presently Cooperatives (60%) Organized Sector (22-25%) Private Dairies (40%) Traditional Milkmen /Vendors Unorganized Sector (75-78%) Self Consumption at Home Source : ISF; RBL Research Indian sector is distributed among organized and unorganized players in the ratio 22-25% and 75-78% respectively. The share of organized sector is expected to increase to 50% by 2022, backed by increased disposable income, rise in consumption of value added products more than the fluid milk and growing demand from large population. Further the organized sector is distributed among co-operatives and private dairies. It has been observed that the Indian Industry has been skewed towards cooperatives. Currently it accounts for the major portion i.e. 60%, while private dairies contribute 40% of organized sector. Notably, the largest co-operative dairy in India is The Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF) which sells the products under the brand name 'AMUL', while other co-operatives include Mother (wholly-owned subsidiary of NDDB) and Nandini (a brand owned by the Karnataka Cooperative Milk Producers Federation (KMF), etc. Among the private dairy players are Hatusn Agro, Heritage Foods ltd, Parag ltd, Prabhat, Nestle, Vadilal, Danone, Chitale, etc. In the unorganized sector, there are milkman and vendors who sell milk from home to home.

5 Prabhat Ltd. Products (Milk & Milk Products) in organized sector Milk Liquid Milk (60-65%) Value added Products (35-40%) Non-Traditional VADP Traditional VADP VADP is expected to grow between 15-20% CAGR over In India, the raw milk is distributed into two categories i.e. Liquid milk (is the white/plain milk) which accounts for around 60-65% while VADP accounts for 35-40%. We have seen that with rising demand for VADP, shift in product mix and increase in disposable income has led to increase value of VADP after Milk is growing at slower pace, while on other hand Value added products has grown at CAGR of 15% during and is expected to grow at 15-20% CAGR over E. Product wise Contribution in FY16 and FY20E FY16 Liqiud Milk 64% UHT Milk, Cheese, Whey, SMP Flavored Milk, etc 18% Ghee 13% Paneer 1% Curd & Yogurt 1% Butter 3% FY20E Liqiud Milk 60% UHT Milk, Cheese, Whey, SMP Flavored Milk, etc 22% Ghee 13% Paneer 1% Curd & Yogurt 1% Butter 3% VADP margins is in range of 15-20% High Margins & CAGR in value added products: We believe value added products like butter, curd, paneer, cheese, UHT milk, flavored milk, ice-cream, lassi, etc. will benefit dairy sector as well as players to garner additional revenue and margin. At present, margins are different for products depending upon the quality of raw material (milk) used in producing it. Margins of skimmed milk powder and pouch milk is around 6-7% while ghee, butter, paneer, cheese, flavored milk, yogurt, ice-cream, lassi and butter milk margins are between 12-18% and lastly there are products like curd, UHT milk and whey which earn high margin of 20-22%. Similarly, we expect improvement in revenue growth of value added products by 2020E. Higher growth of 25-30% is expected from products like flavored milk, yogurt, UHT milk and ice-cream and other products would grow in range of 15-21%. Current product margins and expected CAGR in FY20E 29% 30% 28% 24% 25% 22% 22% 20% 21% 17% 18% 17% 18% 19% 20% 20% 18% 17% 15% 16% 12% 12% 13% 13% 13% 7% 6% 16% Pouch Milk Ghee Butter Curd Flavored Yogurt Paneer Cheese FlavoredUHT milkice CreamWhey Milk Protein Margins % CAGR growth Expected % (2020) Lassi Butter Skimmed milk milk Powder

6 Prabhat Ltd. Organized & unorganized market share in products: We observed that milk and traditional VADP like ghee, butter, curd and paneer have huge share exposed to unorganized segment. However, gradual shift towards organized segment is seen in these products. Value added products like flavored milk & yogurt, cheese, UHT milk, Whey and Skimmed milk powder are present only in organized segment. Market share of Products 80% 80% 85% 90% 95% 100% 100% 100% 100% 100% 100% 20% 20% 15% 10% 5% Pouch Milk Ghee Butter Curd Paneer Flavored Yogurt Cheese Organized % Unorganized % Flavored Milk UHT milk Whey Protein Skimmed milk Powder GST Tax rate implemented on sector products: As dairy products are a part of daily routine, the products fall under 3 GST slabs - 0%, 5% and 12%. Products like milk, curd, lassi, butter milk and loose paneer has 0% tax while Whey, UHT milk, Branded paneer, Skimmed milk powder, cream fall under 5% slab and other high margin value added products like Butter, Ghee, Cheese and condensed milk adheres to 12% GST rate. Previously in Ghee, VAT imposed was around 5% in Northern India whereas 14.5% in Southern India. Implementation of GST led to increase in price of Ghee in north while, marginal decrease in price was seen in south. GST Rates No Tax (0%) 5% Fresh milk and pasteurized milk, including separated milk, milk and cream not containing added sugar. Curd Lassi Butter milk Chena or Paneer (Loose) UHT milk Milk, Cream and Yogurt with Added Sugar, Fruits, Nuts, Cocoa, etc. Whey Chena or Paneer (Branded) Skimmed milk powder 12% Butter Ghee Spreads Cheese Condensed milk Milk Beverages

7 Prabhat Ltd. Business Model - Shift from B2B to B2C, with increasing presence in retail Products: Prabhat Ltd (PDL) has been a dominant player in B2B business, which earlier supplied specialty dairy ingredients but gradually it enhanced its focus to retail segment and planned to add value added products to its portfolio. Increasing presence in consumer milk and milk products would help the company to gain revenue and margin traction. Currently, it generates revenue from both B2B and B2C segment in 70:30 ratio, respectively. Its B2B segment includes co-manufacturing and premium ingredient which caters to its institutional clients, while it serves retail clients through its B2C business segment. Business model B2B (70%) B2B and B2C segment revenue is in 70:30 ratio Prabhat B2C (30%) Revenue share between B2B and B2C (%) 89% 85% 85% 76% 73% 70% 64% 57% 24% 27% 30% 36% 43% 50% 11% 15% 15% FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E B2B B2C PDL s key customers includes names like Mondelez India, Heinz, GSK Consumers etc. B2B Segment: B2B segment focuses on specialty ingredients and the products are made as per client's requirement. Its B2B segment is distributed into premium ingredients and co-manufacturing. In premium ingredients, Prabhat is one of the largest players, where company's specialty products are used in manufacturing Institutional cutomer s products. Its key customers includes names like Mondelez India, Heinz, GSK Consumers, etc. and products like Condensed milk, Whole milk powder, baby foods, full cream milk, etc. On the other hand, Co-manufactured products are those which are manufactured by PDL and are sold by institutional customers under their own brands. Customers for co-manufacturing are Britannia Industries and Mother. PDL produces products like condensed milk, milk powder (Skimmed and Whole), full cream milk, curd, UHT milk, dairy whitener, icecreams, etc.

8 Prabhat Ltd. Institutional Business (B2B) Prabhat Ltd Premium Ingredients Co-Manufacturing Mondelez India Foods Pvt Ltd (Sweetened condensed milk, Skimmed / Whole milk powder, Full cream milk) GSK Consumer Healthcare, Heinz (Skimmed / Whole milk powder) Abbot Healthcare Pvt Ltd (Nutrition supplements for baby food) Britannia Industries Ltd (UHT milk, lassi, yogurt, dairy whitener, clarified butter (ghee), curd Mother Fruit & Vegetable Pvt Ltd (Ice-cream, candies) PDL s products brands are Prabhat, Prabhat Flava, Prabhat Milk Magic and Volup. B2C segment: PDL being the a largest institutional player had first introduced its value added products in 2005 with ghee and skimmed milk powders. Later after eight years, PDL added more capacity for its value added products like curd, ice cream and Skimmed milk powders. Company has strong integrated business model with its presence in entire value chain from procurement to distribution network. It has diversified products and brands for its consumer business which are Prabhat, (Liquid milk, butter, ghee, curd, Lassi, Milk powder, whitener) Prabhat Flava (Flavored milk), and Prabhat Milk Magic (Condensed milk), and recently launched brand Volup (Ice-Creams). Moreover it has planned to increase its consumer product portfolio by increasing presence in HORECA segment and similarly expanding it B2C segment through retail expansion. PDL s strategy is to focus on increasing its presence in value added products in H O R E C A ( H o t e l, R e s t a u r a n t, Café/Catering) segment. HORECA segment: PDL s strategy is to focus on increasing its presence in value added products in HORECA segment. Additionally it aims to produce products like Cheese, Paneer, types of Curd, Shrikhand etc. which will help it to enhance revenue and margins. PDL has the third largest cheese manufacturing plant with a capacity of 30 MT/day. Its initial focus is to grow and develop it domestically among both of its institutional and retail clients and post stabilization it plans to export cheese to UK and SAARC countries. Currently, its cheese capacity utilization level has increased to 25-30% in 9MFY18 from 15% in Cheese such as processed, Mozzarella, cheddar and ricotta are manufactured at its plant. At present PDL is distributing it cheese in Western region (Maharashtra & Gujarat) and is expected to expand in North and Central India. Its key customers are top F&B chains like Dominos, Pizza Hut, McDonald's, etc. and other five star

9 Prabhat Ltd. PDL s products like Paneer, Dahi, lassi, Shrikhand, etc were expanded through modern trade retail like Big bazaar, Star Bazaar, Hypercity, Dmart, etc. hotels. PDL is in talks to produce products like whey, dairy whiteners for both domestic (institution and retail) and exports business, which will help it to expand its other value added business and gain additional revenue. Retail Expansion: Prabhat is present in West India in states of Maharashtra, but gradually with product expansion is increasing its presence in northern and southern markets to become a pan India player. PDL s products like Paneer, Dahi, lassi, Shrikhand, etc were expanded through modern trade retail like Big Bazaar, Star Bazaar, Hypercity, Dmart, etc. Two years ago, it started off with its retail branding and now it has a strong retail distribution network in 26 states and 2 union territories. As shown in the exhibit, it has pan India presence, across 1 lakh plus stores (to increase to 2 lakh stores) with 330+ sales professional, 1375 distributors and 150 mini stockists. Currently, it has expanded in modern trade outlets and scaled up the number to 320 outlets by 9MFY18. PDL s near term plan is to focus on tier 2 and tier 3 towns with higher disposable income in Indian markets. It plans to strengthen its presence in states like Madhya Pradesh & Maharashtra and expand in to North, East, West and Central markets in India. Further, it plans to initiate exports to the SAARC countries Retail Presence across States Milk Procurement Districts in Maharastra Manufacturing Units Pan India Presence Modern Retail Presence Strategy for the next 2-3 years (by 2020): PDL is focusing on expansion in retail segment by targeting tier 2 and tier 3 cities, where consumers preference keep upgrading for products. These lead to rise in demand for value added products and it gives opportunity to players like PDL to manufacture more products in the segment. By 2020, it is planning to transform its business from B2B to B2C in 30:70 ratio on back of high demand and pick up of consumer business products, which would gain high revenue and margin than institutional business. Rise in Direct procurement of milk will aid PDL's growth: The key strength for any company lies in direct milk procurement channel as it helps in saving raw material cost. PDL has set up two manufacturing facilities, one in Srirampur and other in Navi Mumbai, which have total capacity to handle around 1.5 Mn Litres milk per day (MLPD). PDL handles on an average around 1.0 Mn liter milk per day of which around 70% is directly sourced from farmers and the registered milk vendors in Ahmednagar, Pune, Nasik and adjoining districts of Maharashtra, which is the major cow milk producing region in India, while remaining milk is sourced through intermediaries. Its target is to increase direct procurement to 80% by 2020, which would further benefit to produce more value added products. In addition to this, it would aid some relief to procurement cost that will support further expansion of EBIDTA and PAT margin to around 9.8% and 3.5% in FY20. Furthermore PDL is putting efforts in building long term relationship with farmers by engagement program, providing transparency & best milk pricing system and also by assisting them in other welfare activities, which will act as an added advantage in procuring additional milk from farmers and improve its utilization levels.

10 Prabhat Ltd. PDL has engaged with a large number of procurement partners, called Prabhat Mitras. PDL has partnered with Pashu Mitra which are involved in educating farmers. With increasing direct procurement of milk from farmers and utilization levels of its manufacturing unit, it would help PDL to meet the rising demand for its products. For increasing direct procurement, it has engaged with a large number of procurement partners, called Prabhat Mitras, help to co-ordinate the milk procurement process with milk farmers and registered milk vendors. It has also partnered with Pashu Mitra which are involved in educating farmers on cattle breeding, cattle feed and medication, cattle finance and insurance, as well as the delivery and storage of milk at the collection centers, while Veterinary doctors and para-veterinary workers help to run Pashu Mitra. PDL has plans to increase the number of Prabhat Mitra and Pashu Mitra to ensure boost in direct procurement channel with high quality milk on consistent basis and at the same time reducing the procurement cost. 475 Milk collection centers 150 Bulk Coolers Shrirampur Plant PDL has network of more than 475 milk collection centers, 150 bulk coolers centers and 20 milk chilling plants. Printed Receipt 20 Milk Chilling plants Navi Mumbai Plant PDL s revenue is expected to grow at CAGR of 12.5% in FY17-FY20E and improvement in EBIDTA and PAT at CAGR of 13.8% and 35.9% over FY17- FY20E, respectively. PDL is concentrating on its well-coordinated network of milk collection and bulk chilling centers which are equipped to support collection as well as monitoring the quality of milk. At present, PDL has network of more than 475 milk collection centers, 150 bulk coolers centers and 20 milk chilling plants. By 2020, company will increase their infrastructure like bulk milk coolers and chillers at both its facility. Moreover for payments to farmers, they have introduced transparent pricing where the farmers get detailed receipt and transferred payment in cash or to their bank account. Improvement in Operational Efficiency: Prabhat 's revenue has grown at CAGR of 23.9% from FY12-FY17, its EBIDTA and PAT has also grown at 21.3% and 49.5% over the same period led by change in business model from B2B to B2C and change in product mix i.e. adding more value added products. PDL has improved its overall utilization level to 65% in FY17 and added capacity for UHT milk, Cheese, Ghee, Lassi, buttermilk, fresh cream, etc. It has also started rolling out with distribution of products like Lassi and butter milk. Going ahead with expansion in value added segment, we expect growth in its revenue at CAGR of 12.5% in FY17-FY20E and improvement in EBIDTA and PAT at CAGR of 13.8% and 35.9% over FY17-FY20E, respectively. Improvement in Operational Efficiency % % % % % 25.0% 20.0% 15.0% 10.0% % 0.0 FY16 FY17 FY18E FY19E FY20E Net revenue Revenue Growth % 0.0%

11 Prabhat Ltd. EBIDTA and PAT margins Improvement in EBIDTA and PAT at CAGR of 13.8% and 35.9% over FY17- FY20E, respectively % 9.0% 8.9% 9.1% % % 2.0% 2.0% 3.1% 3.5% FY16 FY17 FY18E FY19E FY20E EBITDA APAT EBITDAM (%) APATM (%) 12.0% 8.5% 5.0% 1.5% -2.0% Management is targeting revenue of over INR 2,000 Crs by FY20E along with improvement in margins by more than 10% backed by producing and distributing fresh and long shelf life products. Its focus is on distributing its short and long shelf life products in Maharashtra and then gradually to other parts of India like Indore, Delhi, North Eastern states, etc., where there is demand & supply gap. Going ahead, it plans to enter dairy based beverage segment, which is highly unorganized and untapped market in India. PDL had incurred major capex 2 years ago for expanding its manufacturing plant. For next 2-3 years it would only incur the maintenance capex of INR 50 Crs. Going ahead, its focus will be to fully utilize it's capacity which would help in manufacturing more products and generate revenue. Furthermore, its plan is to reduce debt which will help in improving its ROCE and ROE to 10.6% and 8.3% in FY20E respectively. At present, company's working capital days are high at around 88 days but with increased revenue, better product mix and change in business model to B2C, PDL would gradually be able to reduce working capital. ROE and ROCE (%) Working Capital Days PDL s plan is to reduce debt which will help in improving its ROCE and ROE to 10.6% and 8.3% in FY20E respectively. 9.6% 9.4% 7.7% 8.0% 8.2% 6.3% 3.6% 4.1% 9.3% 6.9% 10.6% 8.3% FY15 FY16 FY17 FY18E FY19E FY20E ROE (%) ROCE % FY15 FY16 FY17 FY18E FY19E FY20E

12 Prabhat Ltd. Company Background Prabhat Ltd incorporated in 1988, is a specialty dairy ingredient company and has emerged as an integrated milk and dairy products company in India. It caters to both institutional as well as retail customers. PDL products are sold under retail consumer brands which include Prabhat, Prabhat Milk Magic, and Prabhat Flava. However its products are sold to number of institutions and multinational companies via ingredient as well as co-manufactured products. PDL manufactures products such as fresh, dry, frozen, cultured and fermented dairy products, including pasteurized milk, flavored milk, sweetened condensed milk, ultra-pasteurized or ultra-high temperature (UHT) milk, yoghurt, dairy whitener, clarified butter (ghee), milk powder, ingredients for baby foods, Lassi and chaas. Company's key strength lies in integrated business model, state-of-the-art manufacturing facilities at Ahmednagar and Navi Mumbai. PDL focus on brand expansion, increasing procurement and distribution reach by retaining its quality standards for value added products. Key Mile-Stone 1998 Incorporation of the company by Nirmal Family 1999 Commenced sale of liquid milk consumer pack under Prabhat brand Introduction of value added products (ghee and powders) Commenced sale of condensed milk to Mondelez India Foods Private Limited 2010 Dedicated condensed milk plant setup for Mondelez and commenced milk powder production with capacity of 30MT/day. Received HACCP and ISO certification 2011 Expanded B2B business with reputed industry players. Launched Prabhat Quality Mission Private Equity infusion by IABF (PE firm managed by Rabobank, Netherlands). Awarded best strategic supplier by Kraft and Abbott Commenced milk processing capacity of 0.3 mn litres/day, in Navi Mumbai. Private Equity infusion by Proparco New capacity added for curd, icecream and powders Initiated marketing & branding activities to increase consumer business Listing on BSE and NSE with a successful IPO raising - Rs 3,000 mn fresh issue - Rs mn offer for sale 2016 Commenced manufacturing of cheese with capacity of 30MT/day (3rd largest in India), paneer with capacity of 5MT/day and shrikhand with capacity of 5MT/day 2017 Launched popular range of ice creams under the brand Volup and premium range of ice creams under the brand Volup Sinsane

13 Prabhat Ltd. Risks & Concerns Seasonality & Cattle feed: The quality and volume of milk produced by dairy cows are linked to many factors like seasonality, cattle feed, etc. If the climate is extreme cold or hot, the milk volume may differ and in the case of cattle feed, if feed is not appropriate than quality of milk will suffer. Single Raw material: Raw material used is only 'Milk', so if milk is not stored, processed or handled with cautiousness then it would lead to wastage. Hence these would lead to produce lower volume of milk & at the same time affect its revenue.

14 Prabhat Ltd. P&L Account - Consolidated Particulars, Rs cr FY17 FY18E FY19E FY20E Net sales 1, , , ,008.4 Expenditure Raw material consumed 1, , , ,556.5 Purchase of stock in trade (Increase) / Decrease In Stocks Employee cost Other expenses Total expenditure 1, , , ,821.6 EBITDA EBITDAM (%) 9.0% 8.9% 9.1% 9.3% Other income Depreciation PBIT Interest expenses PBT Tax Reported PAT PATM (%) 2.0% 2.9% 3.1% 3.5% EPS EPS Growth (%) 21.1% 63.8% 17.8% 30.1% Balance sheet - Consolidated Particulars, Rs Cr FY17 FY18E FY19E FY20E Share Capital Reserves & Surplus Total Shareholder's Fund Long term borrowings Short term borrowing Total Debt Deferred tax liabilities Long term provision Other long term liabilities Current Liabilities Trade payables Short term provisions Other current liabilities Total liabilities 1, , , ,358.1 Application of Assets Net Block Current work in process Goodwill on consolidation Non current investment Long term loans and advances Other non-current assets Current Assets Current investments Inventories Trade receivables Cash & Bank Short term loans and advances Other current assets Total assets 1, , , ,358.1

15 Prabhat Ltd. Cash Flow statement - Consolidated Particulars, Rs cr FY17 FY18E FY19E FY20E Profit before tax Add: Depreciation Add: Interest cost Others Operating profit before working capital Changes in working capital Direct taxes Cash flow from operating activities Purchase of fixed assets Others Cash flow from investing activities Proceeds from issuance of shares Net proceeds from borrowings Dividend (Incl dividend tax) Interest cost Others Cash flow from Financing Activities Net cash Inflow/Outflow Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents Key Financial ratios - Consolidated Particulars FY17 FY18E FY19E FY20E Per share Data EPS Book value per share Rs Dividend per share Dividend Yield (%) 0.2% 0.2% 0.2% 0.2% Payout (%) 16.8% 10.1% 8.6% 6.6% Profitability Ratios EBITDAM(%) 9.0% 8.9% 9.1% 9.3% PBTM (%) 3.9% 3.7% 4.1% 4.7% NPM (%) 2.0% 2.9% 3.1% 3.5% RoCE (%) 8.0% 8.2% 9.3% 10.6% RoE (%) 4.1% 6.3% 6.9% 8.3% Efficiency Data Debt-Equity Ratio Interest Cover Ratio Fixed Asset Ratio Debotors (Days) Inventory (Days) Payable (Days) WC (Days) Valuation P/E P/BV EV/EBIDTA EV/Sales

16 Prabhat Ltd. Before you use this research report, please ensure to go through thedisclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 and Research Disclaimer at the following link : Specific analyst(s) specific disclosure(s) inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 is/are as under: Statements on ownership and material conflicts of interest, compensation Research Analyst (RA) [Please note that only in case of multiple RAs, if in the event answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) below, are given separately] S. No. Statement Answer Tick appropriate YES I/we or any of my/our relative has any financial interest in the subject company? [If answer is yes, nature of Interestis given below this table] I/we or any of my/our relatives, have actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance? I / we or any of my/our relative, has any other material conflict of interest at the time of publication of the research report or at the time of public appearance? I/we have received any compensation from the subject company in the past twelve months? I/we have managed or co-managed public offering of securities for the subject company in the past twelve months? I/we have received any compensation for brokerage services from the subject company in the past twelve months? I/we have received any compensation for products or services other than brokerage services from the subject company in the past twelve months? I/we have received any compensation or other benefits from the subject company or third party in connection with the research report? I/we have served as an officer, director or employee of the subject company? I/we have been engaged in market making activity for the subject company? Nature of Interest ( if answer to F (a) aboveis Yes :... Name(s)with Signature(s)of RA(s). [Please note that only in case of multiple RAs andif the answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) above, are given below] SS.No Name(s) of RA Signatures of RA Serial Question of question which the signing RA needs to make separate declaration / answer YES Copyright in this document vests exclusively with RSL. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose, without prior written permission from RSL. We do not guarantee the integrity of any s or attached files and are not responsible for any changes made to them by any other person. Disclaimer: