HERITAGE FOODS LTD - RESULT UPDATE

This stock initially recommended as a buy below Rs.200/- , ( Old posting HERE) which is currently quoting around Rs.525 , reported December  quarter result as follows:

 Still recommending to HOLD.

HERITAGE FOODS - COMPANY CLARIFICATION

In response to the news item published in today's Business Standard (reproduced in my previous posting) Heritage Foods now issued a clarification to BSE as follows :

 

With reference to the news item appearing in a leading financial daily titled "Premji fund back in retail with Heritage Foods stake buy ", Heritage Foods (India) Ltd has clarified to BSE the following :- "1. The Company decided to subsidiarise Retail business and a wholly owned Subsidiary Company namely Heritage Foods Retail Ltd was incorporated and the decision of the Board was informed to the Stock Exchanges on September 26, 2008. Company is open for strategic partnership in retail business for accelerating its growth. However before finalizing any of such deal the Company will follow the prescribed guidelines as per the Listing Agreement. 2. Company is not looking for any strategic investor at the group company level (HFIL) and the promoters are not looking to sell their stake. 3. The buzz in the market regarding open offer by a strategic player with a total transaction value of $ 100 Million, is not true."

MY OBSERVATIONS



1) Company not denied the investment by Azim Premji's investment fund, which happened during last week of October and first week of September at a price of Rs.380- 390.

2)Heritage denied the entry of a strategic Investor to the main company but nothing commented about a dilution of stake in their retail venture. I feel ,in near future company will de-merge its retail operations into its wholly owned subsidiary and divest some stake of this subsidiary to a strategic investor  . This will surely help the company to reduce its financial burden to a large extent and also help the company to retire its debt substantially over the next few years.

3) Regarding open offer by a strategic player for the company with a TOTAL transaction value of $ 100 Million is really an unthinkable figure. If the author mean this value is for  ENTIRE company , based on some of the recent transactions happened in dairy industry  in India it should be many  times higher than the mentioned figure and in this case I think the promoters will not dilute any stake in their  main company ( Heritage Foods)  at this point of time.

HERITAGE FOODS - UPDATE

COURTESY : BUSINESS STANDARD


Premji fund back in retail with Heritage Foods stake buy 


 Raghuvir Badrinath / Bangalore Dec 05, 2012, 00:50 IST

Premji Invest, the $1.2-billion private and public equity fund of Wipro chairman Azim Premji, has bought a stake in Hyderabad-based Heritage Foods. The latter is a publicly held company, owned by Chandrababu Naidu, former chief minister of the state, with revenue of around Rs 1,400 crore in 2011-12.
It is understood that the stake was bought recently, after a private equity fund managed by the Kotak Mahindra Group offloaded a majority of its 10 per cent stake in the open market. With this, Premji Invest has again takenp direct exposure into the food and groceries retail chain sector, despite the ongoing legal tussle with the promoters of Subhiksha, the failed retail chain in which they’d put a huge amount, shortly before the latter went bankrupt.
While Premji Invest did not respond to queries for this report, senior management officials of Heritage Foods confirmed the move.
Prior to this investment, the PE fund took exposure in Fab India, JSM Corp (which runs the Hard Rock Cafe in India), Trent (part of the Tata Group), Carnation (a car servicing company started by Jagdish Khattar), Manipal Global Education and Healthcare Global (a cancer care chain), among others.
The management of Heritage Foods is understood to be in the advanced stages of spinning off the company’s retail arm, which runs 75 neighbourhood convenience stores under the ‘Fresh’ brand, focused on South India. Heritage Foods gets 90 per cent of its revenue from the dairy business; the rest comes from agriculture and bakery segments.
Heritage’s president, M Sambasiva Rao, told Business Standard they were open to a strategic partnership in the retail business. This business contributes around five per cent, at Rs 300 crore, to the revenue; it report a loss of Rs 20 crore in 2011-12.
The PE sector is also abuzz with reports that Heritage might also be looking for a strategic investor at the group company level. “The stock price during the past three months has had a good run. It has gained as much as 80 per cent and is trading at Rs 465 a share on the NSE. There is a buzz in the market that a strategic player might take a stake and then make an open offer in a total transaction value of $100 million,” two investment bankers told Business Standard.
However, the management of Heritage Foods categorically denied that the promoters were looking at selling stake in the main company. A senior official said during the past two quarters, the profit levels had improved substantially, with the dairy business performing well as procurement costs come down. “That is one of the reasons for the spike in the stock price,” he said.

OLD POSTING ABOUT  THIS  STOCK - HERE

DIWALI WISHES ....

WISHING A HAPPY DIWALI AND PROSPEROUS  YEAR AHEAD.THIS TIME I AM CHOOSING  'BRAND' AS THE THEME FOR  STOCK SELECTION.WE ALL KNOW HOW A BRAND IS IMPORTANT FOR COMPANIES AND HOW STOCK MARKET VALUING COMPANIES WITH GOOD BRANDS .WE HAVE MANY EXAMPLES BOTH FROM MNC AND INDIAN SPACE LIKE NESTLE,GSK CONSUMER,P&G,TTK PRESTIGE,PAGE INDUSTRIES..Etc.THEIR BRANDS ARE THEIR BIGGEST ASSETS AND THE MAIN FACTOR DRIVING GROWTH YEAR AFTER YEAR.BUT IT IS A FACT THAT STOCK PRICE OF COMPANIES HAVING GOODS BRANDS ARE HIGHLY PRICED AND OUT OF REACH OF MANY SMALL RETAIL INVESTORS . BUT STILL THERE ARE SMALL BUT GROWING  COMPANIES WITH GOOD BRANDS IN SOME NICHE SPACES.MANY OF THE SELECTED COMPANIES ARE ALREADY RECOMMENDED HERE AND SOME OF THEM ARE TRADING AT THEIR 52 WEEK HIGH LEVELS.SOME STOCKS EARLIER RECOMMENDED FOR PROFIT BOOKING ,BUT NOW CONSIDERED ALL POSITIVE DEVELOPMENTS INCLUDING FINANCIAL PERFORMANCE AND OTHER FACTORS HAPPENED THEREAFTER WHILE SELECTING THESE STOCKS.I BELIEVE EVEN THESE COMPANIES ARE TRADING AT SUBSTANTIALLY HIGHER RATES ,INDIA'S FAVORABLE DEMOGRAPHIC TRENDS WILL DRIVE THE GROWTH OF THESE COMPANIES GOING FORWARD.

 Company :Heritage Foods                

 Industry  : Dairy
 CMP :440
 Initially Rec.Price : Rs.200
 Sales   FY 2008           FY 2012
              Rs.588 Cr        Rs.1394 Cr
Link to Old Recommendation  HERE
Link to Company website       HERE
Link To Latest Annual Report HERE

Company :La-Opala RG                
 Industry  : Houseware
 CMP :Rs165
 Initially Rec.Price : Rs.50
 Sales   FY 2008         FY 2012
              Rs.55 Cr        Rs.115 Cr
 Link to Old Recommendation  HERE
 Link to Company website       HERE
 
  

Company :Bambino Agro                
 Industry  :  Packaged Foods
 CMP : Rs.61                                  
Initially Rec.Price:Rs.40                          
 Sales FY 2008      FY 2011
           Rs.92 Cr        Rs.215 Cr
        Link to Old Rec. HERE
        Link to Company web.HERE

Company :Acrysil        
Industry : Designer H.Wares
CMP :Rs.117                        
Initially Rec.Price : Rs.85 (Adj.to Bonus Issue)
Sales   FY 2008         FY 2012
              Rs.30 Cr        Rs.62 Cr
 Link to Old Recommendation HERE
 Link to Company website       HERE
 Link to Latest Annual Report   HERE 

Company :Orient Bell        
Industry : Building Materials
CMP :Rs.69                        
Initially Rec.Price :NA
Sales   FY 2008         FY 2012
              Rs.214 Cr        Rs.546 Cr
  Link to Company website       HERE
 Link to Latest Annual Report   HERE 

HERITAGE FOODS ,NARMADA GELATINE ,BAMBINO AGRO - UPDATES

HERITAGE FOODS
This stock recommended as a buy below Rs.200/- .Today hits 52 week high @ Rs.394 and closed @ Rs.376/-, reported September quarter result as follows:

Related Readings :
Link -1

Link-2

Old posting HERE

NARMADA GELATINE
This stock recommended @ Rs.95/- and currently trading @ Rs.127/-, reported September quarter result as follows:

Old Posting HERE

BAMBINO AGRO INDUSTRIES LTD
Recommended @ Rs.40/- and currently trading @ Rs.54/-.Today company filed its latest share holding pattern to BSE .In September quarter ,holdings under promoter category increased slightly which currently stands @ 74.32 %

Old posting HERE

HERITAGE FOODS (INDIA) LTD - UPDATE

   
Heritage Foods recommended around Rs.200 in  2011,which is now trading around Rs.300/- .Inviting your attention to an investor presentation  submitted by the company to BSE today .(For those having academic interest :) ) . I believe , company's integrated business model having great relevance  in coming years . .Heritage's deep rooted relationship with farmers in the field of dairy  and contract farming is a big positive factor and the same is difficult to replicate by competitors easily .The good performance in recent quarters is very encouraging and expecting better days for the company ,especially at a time of increasing food prices and the ongoing re rating in farming related stocks.

For latest investor presentation click HERE

For latest AR , click HERE

FOR OLD POSTING ON THIS COMPANY . CLICK HERE

Disc: I have vested interest in HFL

HERITAGE FOODS (INDIA) Ltd - A Star in Making

Heritage Foods(India) Ltd - may be called as a unique listed company .This is because of the nature of its integrated operations in agri related sector. This company is promoted by Mr Chandra Babu Naidu - former chief minister of Andhra Pradesh.Company having four divisions- Dairy Business,Retail Business,Agri Business and Bakery Business.

DAIRY DIVISION

Heritages Dairy business having one of the largest network in India for collecting,processing  and supplying milk. It span Across Andhra Pradesh, Tamilnadu, Karnataka, Kerala and Maharastra and consists of a number of collection points 12 packing stations, 75 chilling centers/bulk coolers,4 ice plants ..etc.Company sells Milk and Milk Products including Ghee, Paneer, Ice Cream, Cooking butter, Lassi, Doodhpeda, Fresh Cream, Curd etc.It is very difficult for any company to set up such a large supply chain which is crucial for the success of any company in Dairy business.Company also exporting Heritage Pure Ghee and Heritage Butter in Bulk and Consumer Packs from two of its units located at Tirupati and Chittoor. Company also established about 1000 'Heritage Parlor's to sell its value added dairy products across south India.

RETAIL DIVISION

Under the retail division company is selling Groceries ,fresh fruits and vegetables. Under the brand "Farmers Pride”, company offers a full range of staples like rice, pulses, spices , dry fruits..etc Company operating retail stores in two formats - Flagship store (2500 Sqft) where it sells Fresh fruits and vegetables, grocery, processed food, cleaning aids, General merchandise, bakery, dairy, beverages, and frozen food and 'Daily'format stores(1000 sqft) where it sells foods and vegetable items.In total ,company owns about 80 retail stores.

AGRI BUSINESS DIVISION

Through Agri business division ,Company having strong presence in contract farming of vegetables and fruits. These items are selling through its own retail stores. Vegetables and seasonal fruits are produced through contract farmers and then it reaches at pack houses via collection centers strategically located in villages for washing, sorting, grading and packing and dispatch to the retail stores .This backward integration ensures the  freshness of vegetables and fruits sold through retail stores.Agri division activities are based at Chitoor (Andhra Pradesh), Kolar (Karnataka), Krishnagiri (Tamil Nadu) Medak and Nalgonda in Andhra Pradesh .Company having two pack houses one at Mattam and other at Mulugu. Heritage also having a Poly Green House facility for Production of Vegetable Seeds for supplying to farmers engaged in contract farming.

BAKERY DIVISION

Bakery Division  is relatively a new initiative of the company ,Currently this division operates at 14 company-owned stores in Andhra Paradesh and it is planning to expand it. This division also running Hyderabad’s first Premium Bistro as “ Heritage Bon Sante Bistro” in Jubilee Hills.

What is special with Heritage food ?

This company is growing as a one stop shop for daily needs through its various verticals. This integrated business model which includes farming,processing ,retailing ,baking and diary - Heritage is a company with no comparable listed players.It is very difficult to replicate a supply chain created by Heritage which connects the farmers from remote villages with the consumers of Metros.Only negative side of its operations is the poor performance of its Retail division which is eating a major portion of the profit generated by the dairy division .After the dismal performance of retail division last year ,now company took many cost cutting efforts and even closed down some shops which are unviable. As a result ,in the December quarter loss of this division has come down by 50%.For the nine month ended December ,Heritage posted a turnover of Rs.788 Cr and a net loss of Rs.46 lakhs.It is expected to back to black on a full year basis and post good performance going forward.Any chance of a turnaround in Retail division or a separation of this division from the main company will surely changes its fortune.Chances of such a move is very high in future. Stock price of Heritage foods moved up in recent times and it is trading around Rs.234/- .Any correction below Rs.200 should be consider as a buying opportunity with a four digit price target in five years.