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Directors Report of Heritage Foods Ltd.

Mar 31, 2022

Your Directors have a great pleasure in presenting the 30th Annual Report together with the Audited Standalone & Consolidated Financial Statements of your Company for the Financial Year ended March 31, 2022.

Financial Results

The Company''s financial performance for the year ended March 31, 2022 is summarized below:

('' in Millions)

Particulars

Standalone

FY 2021-22

FY 2020-21

Net Sales

26404.91

24067.87

Other Operating Income

24.30

2.42

Total Revenue

26429.21

24070.29

Add: Other Income

103.14

84.07

Total Income

26532.35

24154.36

Less: i) Total Expenditure

24556.70

21525.36

ii) Fair value loss on FVTPL equity shares

-

48.12

Profit before Finance cost, Depreciation, Amortisation Expenses and Tax

1975.65

2580.88

Less: i) Finance cost

32.01

178.48

ii) Depreciation and Amortisation Expenses

499.64

440.54

Profit before tax and exceptional items

1444.00

1961.86

Exceptional items

91.40

-

Profit before tax

1352.60

1961.86

Less: i) Current Tax

343.01

500.37

ii) Deferred Tax

(5.75)

9.85

Profit after tax

1015.34

1451.64

Performance of the Company Standalone

Your Company, during the year under review earned revenue from operations (Gross) of '' 26,429.21 Million, against '' 24,070.29 Million over the previous year. The profit before Finance Cost, depreciation & amortization and tax was of '' 1975.65 Millions as against '' 2,580.88 Million in the previous year.

The Profit After Tax for the current year is '' 1,015.34 Million against '' 1,451.64 Million in the previous year.

Consolidated

Your Company, during the year under review earned revenue from operations (Gross) of '' 26,812.79 Million, against '' 24,731.13 million over the previous year. The profit before Finance Cost, depreciation & amortization and tax was of '' 1,869.31 Millions as against '' 2,679.24 Million in the previous year.

The Profit After Tax from continuing operations for the current year is '' 965.21 Million against '' 14,90.50 Million in the previous year.

Transfer to General Reserves

Your Directors do not propose to transfer any amount to general reserves for the financial year ended March 31, 2022.

Dividend

During the year under review the Board of Directors at its meeting held on October 21, 2021 declared 1st interim dividend of 50% i.e. '' 2.50/- per equity share of face value of '' 5/- each amounting to '' 115.99 Million for the Financial Year 2021-22 and paid on November 12, 2021.

Your Directors have pleasure in recommending a final dividend of 50% i.e. '' 2.50/- per equity share of face value of '' 5/- each for the financial year ended March 31, 2022 at their meeting held on May 27, 2022 amounting to '' 115.99 Million. The dividend payout is subject to approval of members at the ensuing Annual General Meeting.

The Register of Members and Share Transfer Books will remain closed from Saturday, July 23, 2022 to Friday, July 29, 2022 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2022. The Annual General Meeting is scheduled to be held on Friday, July 29, 2022.

Dividend Distribution Policy

In terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations”), the Company has formulated and adopted a Dividend Distribution Policy with the objective of providing clarity to its stakeholders on the profit distribution strategies of the Company. During the year, the said Policy has been reviewed by the Board of Directors of the Company. The policy hosted on the website of the Company at https://www. heritagefoods.in/policy

Share Capital

The Authorised Share Capital of the Company as on March 31, 2022 was '' 500,000,000/- divided into 9,60,00,000 equity shares of '' 5/- each and 20,00,000 preference shares of '' 10/- each. The paid up Equity Share Capital as on March 31, 2022 stood at '' 23,19,90,000/- divided into 4,63,98,000 equity shares face value of '' 5/- each. During the year under review, the Company has not issued any shares including shares with differential voting rights, not granted any stock options and not issued any sweat equity share to its employee(s)/director(s). As on March 31, 2022, none of the Directors of the Company holds any instruments convertible into equity shares of the Company. The Company has not issued equity shares with differential rights as to dividend, voting or otherwise as on March 31, 2022.

Deposits

Your Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013, i.e. within the meaning of Section 2(31) of the Companies Act, 2013 read with Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 and as such there are no such overdue deposits outstanding as on 31st March, 2022.

Buy Back of shares

The Company has not bought back any of its shares during the Financial Year ended March 31, 2022.

Particulars of Loans, Guarantees and Investments

Loans: During the year under review your Company has not given any loans to any persons or body corporates as envisaged under Section 186 of the Companies Act, 2013.

Guarantees: The Company has given corporate guarantee as at March 31, 2022 of '' 207.50 Million for the credit facilities availed by its wholly owned subsidiary Company namely M/s. Heritage Nutrivet Limited (CIN: U15400TG2008PLC062054) (the outstanding as on March 31, 2022 was '' 79.69 Million) and '' 220 Million for the credit facilities availed by its joint venture Company namely Heritage Novandie Foods Private Limited (CIN: U74999TG2017PTC120860) (the outstanding as on March 31, 2022 was '' 120.26 Million).

Investments: During the year under review your Company has invested '' 104.65 million in the equity shares of its Joint Venture namely Heritage Novandie Foods Private Limited.

Particulars of Contract or Arrangements made with Related Parties

The particulars of contracts or arrangements with related parties as per Section 188 of the Companies Act, 2013 and rules made thereof as amended from time to time and as per the Related Party Transaction (RPT) policy the Company during the financial year ended March 31, 2022 in prescribed Form AOC-2 is annexed to this Board''s Report (Annexure-1). Further there are no materially significant related party transactions during the year under review with Promoters, Directors, Key Managerial Personnel''s and their relatives, which may have potential conflict with interest of the company at large. The related party transactions were placed before the audit committee and also to the Board at their respective meetings for approval. All related party transactions entered during the year were in the ordinary course of business and at arm''s length basis. Details of the related party transactions during the year are part of the financial statements forming part of this Annual Report.

Material changes and commitments affecting financial position between the end of the financial year and date of report

There are no material changes and commitments affecting financial position of the company, which occurred after the end of the financial year i.e., March 31, 2022,

Director''s Responsibility Statement as required under Section 134 (3)(c) & (5) of the Companies Act, 2013.

The financial statements are prepared in accordance with the provision of Section 129 read with Schedule III of the Companies Act, 2013 and the rules made thereof, Ind-AS and Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis except the sale proceeds received under REC Mechanism of the Renewable Energy. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (''the Act''), read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act and guidelines issued by the Securities and Exchange Board of India (SEBI). There are no material departures from prescribed accounting standards in the adoption of these standards.

The Board of Directors to the best of their knowledge and understand confirm that:

• In the preparation of the annual accounts (Standalone & Consolidated) for the financial year 2021-22, the applicable accounting standards have been followed along with proper explanation relating to material departures.

• They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2021-22 and of the profit and loss of the Company for that period.

• They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities if any,

• The annual accounts of the company have been prepared on a going concern basis.

• They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

• They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Variation in market capitalization

As at March 31

2022

2021

Market Capitalization ('' in million)

14,838.08

13,622.50

Price earning Ratio

14.62

9.38

Note: Data based on share prices quoted on BSE

Management Discussion and Analysis

In terms of the provisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 as amended from time to time, the Management''s Discussion and Analysis is provided in a separate section and forms an integral part of this Report.

Corporate Governance

Corporate governance is an ethically driven business process that is committed to values aimed at enhancing an organization''s brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders'' expectations. It is imperative that your company''s affairs are managed in a fair and transparent manner. This is vital to gain and retain the trust of the stakeholders.

In terms of Regulation 34 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter "Listing Regulations”) as amended from time to time, a Report on Corporate Governance along with Compliance Certificate

issued by Statutory Auditors of the Company forms integral part of this Annual Report.

Business Review

Your Company has not changed its nature of business during the period under review. Your Company has two divisions i.e. Dairy division and Renewable division in operation in different States in India as on March 31, 2022.

Dairy Business:

Global Dairy Industry: World milk production is expected to increase by 1.6 percent annually between 2021 and 2029 and reach 997 million tons in 2029, according to a report prepared by OECD-FAO. This report reveals that the increase in milk yield is highly related to the diet. In countries where grazing-based livestock breeding is carried out, milk production increases are mostly related to the number of herds, while in countries where special feeding is common, production increases due to productivity.

Indian Dairy Industry: India has been the leading producer and consumer of dairy products worldwide since 1998 with a sustained growth in the availability of milk and milk products. Dairy activities form an essential part of the rural Indian economy, serving as an important source of employment and income. India also has the largest bovine population in the world. However, the milk production per animal is significantly low as compared to the other major dairy producers. Moreover, nearly all of the dairy produce in India is consumed domestically, with the majority of it being sold as fluid milk. On account of this, the Indian dairy industry holds tremendous potential for value-addition and overall development.

Along with offering profitable business opportunities, the dairy industry in India serves as a tool of socio-economic development. Keeping this in view, the Government of India has introduced various schemes and initiatives aimed at the development of the dairy sector in the country. For instance, the "National Dairy Programme (Phase-I)” aims to improve cattle productivity and increase the production of milk expanding and strengthening and expanding the rural milk procurement infrastructure and provide greater market access to the farmers. On the other hand, the private participation in the Indian dairy sector has also increased over the past few years. Both national and international players are entering the dairy industry, attracted by the size and potential of the Indian market. The focus is being given to value-added products such as cheese, yogurt, probiotic drinks, etc. They are also introducing innovative products keeping in mind the specific requirements of the Indian consumers. These players are also improving their milk procurement network which is further facilitating the development of the dairy industry in India.

Dairy Market Forecast: As per the research report by IMARC Group, The dairy market in India has reached a value of '' 13,174 Billion in 2021. Looking forward, IMARC Group expects the market to reach '' 30,840 Billion by 2027, exhibiting a CAGR of 14.98% during 20222027.

Organized & Unorganized Dairy Market in India: Being one of the primary dairy consumables in India, the demand increase for milk in the country is owed to the increasing population. As of

FY 2020-21, 70-74% of the Indian dairy and milk processing market was part of the unorganized sector.

State-wise segment: Uttar Pradesh, Rajasthan, and Gujarat have been the major milk producing states in India. Uttar Pradesh is the largest dairy and milk-producing state because it is home to the highest buffalo population and the second-highest cattle population in the country. The majority of the rural population in this state is engaged in livestock rearing and dairying. Gujarat has numerous cooperative dairy milk unions, private dairy plants, and primary milk cooperative societies, which play crucial role in the production of milk in the state.

Value-added product: Apart from milk, the revenue of the Indian dairy and milk processing industry is generated from several value-added products such as butter, curd, paneer, ghee, whey, flavored milk, ultra-high temperature (UHT) milk, cheese, yogurt etc. The value-added products market is under-penetrated, thus having tremendous scope for the growth and is expected to grow at much faster rate as compared with the commodity market.

Export/Import: From India, the export of dairy products has increased to countries like Bhutan, Afghanistan, Canada, Egypt, and the United Arab Emirates. India has also imported a significant amount of dairy products from countries like France, New Zealand, Ireland, France, Ukraine, and Italy.

Key growth drivers of the market: India''s livestock sector is regarded as one of the largest in the world with a bovine population of 299.90 Mn, which comprises of cow''s and buffalo''s. The growth of the Indian dairy and milk processing market is ensured by the steady supply of milk which is the primary raw material for this industry.

The major challenge faced by the Dairy Industry is the organization of the supply chain and logistics. The good part is that challenges are nothing but opportunities in disguise and in order to meet this challenge head on, proactive steps need to be taken to empower farmers and provide a stronger supply chain for them to rely on. Even though India is the largest producer of milk in the world, the industry itself is largely unorganized, with only 26-30% percent of the total milk produced being channelized in an organized manner. The first step to countering this would be to shift the focus to smaller dairy farms, which sometimes lack veterinary facilities and basic nutritious fodder etc.

Increasing Demand for Milk and Value-Added Products: With an increase in the spending power of the population, the demand for milk and other value-added dairy products is expected to increase in the coming years. In order to meet the rising demand, there needs to be a marked shift from the unorganized to the organized sector. Moreover, consumers now-a-days are not only hold greater buying power but also health conscious regarding what they consume. Value added products are produced by some modification or enhancement via addition or segregation of liquid wholesome milk. Value-added products include cheese, paneer, ghee, yoghurt and probiotic drinks etc. These products are produced by alteration and enrichment via use of additives,

microbial fermentation or simply mixing with liquid milk. There is thus a necessity to provide healthy dairy products which can be readily consumed. This creates an opportunity for boutique dairy farms to set up local operations providing fresh cow or buffalo milk to consumers. Over and above with people having less time these days, the demand for premium value added products such as probiotic yoghurt, cheese, milk shakes etc. are on the rise. These products not only have a higher margin but also have a longer shelf life which makes the supply chain easier and cost effective.

There is immense room for the organized sector to gain market share of marketable milk from unorganized sector as per the Department of Animal Husbandry, Dairying and Fisheries, the organized milk handling is expected to grow from 26-30% at present to 50% by FY23.

Organised players account for just 26-30% of the overall milk market and expect their share to grow going forward. Also expect rising milk procurement prices to be passed on by B2C players, resulting in stable margins.

Government Initiatives: Government is progressively taking initiatives to promote the dairy industry in India, in which inclination towards cattle breeding, clean milk production, dairy development and feed fodder management are included. The Department of Animal Husbandry, NDDB, and other government affiliated institutions manage these initiatives in a constructive way. Utilizing the available resources for dairy industry to their full extent is the main objective behind these initiatives. The manner in which Dairy industry would enhance milk production and upgrade milk processing technologies, is also supervised by these departments/agencies.

Your Company is a strong player in the curd segment and has expanded its product basket by entering into the fastest growing product like Yoghurt, through a Joint Venture Company.

The motto of your company is to empower farmers by doing the following activities

• Facilitating loans for the purchase of cattle through commercial banks/ NBFCs

• Facilitating cattle insurance;

• Conducting veterinary camps for animals at frequent intervals;

• Supply of high quality cattle feed and fodder seeds;

• Ensuring timely payment to farmers.

In its bid to become a pan India player, your Company has expanded its distribution of products to 11 states in India covering South, West and North India. It has direct procurement network of 0.3 million dairy farmers across eight major milk producing States namely, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Maharashtra, Rajasthan, Punjab and Haryana. The direct

'' in Millions

Particulars

Heritage Nutrivet Limited (Wholly Owned Subsidiary) year ended on

Skil Raigam Power (India) Limited (Associate) year ended on

Heritage Novandie Foods Private Limited (Joint Venture) year ended on

31/03/2022

31/03/2021

31/03/2022 31/03/2021

31/03/2022

31/03/2021

Total Income

959.97

1218.56

-

23.49

1.17

Total Expenses

944.32

1120.98

28.91

0.19

144.17

45.33

Profit/ (Loss) before tax

15.65

97.58

(28.91)

(0.19)

(120.68)

(44.16)

Current tax

0.58

16.03

-

-

-

-

Deferred tax

4.48

9.43

-

-

-

-

Profit/ (loss) for the year

10.59

72.12

(28.91)

(0.19)

(120.68)

(44.16)

route of milk procurement enables it to maintain quality. The company also operates 187 bulk coolers, chilling plants and procured 1.3 Million liters of milk per day. It operates 18 own processing plants with installed milk processing capacity of 2.7 million liters per day.

Your Company procures 1.3 Million litres of milk daily from 0.3 million farmers across eight states. The milk is directly procured from farmers which ensures greater consistency in milk quality and consistency in supply. The company''s installed processing capacity is 2.7 Million liters per day and chilling capacity is 2.13 Million LPD. Products of the Company are available across 11 states viz. Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharashtra, Odisha, NCR Delhi, Haryana, Uttar Pradesh and Uttarakhand.

COVID

The second wave of the global health pandemic COVID-19 in the month of April and May 2021 in India and the lockdown imposed by the State Governments resulted in slowdown of most of the businesses in India. Your Company''s plants continued to operate as per the business requirements and in compliance with the instructions and guidelines issued by the Government of India and the respective State Governments.

Your Company was been categorised under "Essential Commodities” as per the notification issued by Ministry of Home Affairs (MHA) Govt. of India, for supply of Milk and Milk Products. The pandemic had no material adverse impact on the company''s business, although the sales of milk and value-added products have come down because of the lockdown imposed by various State Governments. Transportation was also impacted initially to some extent due to absenteeism of drivers. All the milk supplied by farmers was procured and processed during the lockdown period.

However, the availability of raw materials and the supply chain of the company were not affected.

The Company took conscious decision to balance uninterrupted operations and ensuring a safe working environment. The company is continuously ensuring a safe working environment to its employees by sanitizing its work place regularly. Your Company has complied with the COVID-19 guidelines issued by the Government of India and the respective State Governments.

The Board of Directors expressed their satisfaction about the way company has handled the business during the period of COVID-19 outbreak.

Renewable Energy Division

Your Company strongly recognizes the responsibility towards protecting the environment. As a forward-looking enterprise, it is strongly committed to extending the Green'' footprint.

Your Company is taking a lot of initiatives for conservation of energy. Renewable energy was the major focus area in the last ten years. Now your Company has 10.50 MW of solar and wind power

for captive consumption. Your Company is continuously investing in latest technologies and efficiencies to conserve energy.

Renewable Energy Division of your Company had achieved the turnover of 90.03 Million during the year under review

Subsidiary / Associate Companies

Your Company as on March 31, 2022 is having following subsidiary/ associate/joint venture Companies:

Heritage Nutrivet Limited (CIN: U15400TG2008PLC062054)

A wholly owned Subsidiary Company operating with Animal Nutrition and one of the leading Live Stock Feed & Feed Supplements Companies in Southern and Western India, covering over 0.3 million farmers spread across five states viz., Andhra Pradesh, Telangana, Tamil Nadu, Karnataka and Maharastra. Product quality is pivotal in our endeavour towards "HEALTHY MILCH ANIMAL - HAPPY FARMER”

It is also proficient in providing cost-effective solutions for the farmers facing ground reality. The products of the Heritage Nutrivet Limited are innovatively engineered to serve varieties of needs of the animals. It segregate the animal feed into dairy power, dairy milk, rich, dairy supreme, milk magic plus, gomitra, gomitra plus.

Skil Raigam Power (India) Limited (CIN:U40102TG2009PLC063671)

An associate Company as per the provisions of Section 2(6) of the Companies Act, 2013, which has been declared as Dormant Company as per Section 455(2) of Companies Act, 2013 vide SRN: T42936765 dated September 22, 2021, the Company will be in the process of setting up hydro power plant at Raigam, in Arunachal Pradesh. Your Company is having 43.33% of shareholding in this Company.

Heritage Novandie Foods Private Limited (CIN: U74999TG2017PTC120860)

A 50:50 Joint Venture Company between Heritage Foods Limited (HFL), Hyderabad, India and Novandie, France with an object to manufacture and market various Fruit Yoghurts and other dairy products in India. The Company had started the commercial production on February 16, 2021 and launched French Yoghurt brand ''Mamie Yova'' in India. The Company is hoping to woo Indian consumers with its fruit-based yogurt and aims to have a strong presence across 8-10 key cities in the next two years. Due to COVID out-break the Company has not make the market penetration in large scale, however during the coming financial year the company is expected to make more penetration in the market, resulting to make more revenue and losses will be minimised.

The details of transaction are available in the AOC-1 which is forming part of the consolidated financial statement. The gist of financial performance of the Subsidiary/ Associate/Joint Venture companies is as follows.

During the financial year under review, your Company has not added/ removed any subsidiaries, joint ventures or associate companies.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its Subsidiary, Associate and Joint Venture are available on the website of your Company www.heritagefoods.in. These documents will also be available for inspection during the business hours of the Company at its registered office in Hyderabad, India.

Quality

Your Company continues the journey of delivering value to its consumers/customers through significant investments in quality assurance programs.

Your Company adheres to international quality standard certifications such as ISO 22000:2018 (Food Safety Management System), ISO 9001:2015 (Quality Management System), ISO 45001:2018 (Occupational Health & Safety), ISO 14001:2015 (Environmental Management System), ISO 50001:2018 (Energy Management System) and HALAL Certification by JUHF. Your Company has also have AgMark, BIS and EIA certificates.

The Quality department of your Company handles large change management initiatives to drive quality and productivity improvements across the Company, using various techniques and updated technologies.

Branding

"Heritage” as a brand reflects your company''s identity, core values and belief system. Your company is actively working on diversifying the products portfolio in line with the current consumer trends and mission of bringing health, nutrition & happiness to every home. On the communication front your company focusing on improving

consumer connect using social & digital media platforms. In the coming years, your company shall develop interactive and engaging campaigns that help to connect with the consumer actively.

Awards & Recognitions

During the financial year 2021-22 your Company has received the following awards and recognitions.

• CII National Energy Conservation Awards for FY 2020-21

♦ 1st Prize won by Gokul Plant, Charndragiri (M), Chittoor Dist-517101, Andhra Pradesh, India

♦ 2nd Prize won by Bayyavaram Plant, Bayyavaram(V), Visakhapatnam District-531031, Andhra Pradesh, India

♦ Certificate of Merit to Bengaluru Plant, Yadavanhalli (V), Anekal Taluk, Bengaluru South-562107, Karnataka, India

• CII National Award in Food Safety for the Year 2021

♦ 1st Prize won by B. Kothakota Plant, Kothakota (M), Chittoor Dist-517370, Andhra Pradesh, India

• The central Board of Indirect Taxes and Customs conveyed its appreciation to the Company for prompt filing of returns and payments of Goods and Services Tax (GST) as on 31st March, 2021 in the following states:

PUNJAB HARYANA RAJASTHAN

MAHARASHTRA KARNATAKA TELANGANA

Human Resources and Industrial Relations

Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. Your company ensures that it provides a harmonious and cordial

working environment to all its employees. To ensure good human resources management, your Company focused on all aspects of the employee lifecycle. This provides a holistic experience for the employee as well. During their tenure at the Company, employees are motivated through various skill- development program, engagement and volunteering programs. Your company has put in continued efforts in building capabilities of Human Resources with adoption of specific and targeted interventions. Your Company has a structured induction process at all locations and management development programs to upgrade skills of managers. Objective appraisal systems based on Key Result Areas are in place for all employees.

Your Company is committed to nurture, enhance and retain talent through superior Learning & Organizational Development.

The total strength of your Company employees as on March 31, 2022 was 3009.

Investor Relationship

Your Company continuously strives for excellence in its Investor Relationship (IR) engagement with Domestic and International investors and has set up feedback mechanism to measure IR effectiveness. Structured conference calls and periodic investor/ analyst interactions, participation in investor conferences, quarterly earnings calls and annual analyst meet with the Executive Director, President, Chief Executive Officer, Chief financial Officer, Chief Operating Officer and Business Heads were organised during the year. Your Company always believes in leading from the front with emerging best practices in IR and building a relationship of mutual understanding with investor/ analysts. Your Company ensures that relevant information about the Company is available to all the investors by uploading all such information at the Company''s website and the Stock Exchanges where the shares of the company are listed.

Credit Rating

The details of the credit rating are as follows:

a) Credit rating obtained by the company: in respect to long term and short term debts

b) Name of the credit rating agency: Credit Rating Information Services of India Limited (CRISIL)

i. Long term Rating: CRISIL A/Positive

ii. Short term Rating: CRISIL A1

c) Date on which the credit rating was obtained: April 07, 2022 (valid up to December 31, 2022)

d) Revision in the credit rating: No

e) Reasons provided by the rating agency for a downward revision: NA

Particulars of Employees and Related Disclosures

The table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in Annexure-2A. A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of '' 10.20 million or more per annum or employed for part of the year and in receipt of ''

0. 85 million or more in a month under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended from time to time are provided in Annexure-2B to this report.

Information Technology and Digitization:

Implementation of IT & Digital Transformation Strategy has been a key priority for your company for the financial year 2021-22. The Strategy was focused on addressing the perspective of all the stakeholders, viz. Farmer, Consumer, Customer and the Employee to achieve the desired outcomes of reducing the Cost, enhancing the efficiency, consumer delight and enhancing revenue.

Introduction of various initiatives using Data Science such as grading of MCCs & Agents and Forecasting of SMP Price - have helped the Organisation in taking data driven decisions. BI Dashboards have been deployed covering all major functions such as; Sales, Procurement, Finance, Production, Purchase & Stores and Human Resource.

Heritage CLapp (Customer Live Application) & DMS (Distributor Management System) have given an edge in terms of streamlining the primary and secondary sales process from Agent level up to the counter sales level in an authentic manner.

Vet app continued to widen its user base and the range of services helping the Farmers with hassle free veterinary services and eventually enhancing their income.

All the IT related initiatives combinedly have helped the organisation in being consumer centric and farmer friendly while making Heritage as the best place to work with for its employees.

Board Diversity

Your Company recognizes and embraces the importance of a diverse board for its success. Your Company believes that a truly diverse board will leverage differences in thought, perspective, knowledge, skill and industry experience, cultural and geographical background, age and gender, which will help the Company, retain its competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Policy is available in the Company website

1. e. www.heritagefoods.in > Investor > Policies.

Meetings of the Board

The Board met six (6) times during the financial year 2021-22, the details of which are given in the Corporate Governance Report forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Policy on Director''s Appointment and Remuneration

The current policy is to have an appropriate mix of Executive and Non-executive & Independent and Women Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2022, the Board consists of 7 members, 2 of them are Executive/Whole-time directors, 1 is Non-Executive Director, 1 is Non-Executive Independent Woman Director and 3 are Non-Executive Independent Directors. The Board periodically evaluates the need for change in its composition and size.

The policy of your Company on directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters as provided under Section 178(3) of the Companies Act, 2013, and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 was adopted by the Board. It is affirmed that the remuneration paid to the Director(s) are as per the terms laid out in the nomination and remuneration policy of the Company.

Declaration from Directors

Your Company has received necessary declaration from all directors stating that they are not debarred or disqualified from being appointed or continuing as Directors of companies as per the Securities and Exchange Board of India, Reserve Bank of India, Ministry of Corporate Affairs or any such other Statutory Authority.

Declaration by Independent Directors

Your Company has received necessary declaration from each independent director stating that they met the criteria prescribed for independence under Section 149 of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and the Board has confirmed its veracity and taken the same on record.

Board Evaluation

As per the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time the Nomination and Remuneration Committee laid down criteria for performance evaluation of individual director(s), the board and its committee(s). Accordingly,

an annual evaluation was carried out for the Board''s performance, its Committees and individual director(s).

The Board performance evaluation is carried out through a structured questionnaire which provides a clear and valuable feedback for Board effectiveness and highlighting areas for further development.

The following are some of the broad issues that are considered in performance evaluation questionnaire

• Ability to act on a fully informed basis, in good faith, with due diligence and in the best interest of the company and the stakeholders.

• Optimum combination of knowledge, skill, experience and diversity on the Board as well as its Committees.

• Relationships and effective communication among the Board members.

• Effectiveness of individual non-executive and executive directors and Committees of Board.

• Quality of the discussions, general information provided on the company and its performance, papers and presentations to the Board.

• Risk management as well as processes for identifying and reviewing risks.

• Well- defined mandate and terms of reference of Committee.

• Attendance at Board as well as Committee Meetings

• Procurement of Information, preparation for Board Meetings and value of contribution at meetings

• Relationships with fellow Board members, the company secretary and senior management and mutual trust and respect they stimulated within the Board.

• Keeping update with the latest developments in the areas of governance and financial reporting

• Willingness to devote time and effort to understand the company and its business

• Providing necessary guidance using their knowledge and experience in development of corporate strategy, major plans of action, risk policy, and setting performance objectives.

• Independence exercised in taking decisions, listening to views of others and maintaining their views with resolute attitude

• Ability in assisting the Company in implementing the best corporate governance practices.

• Capability in exercising independent judgement to tasks where there is potential conflict of interest

• Commitment in fulfilling the director''s obligations fiduciary responsibilities.

The Board of Directors received all evaluations from each Director including Board as a whole and its committee based on the above criteria, discussed various points and all points are satisfactory, no further action is required. There were no actions pending from the previous year observations. The detailed format of Board evaluation is available in the website of the Company i.e. https://www.heritagefoods.in/ uploads/ investors/pdf/ 15870145475 Board_&_Director_Evaluation_ Framework.pdf

Training of Independent Directors

Every new independent director of the Board attends an orientation program. To familiarize the new inductees with the strategy, operations and functions of your Company, the Executive Directors/Senior Managerial Personnel make presentations to the inductees about the Company''s strategy, operations, product and service offerings, markets, organization structure, quality and risk management etc.

Appointment/Re-Appointment

Mr. M P Vijay Kumar (DIN: 05170323) has been appointed as a Non-Executive Independent Director of the Company w.e.f. November 01, 2021, for a period of 5 consecutive years, the said appointment was approved by shareholders through postal ballot on November 24, 2021.

The approval of members through special resolution was taken on April 29, 2022 for Continuation of directorship as per Regulation 17(1A) of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 of Dr. V Nagaraju (DIN: 00003730) as a Non Executive Director after attaining the age of 75.

In order to comply with the provisions of section 152 of the Companies Act, 2013 and rules applicable thereunder, the appointment of Dr. V. Nagaraja Naidu (DIN: 00003730) Non-Executive Director of the Company is liable to retire by rotation at this Annual General Meeting, being eligible offers himself for re-appointment.

Retirements and Resignations

During the year under review, none of the Directors retired or resigned from the Board.

Key Managerial Personnel

During the year under review, the Company is having the following persons as Key Managerial Personnel.

Name of the Official

DIN/M. No

Designation

Mrs. N. Bhuvaneswari

00003741

Vice Chairperson & Managing Director

Mrs. N. Brahmani

02338940

Executive Director

Mr. A Prabhakara Naidu

FCA 200974

Chief Financial Officer

Mr. Umakanta Barik

FCS 6317

Company Secretary& Compliance Officer

Dr. M Sambasiva Rao

-

President

Mr. Srideep Madhavan Nair Kesavan*

-

Chief Executive Officer

* Mr. Srideep Madhavan Nair Kesavan appointed as Chief Executive Officer the Company w.e.f 28-07-2021

Committees of the Board

Currently, the Board has six committees i.e. Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Risk Management Committee and Management Committee.

A detailed note on the Board and its committees is provided under the Corporate Governance Report section in this Annual Report. The composition of the committees and compliances, as per the applicable provisions of the Act and Rules, are as follows:

Name of the Committee

Composition of the Committee

Highlights of roles and responsibilities

Audit

Mrs. Aparna Surabhi (C)

• All recommendations made by the audit committee during the year were accepted

committee

Mr. Rajesh Thakur Ahuja (M)

by the Board.

Mr. N Srivishnu Raju (M)

• Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

Mr. M P Vijay Kumar (M)

• Approval or any subsequent modification of transactions of the Company with

(wef. 21/01/2022)

related parties.

Dr V Nagaraja Naidu (M)

• Reviewing, with the management, the performance of statutory auditors and

internal auditors, adequacy of internal control systems, etc.

Nomination

Mr. N Srivishnu Raju (C)

• The committee oversees and administers executive compensation, operating

and

Remuneration

Committee

Mr. Rajesh Thakur Ahuja (M) Mrs. Aparna Surabhi (M)

Mr. M P Vijay Kumar (M) (wef. 21/01/2022)

under a written charter adopted by our Board of Directors.

• The nomination and remuneration committee has framed the nomination and remuneration policy.

Corporate

Mr. Rajesh Thakur Ahuja (C)

• To formulate and recommend to the Board, a Corporate Social Responsibility

Social

Responsibility

Mr. N Srivishnu Raju (M)

(CSR) Policy indicating activities to be undertaken by the Company in compliance with provisions of the Companies Act, 2013 and rules made there under.

Committee

Mrs. N Bhuvaneswari (M)

• To monitor the implementation of the CSR Policy of the Company from time to

time

Stakeholders

Dr. V Nagaraja Naidu (C)

• The committee reviews and ensures redressal of investor grievances.

Relationship

Committee

Mr. N Srivishnu Raju (M)

• The committee noted that all the grievances of the investors have been resolved

Mrs. N Bhuvaneswari (M)

during the year.

Mr. Rajesh Thakur Ahuja(M)

Risk

Mr. Rajesh Thakur Ahuja (C)

• The purpose of the committee is to assist the Board in fulfilling its corporate

Management

Mr. N Srivishnu Raju (M)

governance with regard to the identification, evaluation & mitigation of operational,

Committee

strategic and environmental risks efficiently and effectively.

Mrs. N Bhuvaneswari (M)

• The Company has developed and implemented a risk management framework

Mrs. Aparna Surabhi (M)

that includes identification of elements of risk, if any, which in the opinion of the Board may threaten the existence of the Company.

Management

Mrs. Aparna Surabhi(C)

• Setting the strategic direction to guide and direct the activities of the organization;

Committee

Mr. N Srivishnu Raju (M)

• Ensuring the effective management of the organization and its activities; and

Mr. M P Vijay Kumar (M)

• Monitoring the activities of the organization to ensure they are in keeping with the

(wef. 21/01/2022)

founding principles, objects and values.

Mrs. N Bhuvaneswari (M)

C- Chairperson M-Member

Policies

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated the formulation of certain policies for all listed companies. All the corporate policies are available on the Company website (www.heritagefoods.in/Investors/ policies). The policies are reviewed periodically by the Board and updated based on need and new compliance requirement.

In addition to its Code of Conduct and Ethics, key policies that have been adopted by the Company are as follows:

Name of the policy

Brief description

Web link

Whistleblower Policy (Policy on vigil mechanism)

The Company has adopted the whistleblower mechanism for directors and employees to report concerns about unethical behaviour, actual or suspected fraud, or violation of the Company''s code of conduct and ethics. It also provides for adequate safeguards against victimization of employees who availed the mechanism and also provides for direct access to the Chairperson of the Audit Committee.

Insider Trading Policy and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information

The Company has adopted a Code of Conduct to Regulate, Monitor & Report Trading by Insiders and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information as per the SEBI (Prohibition of Insider Trading) Regulation 2015, with a view to regulate trading in securities by the Directors and Designated Persons while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed and other certain situations. All Board of Directors and the designated employees have confirmed compliance with the Code.

Policy and procedure of inquiry in case of leak or suspected leak of unpublished price sensitive information ("upsi”)

The Policy aims to provide a framework for inquiry in case of leak or suspected leak of Unpublished Price Sensitive Information.

Nomination and Remuneration Policy

This policy formulates the criteria for determining qualifications, competencies, positive attributes and independence for the appointment of a director (executive / non-executive) and also the criteria for determining the remuneration of the directors, key managerial personnel and senior management of the Company.

https://www.heritagefoods.in/policy

Corporate Social Responsibility Policy

The policy outlines the Company''s strategy to bring about a positive impact on Society through programs relating to hunger, poverty, education, healthcare, environment, relief, disaster management etc., as per the provisions of the Companies Act, 2013.

Policy for Determining Material Subsidiaries

The policy is used to determine the material subsidiaries and material non-listed Indian subsidiaries of the Company and to provide the governance framework for them.

Related Party Transaction Policy

The policy regulates all transactions between the Company and its related parties

Policy on Preservation of Documents

The policy deals with the preservation of corporate records of the Company.

Archival Policy

The policy deals with the retention and archival of corporate records of the Company.

Business Responsibility Policy

This Policy endorses the Company''s commitment to follow principles and core elements, in conducting its business, as laid down in the National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business.

Dividend Distribution Policy

This Policy is to ensure the right balance between the quantum of Dividend paid and amount of profits retained in the business for various purposes

Policy on Determination of Materiality of Events

The Policy is to determine materiality of events or information relating to the Company and to ensure timely and accurate disclosure on all material matters concerning the Company.

Risk Management Policy

This policy sets out the objectives and accountabilities for the management of risk within the Company such that it is structured, consistent and effective

Anti-Sexual Harassment - Safe work environment policy

The policy aims at providing a safe work environment for women at workplace

Code of Conduct to Regulate, Monitor & Report Trading by Insiders

This code Regulates any kind of Insider Trading by designated persons

Note: There were no changes in the above policies during the year under review except the Related Party Transaction Policy of the Company.


Remuneration of Directors, Key Managerial Personnel and Senior Management

The remuneration paid to the Directors, Key Managerial Personnel and Senior Management is in accordance with the Nomination and Remuneration Policy formulated in accordance with Section 178 of the Act and Regulation 19 of the Listing Regulations.

The information required under Section 197 of the Act read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors/ employees of the Company is set out in the Annexure-2 [A&B] to this report.

Auditors'' & Auditor''s Report Statutory Auditors:

As per Section 139 of the Companies Act, 2013 (''the Act''), read with the Companies (Audit and Auditors) Rules, 2014, the Members of the Company at their 25th Annual General Meeting held in the year 2017, approved the appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants (FRN 001076N/N500013), as the Statutory Auditors of the Company for a term of 5 years i.e. from the conclusion of 25th Annual General Meeting till the conclusion of ensuing 30th Annual General Meeting of the Company.

The Audit reports dated May 27, 2022 (Standalone UDIN: 22207660AJRYHR7151) (Consolidated UDIN: 22207660AJRYLT1186) issued by M/s. Walker Chandiok & Co. LLP, Chartered Accountants, Statutory Auditors on the Company''s standalone and consolidated financial statements for the financial year ended 2021-22 is part of the Annual Report. There has been no qualification, reservation or adverse remark in their Report.

The Board of Directors of the Company on recommendation of the Audit Committee, has recommended the re-appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants (FRN 001076N/ N500013), as statutory auditors of the Company for second and final term of 5 (five) consecutive years (i.e. from April 01, 2022 to March 31, 2027) to the members at the ensuing Annual General Meeting of the Company. Accordingly, a resolution proposing appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants, as statutory auditors of the Company from the conclusion of 30th Annual General Meeting till the conclusion of 35th Annual General Meeting of the Company pursuant to Section 139 of the Companies Act, 2013, forms part of the Notice calling 30th Annual General Meeting of the Company, Further, M/s. Walker Chandiok & Co. LLP has furnished a certificate of their eligibility and consent for appointment under Section 139(1) & 141 of the Companies Act, 2013 and the Rules made thereunder.

Cost Auditor

As your Company is dealing with Skimmed Milk Powder, which require to maintain the cost records. Your Company has maintained all the required records as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013 and the appointment of Cost Auditor is not applicable for your Company.

Secretarial Auditor and Secretarial Standards

The Secretarial Audit was carried out by Mrs. Savita Jyoti, Partner, M/s. Savita Jyoti Associates, Practicing Company Secretary (CP No:1796, M.No.3738), Hyderabad - 500094, Telangana for the financial year

2021- 22. The Report issued by the Secretarial Auditors is annexed in Annexure-3 and forms integral part of the Board''s Report. There has been no qualification, reservation or adverse remark in their Report.

In terms of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Board of Directors appointed Mrs. Savita Jyoti, Partner, M/s. Savita Jyoti Associates, Practicing Company Secretary (CP No:1796, M.No.3738), Hyderabad - 500094, Telangana as the Secretarial Auditors of the Company for the financial year

2022- 23.

In terms of Regulation 24(A) of SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015 as amended from time to time, the Company has obtained the Secretarial Compliance certificate from Mrs. Savita Jyoti, Partner, M/s. Savita Jyoti Associates, Practicing Company Secretary (CP No: 1796, M.No.3738), Hyderabad - 500094, Telangana is annexed in Annexure-3(i) and forms part of the Annual Report and the same was also intimated to the Stock Exchanges where the shares of the Company are listed.

Pursuant to Regulation 34(3) and Schedule V Para C clause (10) (i) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Company has obtained a certificate from Mrs. Savita Jyoti, Partner, M/s. Savita Jyoti Associates, Practicing Company Secretary (CP No:1796, M.No.3738), Hyderabad - 500094, Telangana is annexed in Annexure-3(ii) and forms part of the Annual Report and the same was also intimated to the Stock Exchanges where the shares of the Company are listed.

Your Company has obtained a secretarial Audit Report of its wholly owned subsidiary company namely Heritage Nutrivet Limited from Mrs. Khusboo Laxmi Bhagat, Partner of M/s. KLB & Associates, Practicing Company Secretary (CP No:14703, M.No.9376), Hyderabad- 500016, Telangana is annexed in Annexure- 3(iii) and forms part of the Annual Report.

Your Company is in compliance with all applicable Secretarial Standards issued by the Institute of Company Secretaries of India, New Delhi for the financial year ended March 31, 2022.

Internal Auditors

The Company has appointed external firms of Chartered Accountants across the locations as internal auditors to conduct internal audit and to review internal controls and operating systems and procedures as per the scope of the audit. The Internal Audit Reports of the company are reviewed by the Audit Committee on monthly basis. The Internal Auditors send the quarterly audit observations to the Company in addition to the monthly reports and the same were presented quarterly by the lead internal auditor of the Company to the Audit Committee. The Audit Committee along with Statutory Auditors and

the management of the Company meets all Internal Auditors of the Company once in a year and review the internal controls and its adequacy. The Board of Directors on recommendation of the Audit Committee appoints/re-appoints the Internal Auditors every year in compliance with Section 138 of the Act read with the Companies (Accounts) Rules, 2014. List of Internal Auditors is provided in the corporate information section in the Annual Report.

Internal Audit & Control Systems

Your Company has a well-defined and documented internal audit & control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

These are supplemented by internal audit of your Company carried out by reputed firms of Chartered Accountants across the locations of the Company. Your Company has an Audit Committee consisting of Four Non-Executive Independent Directors and one NonExecutive Director. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggests improvements if any for strengthening them. Your Company has a robust Management Information System which is an integral part of the control mechanism.

Listing and Custodian Fees

The equity shares of your Company are listed at BSE Limited, Mumbai and National Stock Exchange of India Limited, Mumbai. The applicable annual listing fees were paid before the due date. The annual custodian fees have also been paid to the depositories before the due date.

Significant Material Orders Passed by the Regulators

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

Your Company has complied with all the Acts, Rules, Regulations and Guidelines issued/prescribed by the Securities Exchange Board of India, Reserve Bank of India, Ministry of Corporate Affairs and other statutory authorities.

Annual Return

The Annual Return as on March 31, 2022 as required under Section 92(3) and Section 134(3)(a) of the Companies Act, 2013, is available on the Company''s website (https://www.heritagefoods.in/annualreturn)

Internal Financial Control (IFC) and its adequacy

Your Company has adequate Internal Financial Controls as per Section 134(5)(e) of Companies Act, 2013, that commensurate

with the size of the business and nature of its operations, designed to provide reasonable assurance with regard to the accuracy and completeness of the accounting records and timely preparation and provision of reliable financial statements.

The Board has inter alia reviewed the adequacy and effectiveness of the Company''s internal financial controls relating to its financial statements.

The Board has discussed with the Management of the Company the major financial risk exposures if any and the steps taken by it to monitor and control such exposures, overseen and reviewed the functioning of the Whistle Blower Mechanism and the findings in respect of the investigations conducted on frauds if any, which were material in nature and the actions taken by the Management, in this regard.

Your Company has adopted necessary policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of financial information.

During the year, such controls were tested and no reportable material weakness in the design or operation was observed by the consultant namely, CA JSS Sivarama Prasad, Chartered Accountant (M No. 208735), Hyderabad appointed by the Board of Directors of the company

During the year no fraud by the Company or with the Company by its officers or employees has been noticed / reported.

Declaration as per Section 134(3)(ca) of the Companies Act, 2013

During the year, the statutory auditors and secretarial auditor have not reported any instances of frauds committed by or against the Company by its Directors/Officers/ Employees to the Audit Committee or Board under section 143(12) of the Companies Act, 2013 and rules made thereof. Therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.

CEO & CFO Certification

The Vice Chairperson & Managing Director, Chief Executive Officer and Chief Financial Officer of the Company have given annual certification on financial reporting and internal controls to the Board in terms of Regulation 17(8) of the SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015. Vice Chairperson & Managing Director, Chief Executive Officer and Chief Financial Officer also give quarterly certification on financial results while placing the financial results before the Board in terms of Regulation 33(2) (a) of the SEBI (Listing Obligation & Disclosure Requirements) Regulation, 2015. The annual certificates given by the Vice-Chairperson & Managing Director, Chief Executive Officer and Chief Financial Officer forms part of this Annual Report.

Corporate Social Responsibility (CSR)

Your Company has been an early adopter of corporate social responsibility (CSR) initiatives. Your Company has made Corporate Social Responsibility (CSR) an integral part of its ethos and culture. Your company has constituted a Corporate Social Responsibility Committee ("CSR Committee”) in accordance with Section 135 of the Companies Act, 2013. A robust system of reporting and monitoring has been put in place to ensure effective implementation of planned CSR initiatives.

The CSR activities / projects as per the provisions of the Companies Act, 2013 and rules made thereof, is undertaken directly by the Company or through a registered trust or a registered society. During the Financial Year 2021-22 the CSR Committee of the Board evaluated various options to implement the CSR activities and decided to contribute the mandated CSR amount to the following implementing Agencies:

S.

No

Name of the implementing Agency

List of Activities

NTR Memorial Trust,

To carry out the activities such as

NTR Bhavan, Road

promoting education, enhancing

1.

No. 2, Banjara Hills,

the vocational skill & supply of clean

Hyderabad -500034,

drinking water, disaster management,

Telangana.

relief and rehabilitation etc.

Asian Healthcare

To carry on research related to

Foundation,

Single cell whole transcriptome

2.

#6-3-661,

based approach to understand the

Somajiguda,

dysregulation in immune repertoire

Hyderabad 500082, Telangana.

in COVID-19 long haulers

NTR Memorial Trust

NTR Memorial Trust is operating since 1997 towards the promoting and preventive of health care of the needy groups, meeting the educational needs of underprivileged students, advancing the concept of entrepreneurship and self-employment and offering support and relief during disasters and lot more other initiatives for the upliftment of the backward and needy population in the society.

Asian Healthcare foundation

Asian Healthcare Foundation (AHF) is the research and training wing of Asian Institute of Gastroenterology (AIG), a premier medical institution (accredited by OMED) providing tertiary medical care for gastroenterology related diseases. The mission of AHF is to conduct focused research in frontier areas of gastroenterology & minimum invasive surgical Gastroenterology and to translate the benefits for better patient care not only for India but for the world at large.

The mandated CSR amount of the Company for FY 2021-22 was '' 29.35 million out of which '' 0.025 million was spent on single year project and '' 29.325 million was allocated for spending on ongoing/ multi-year projects. The details of the CSR initiatives undertaken by the Company on CSR activities during the year are set out in Annexure-4 forming part of the Board''s Report in the format

prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.

These projects are in accordance with Schedule VII of the Companies Act, 2013 and the Company''s CSR Policy. The Policy is available at the Company''s website at www.heritagefoods.in.

Business Responsibility Report (BRR)

Pursuant to regulation 34(2)(f) of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, top 1000 listed entities based on their market capitalisation as on 31st March every year, are required to submit their Business Responsibility Report (BRR) as a part of their Annual Report. The Annual Report shall contain a Business Responsibility Report (BRR) describing the initiatives taken by the Company from an environmental, social and governance perspective. BRR has been designed as a tool to help companies understand the principles and core elements of responsible business practices and start implementing which reflect their adoption in the manner the company undertakes its business. Based on the market capitalization of BSE as on March 31, 2022 your Company was in sl no. 796 under top 1000 listed Company. In compliance with the regulation, the BRR is annexed in Annexure-5 to the board report.

Energy Conservation, Technology Absorption & Foreign Exchange Earnings & Outgo

The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules, 2014 are provided in the Annexure-6 to the Board Report.

Transfer of Un-Claimed Dividends and Shares

Pursuant to Section 124(5) of the Companies Act, 2013 [Section 205C(2) of the Companies Act, 1956] read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended from time to time the unclaimed/ unpaid dividend amount of '' 22,30,704/- (Twenty Two Lakhs Thirty Thousand Seven Hundred and Four Only) for the year 2013-14 was transferred to the Investor Education and Protection Fund during the financial year 2021-22.

In compliance with the provisions of Section 124 of the Companies Act, 2013, the Company has transferred 24,234 no of equity shares belongs to 42 members of the company to Investor Education and Protection fund Authority (IEPF) on November 29, 2021 of those members who have not claimed the dividends for a continuous period of 7 years.

Pursuant to Section 124(5) of the Companies Act, 2013 [Section 205C (2) of the Companies Act, 1956] read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed/unpaid dividend and the shares thereof pertaining for the financial year 2014-15 shall be transferred to the Investor Education and Protection Fund during the financial year 2022-23.

The information in respect of unclaimed/unpaid dividend & shares thereto and the last date for claiming the dividend are given below:

Date of Declaration of Dividend

Unclaimed/Unpaid Dividend

Financial

Last date for claiming

as on March 31, 2022

year ended

unpaid Dividend

Amount outstanding ('' in Rupees)

1

No of Shares

2014-15

24-09-2015

29-10-2022

2199882.00

733294

2015-16

19-08-2016

24-09-2023

1721013.00

573671

2016-17

23-08-2017

27-09-2024

2895932.00

723983

2017-18

30-08-2018

04-10-2025

1491520.00

745760

2018-19

30-08-2019

04-10-2026

1457828.00

728914

2019-20

28-08-2020

03-10-2027

1694148.50

524671

2020-21

30-07-2021

03-09-2028

2624739.00

604538

2021-22

21-10-2021 (1st Interim Dividend)

25-11-2028

1364854.50

644555

Policy on Sexual Harassment

The Company has always believed in providing a safe and harassment free workplace for every women working in Company''s premises, through various interventions and practices. The Company has adopted policy and constituted the Internal Complaint Committee under Prevention of Sexual Harassment of Women at Workplace in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 as amended from time to time.

The Company has not received any complaints during the year.

The Company regularly conducts awareness programmes for its employees.

The following are the summary of sexual harassment complaints received and disposed of during the year:

Sl

No

Particulars

Status of the No. of complaints received and disposed off

1

Number of complaints on sexual harassment received

Nil

2

Number of complaints disposed off during the year

Nil

3

Number of cases pending for more than ninety days

Nil

4

Number of workshops or awareness programmes against sexual harassment carried out

The Company regularly conducts necessary awareness programmes for its employees

5

Nature of action taken by the employer or district officer

Nil

Vigil Mechanism policy

The Board of Directors of the Company had adopted the Whistle Blower Policy in compliance with the provisions of Section 177 of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A

The voting rights on the shares transferred to IEPF Authority shall remain frozen till the rightful owner of such shares claim the shares. The company sends reminders to the members concerned to claim the unclaimed and unpaid dividends & shares thereto before they are transferred to the IEPF Authority as per the applicable provisions.

The members whose shares and dividend thereof got transferred to IEPF Authority shall claim the dividends and shares from IEPF Authority by submitting an online application in the prescribed e-Form-IEPF-5 available on the website www.iepf.gov.in and the procedure prescribed thereon.

Mr. Umakanta Barik is the Nodal Officer who was appointed by the Company under the provisions of IEPF.

Risk Management

Your Company have constituted a Risk Management Committee pursuant to Section 134 (3) (n) of the Companies Act, 2013 & Regulation 21 of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company''s enterprise risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, Information Technology, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Risk Management Procedure shall be reviewed by the Risk Management Committee and Board of Directors on a half- yearly basis at the time of review of Financial Results of the Company.

The policy is available in the Company website: www.heritagefoods. in>Investor> policies

mechanism has been established for employees to report concerns about unethical behaviour, actual or suspected fraud, or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Audit Committee reviews periodically the functioning of whistle blower mechanism. No complaint have been received during the Financial Year ended March 31, 2022. No personnel have been denied access to the Audit Committee during the Financial Year 2021-22.

The details of said vigil mechanism are given in Corporate Governance Report, which forms part of this Annual Report. A copy of the Whistle Blower Policy is available in the company''s website i.e. www.heritagefoods.In.

Indian Accounting Standards (Ind AS)

The Company has adopted Indian Accounting Standards (Ind AS) with effect from April 1, 2017 pursuant to Ministry of Corporate Affairs'' notification of the Companies (Indian Accounting Standards) Rules, 2015. The standalone and consolidated financial statements of the Company, forming part of the Annual Report, have been prepared and presented in accordance with all the material aspects of the Indian Accounting Standards (''Ind AS'') as notified under section 133 of the Companies Act 2013 read with the Companies (Indian Accounting Standards) Rules 2015 (by Ministry of Corporate Affairs (''MCA'')) and Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 as amended and relevant amendment rules issued thereafter and guidelines issued by the Securities Exchange Board of India ("SEBI”). There was no revision of Financial Statements (Standalone & Consolidated) and Board Reports during the year under review.

Prevention of Insider Trading Code

As per SEBI (Prohibition of Insider Trading) Regulation, 2015 as amended from time to time, the Company has adopted a Code of Conduct for Prevention of Insider Trading. The Company has appointed Mr. Umakanta Barik, Company Secretary of the Company as Compliance Officer, who is responsible for setting forth procedures and implementation of the code of conduct for trading in Company''s securities. During the year under review, there has been due compliance with the said code.

Acknowledgement and Appreciation

The Board takes this opportunity to thank all farmers, consumers, customers, vendors, investors, bankers and Statutory Authorities for their continued support during the year. The Board also wishes to place on record its sincere appreciation of the effort/ contribution made by its employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain an industry leader. The Company''s consistent growth was made possible by their hard work, solidarity, cooperation and support and look forward to their continued support in the future.

For and on behalf of the Board of Directors N. BHUVANESWARI N. BRAHMANI

Place : Hyderabad Vice Chairperson & Managing Director Executive Director

Date : May 27, 2022 (DIN: 00003741) (DIN : 02338940)


Mar 31, 2018

To the members,

The Directors have great pleasure in presenting the 26th Annual Report of the Company together with the Standalone & Consolidated Audited statement of accounts for the Financial Year ended March 31, 2018.

FINANCIAL RESULTS

(Rs. In Lakhs)

Particulars

Standalone

FY 2017-18

FY 2016-17

Net Sales

234385.51

183309.59

Revenue from transaction with discontinued operation

-

3759.63

Other operating income

15.59

74.35

Total Revenue

234401.10

187143.57

Add: Other Income

716.95

360.68

Fair value gain on FVTPL Equity Shares

39537.07

24681.01

Less: Total Expenditure

221699.95

168635.18

Purchase transaction with discontinued operation

-

3913.54

Loss due to change in Fair valuation of derivative transaction

38703.86

3854.87

Profit before Finance Cost, Depreciation and Tax

14251.31

35781.67

Less: Finance costs

1745.45

963.24

Depreciation & Amortisation

3698.54

2487.07

Profit / (Loss) before tax

8807.32

32331.36

Less: Provision for current taxation (Incl. tax. earlier yrs)

2829.39

2600.07

Less: Provision for deferred taxation

(60.23)

471.15

Profit / (Loss) after tax

6038.16

29260.14

PERFORMANCE OF THE COMPANY (STANDALONE)

Your Company, during the year under review earned revenue from operations (Gross) of Rs.2,34,401 Lakhs, achieved an increase of 25.25% over the previous year. The profit before Finance Cost, depreciation & amortization and tax was of Rs.14,251 Lakhs (6.08% on total revenue) as against Rs.35,782 Lakhs (19.10% on total revenue) in the previous year. The operating profit after depreciation was amounted to Rs.10,553 Lakhs (4.50% to revenue) as against Rs.33,295 Lakhs (17.79% to revenue) in the previous year

DIVIDEND

Your Directors have pleasure in recommending a dividend of Rs.2/- (40%) per equity share face value of Rs.5/- each for the financial year ended March 31, 2018, amounting to Rs.928 lakhs. The dividend payout is subject to approval of members at the ensuing Annual General Meeting.

The Register of Members and Share Transfer Books will remain closed from Thursday, August 23, 2018 to Thursday, August 30, 2018 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2018. The Annual General Meeting is scheduled to be held on August 30, 2018

The dividend payout for the year under review has been finalized in accordance with shareholders’ aspirations and the Company’s policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

SHARE CAPITAL

The paid up Equity Share Capital as at March 31, 2018 stood at Rs.23,19,90,000/- divided into 4,63,98,000 equity shares face value of Rs.5/- each. During the year under review, your Board of Directors recommended for sub-division of Equity Shares of Rs.10/- each into two Equity Shares face value of Rs.5/- each which was approved by the Shareholders through postal ballot on September 26, 2017. Accordingly the Equity Shares of face value of Rs.10/- each were sub-divided into two Equity Shares of face value of Rs.5/- each by way of corporate action to the shareholders who held the shares as on the Record Date i.e. October 11, 2017.

DEPOSITS

Your Company has not accepted any deposits from the Directors/Shareholders/Public and as such, no amount of principal or interest on public deposits was outstanding as at the Balance Sheet date.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report.

PARTICULARS OF CONTRACT OR ARRANGEMENTS MADE WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties as per the Section 188 of the Companies Act, 2013 entered by the Company during the financial year ended March 31, 2018 in prescribed Form AOC-2 is annexed to this Board’s Report (Annexure-1). Further there are no materially significant related party transactions during the year under review with Promoters, Directors, Key Managerial Personnel and their relatives, which may have potential conflict with interest of the company at large.

The related party transactions were placed before the audit committee as also to the Board for approval. The details of the related party transactions during the year are part of the notes on Accounts forming part of the Annual Report.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF REPORT

There are no material changes and commitments affecting financial position of the company between March 31, 2018 and the date of Board’s Report.

VARIATION IN MARKET CAPITALIZATION

As at March 31,

Increase /

2018

2017

(decrease) in %

Market capitalization (Rs. in Crore)

Price earnings ratio

3,199.14

53.00

2,497.14

17.07

28.11

210.48

Note: Data based on share prices quoted on BSE

MANAGEMENT’S DISCUSSION AND ANALYSIS

In terms of the provisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Management’s Discussion and Analysis is set out in this Annual Report.

BUSINESS REVIEW

Your Company has Two Divisions in operation in different States in India as on March 31, 2018.

As a part of the strategic business restructuring the Retail, Bakery, Agri & VetCa divisions of the Company were transferred on a going concern basis as a slump sale to M/s. Heritage Foods Retail Limited (HFRL), a wholly owned subsidiary Company. Subsequent to that the Retail, Agri & Bakery verticals of HFRL were transferred to Future Retail Limited (FRL), Mumbai by way of demerger through a Composite Scheme of arrangement as per the provisions of Sections 391 to 394 and Sections 100 to 103 of the Companies Act, 1956 and/or Sections 230 to 232 and Section 66 of the Companies Act, 2013 (as applicable) and Section 52 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 1956 and Companies Act, 2013 (as may be applicable). As per the Composite Scheme of Arrangement the Retail undertaking was taken over by the Future Retail Ltd. by the closing hours of March 31, 2017

The Hon’ble National Company Law Tribunal (NCLT) Benches at Hyderabad & at Mumbai approved the Composite Scheme of arrangement amongst Heritage Foods Ltd (HFL), Heritage Foods Retail Limited (HFRL) and Future Retail Ltd (FRL) on 03/05/2017 and 11/05/2017 respectively. The order copies have been filed with respective Registrars of Companies (ROC) on 19th May, 2017 to give effect to the Composite Scheme.

Your Company acquired the entire dairy business of Reliance Retail Ltd (RRL) in a slump sale. RRL operates a pan India dairy procurement, processing and distribution platform under two brands ‘Dairy Life’ and ‘Dairy Pure’ with wide variety of products such as packaged milk, flavored milk, butter, ghee, curd, dairy whitener, sweets and skimmed milk powder. This acquisition augurs well for your company as it gives new opportunities in states like Punjab, Himachal Pradesh, Uttarakhand, Uttar Pradesh and Rajasthan where your company is not present and strong synergies in markets like Mumbai and Delhi-NCR where your company already commenced its operations.

DAIRY BUSINESS:

With population size of 1.32b growing at 3-4% CAGR, rising urbanization, health awareness and higher disposable income, there is tremendous potential for growth for dairy players. Organized dairy industry is slated to witness higher growth as overall organized sector share in milk products is less than 30%. In fresh milk product category there is huge scope for private dairies as organized market share is as low as 5% in Paneer and 7-8% in curd. Only 20% of total Indian milk production is procured, processed and sold by organized dairies in India. Overall industry clocked 4.5% volume CAGR during FY10-17 with organized segment posting 9.5% volume CAGR over same period. In value terms, dairy sector logged an impressive 16.9% CAGR during this period led by better realization and value-added products (VAP), which grew 23% CAGR Vs 15% for liquid milk. Going forward, we expect industry volumes to post 4.8% CAGR and 14-15% CAGR in value terms to Rs.8.2tn over FY17-20E.

Companies having deep rooted distribution network, efficient procurement systems, optimum product portfolio and consistent track record of quality will be the winners in the long run. Companies having transparency in raw milk procurement have developed long lasting relationships with farmers. Dairy sector contributes 27% to the agriculture GDP of India and involve over 70m rural households in dairying. The overall industry is estimated to record 14-15% CAGR over FY2017-20, to reach Rs.8.2lac crore, underpinned by a growth in volume and realization. India is the world’s largest milk producer and consumer, accounting for 19% of the world’s milk production and 21% for global consumption.

India’s per capita milk consumption, at 97 litres per year, is lower than many other major milk markets, except China. India’s per capita milk consumption is estimated to log 3% CAGR versus 1% CAGR globally led by higher population growth and rising yield. Rising population and yield provides further scope for higher per capita consumption, aided by growth in value-added products. Burgeoning demand for dairy products in India is reflected in not only per capita consumption, but is also apparent from rising expenditure on dairy products by households—which has grown at a faster rate over the past 10 years. Dairy products account for 19% of household expenditure on food on an average.

Indian dairy industry can be classified into Commodity dairy products having low margin but highest asset turn (Pouch milk, Skimmed milk powders, Dairy whitener); Milk Products having higher margins than pouch milk (viz. curd, buttermilk, ice cream and paneer) and Premium Value Added Products having highest margins but low asset turn and return ratios (cheese, spreads, whey). We believe Fresh milk product category is the sweet spot and will see maximum volume growth. Organized industry is even slated to witness higher growth as overall organized share in milk products is less than 25%. In fresh milk product category there is tremendous scope for private dairies as organised market share is as low as 5% in Paneer and 7-8% in curd.

Your Company also a market leader in the curd segment and is now looking to expand its product basket by entering into the fastest growing product like Yoghurt.

The motto of your company is to empower farmers by doing the following activities

- Facilitating loans for the purchase of cattle through commercial banks. NBFCs

- Facilitating cattle insurance;

- Conducting veterinary camps for animals at frequent intervals;

- Supply of high quality cattle feed and fodder seeds;

- Helping to source good productive animals;

- Supply of milk analyzers for ensuring accurate measurement of milk quality.

- And ensuring timely payment to farmers.

In its bid to become a pan India player, your Company has expanded its distribution of products to 15 states in India covering South, West and North India. It has almost 100% direct procurement network of 3 lakh dairy farmers across nine major milk producing states namely, Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Maharashtra, Gujarat, Rajasthan, Haryana and Punjab. The direct route of milk procurement enables it to maintain quality at lower prices. The company also operates 209 bulk coolers, chilling plants and procures 1.32m liters of milk per day. It operates 16 own processing plants and 2 leased processing plants with installed milk processing capacity of 2.09mn lpd through own plants and 0.15mn lpd through leased plants.

Your company has launched several value added products since 2007 and has increased its contribution to dairy revenues from 10.4% in FY11 to 22.43% in FY18. As on FY18, curd contributes 17 % of total value added products revenue.

Your Company procures 1.32mn litres of milk daily from 3 lakhs farmers across 9 states. 90% of milk is directly procured from farmers which ensures greater consistency in milk quality and consistency in supply. The company’s installed processing capacity is 2.24mn liters per day and chilling capacity is 2.10mn liters per day. After processing, 1.05 mn litres of milk is sold across 1.50mn households on a daily basis and the remaining is converted into value added products and products are available across 15 states viz. Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharashtra, Odisha, NCR Delhi, Haryana, Rajasthan, Gujarat, Punjab, Uttar Pradesh, Himachal Pradesh and Uttarakhand.

During the financial year 2017-18, Dairy Division has increased milk Chilling capacity by 4,25,000 LPD by commissioning of 18 units which includes Bulk chilling units, Mini Chilling units, chilling centres and Franchisee Bulk chilling units to increase the milk procurement and to maintain the quality.

RENEWABLE ENERGY DIVISION:

Your Company strongly recognizes the responsibility towards protecting the environment. As a forward-looking enterprise, it is strongly committed to extending the Green’ footprint.

Your Company is taking a lot of initiatives to improve efficiencies of the company. Renewable energy is the major focus area in the last ten years. Now your Company has 10.39 MW of solar and wind power for captive consumption. Your Company is continuously investing in latest technologies and efficiencies to conserve energy. As a result, Company saved about 14.5% and 10% when it comes to electrical units and thermal units respectively

Renewable Energy Division of your Company had achieved the turnover of Rs.686 Lakhs during the year under review.

SUBSIDIARY / ASSOCIATE COMPANIES

Your Company as on March 31, 2018 is having one Subsidiary Company namely M/s. Heritage Nutrivet Limited (Formerly known as Heritage Foods Retail Limited) (CIN:U15400TG2008PLC062054), one Associate Company M/s SKIL Raigam Power (India) Limited (CIN:U40102TG2009PLC063671) and one Joint Venture Company i.e. M/s. Heritage Novandie Foods Private Limited.

During the year under review the name of the subsidiary Company namely M/s. Heritage Foods Retail Limited has been changed to M/s. Heritage Nutrivet Limited w.e.f. November 14, 2017.

Your Company had incorporated one Joint Venture Company namely M/s. Heritage Novandie Foods Private Limited on November 28, 2017. The joint venture company was incorporated with 50:50 Equity Shareholding between Heritage Foods Limited and Novandie SNC, France, for production & marketing of Yoghurts.

One subsidiary Company namely M/s. Heritage Conpro Limited (CIN:U52100TG2011PLC072132) had resolved to voluntarily winding up pursuant to the provisions of Section 484 of the Companies Act, 1956 read with rule made thereunder. The Hon’ble High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh had approved voluntary winding up the Company and issued the order ref no: CA N0.568/2017 on July 06, 2017 Your Company had filed the necessary e-forms with the Registrar of Companies, Hyderabad on September 02, 2017

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its Subsidiary & Associate, are available on our website of the Company www. heritagefoods.in. These documents will also be available for inspection during the business hours at our registered office in Hyderabad, India.

QUALITY

Your Company continues the journey of delivering value to its consumers/customers through significant investments in quality programs. While sustaining existing external benchmarks and certifications, your Company added new certifications and further enhanced the programs and initiatives to renew the commitment to the culture of quality.

Your Company adheres to international quality standard certifications such as ISO 22000:2005, (OHSAS) ISO 18001:2007, ISO 14001:2004, (ENMS) ISO 50001:2011 and Halal Certification Hyderabad HFC 15-101 & 102.

Your Company has also received an independent auditor’s assurance report on compliance to ISO 14001 & 18001 (EMS & OHSAS) 2nd Cycle Re-registration and same was submitted to certification body (SGS, Hyderabad).

The Quality department of your Company handles large change management initiatives to drive quality and productivity improvements across the Company, using various techniques.

BRANDING

During the year your Company had launched its new premium range of ice-creams under the brand name Heritage ‘Alpenvie’ as part of its strategy to strengthen existing product range. In developing the new Heritage ‘Alpenvie’ range, an effort was made to understand the choices of its target group of college-goers & young adults. This new range of ice creams delivers offerings which celebrate “Little moments of Happiness” at an affordable price. The new offerings range from absolutely luxurious chocolate delights, to inclusions which have real fruit like Pineapple, Mango, Strawberry and also traditional offerings like Kulfis and Rajbhog. It has all the diverse formats of ice cream in the form of sticks, bars, cones and scoopable ice-creams for both out-of-home and in-home consumption.

AWARDS & RECOGNITIONS

During the financial year 2017-18 the Company has received the following awards and recognitions.

- The Company declared as the Winner of the FTAPCCI Excellence Awards in Corporate Social Responsibility (Sri Ayyadevara Venkat Radhakrishna Memorial Silver Rolling Trophy)” - Instituted by Sri Srinivas Ayyadevara, Chartered Accountant, Hyderabad. The above award was received by Mrs. N Brahmani, Executive Director of the Company from Sri Bandaru Dattatreya, Hon’ble Minister of State for Labour & Employment, Govt. of India on June 25, 2017 at Hyderabad.

- The Company has been declared as the Winner of ‘Golden Peacock Award for Excellence in Corporate Governance’ for the year 2017 by Institute Of Directors (IOD), India. The above award was presented at London UK, during IOD India’s “17th London Global Convention on Corporate Governance & Sustainability” and Global Business Meet. It is the Second time the Company got this Prestigious Award.

- The Gokul Plant of Dairy Division has received the 2nd Prize in ‘National Energy Conservation Award’ in Dairy sector from the Ministry of Power, Govt of India during the year 2017. This is the seventh time that the energy conservation efforts of the Company are recognized by the Ministry. The Company had won such Awards earlier in 2008, 2010, 2012, 2014, 2015 and 2016.

- Your Company has won “The Great Indian Ice-cream & Frozen Dessert Contest” Season-6 held on November 16, 2017 conducted by DUPONT at New Delhi in the following three categories:

- Silver Award for the Best Chocolate Category

- Silver Award for the Standard Vanilla FD Category

- Bronze Award for the Sorbet Category

- The Company has received the Telangana Best Employer Award 2017 from the World CSR Day & World Sustainability during the year 2017

- Mr. K Rajababu, IT Head of the Company has been awarded with the “50 Most Innovative CIO of India” by The World CSR day, during the year 2017

- Mr. A Prabhakara Naidu, CFO of the Company has been awarded as Hyderabad CFO Leadership Award instituted by the World CSR Day & World Sustainability during the year 2017.

- Mr. Dheeraj Tandon, Head HR of the Company has been awarded with “100 Top HR Mind in India Award” by the World HRD Congress, during the year 2017.

- Mr. A. Prabhakara Naidu, Chief Financial Officer of the Company has been conferred with “CA-CFO Award in the Agriculture & Allied Services Sector” by The Institute of Chartered Accountants of India in its 11th ICAI Awards, 2017 held in Mumbai on January 19, 2018.

- ”India’s 50 Best CFO’s Awards 2017-18” was conferred to Mr. A. Prabhakara Naidu, Chief Financial Officer of the Company by White Page International in association with UK Asian Business Council. The award was presented at The Asian Brand & Leadership Conclave, held in Singapore on March 09, 2018.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. To ensure good human resources management, your Company focused on all aspects of the employee lifecycle. This provides a holistic experience for the employee as well. During their tenure at the Company, employees are motivated through various skill- development, engagement and volunteering programs. Your Company has a structured induction process at all locations and management development programs to upgrade skill of managers. Objective appraisal systems based on Key Result Areas are in place for senior management members.

Your Company is committed to nurturing, enhancing and retaining talent through superior Learning & Organizational Development. This is a part of Corporate HR function and is a critical pillar to support the organization’s growth and its sustainability in long run.

The total strength of your Company employees at the end of financial year 2017-18 was 2551.

PARTICULARS OF EMPLOYEES

The table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure-2A to the Board’s report.

A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs.102 lakh or more PA, or employed for part of the year and in receipt of Rs.8.5 lakh or more in a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended from time to time, is enclosed as Annexure-2B to the Board’s report.

CORPORATE GOVERNANCE

Corporate governance is an ethically driven business process that is committed to values aimed at enhancing an organization’s brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders’ expectations. It is imperative that your company’s affairs are managed in a fair and transparent manner This is vital to gain and retain the trust of the stakeholders.

Your Company complies with the Securities and Exchange Board of India (SEBI)’s Regulations on corporate governance. Your Company has documented internal policies on corporate governance. During the year, your Company continued to comply with the Companies Act, 2013. Company Corporate governance report for financial year 2017-18 forms part of this Annual Report. All Corporate policies are available in Company website i.e. www.heritagefoods.in Corporate Policies.

AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE

As required by SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the auditors’ certificate on corporate governance is forming part of the Annual Report.

Your Company recognizes and embraces the importance of a diverse board for its success. Your Company believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill and industry experience, cultural and geographical background, age and gender, which will help the Company retain its competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Policy is available in the Company website www.heritagefoods.in>corporate>policies>BD

MEETINGS OF THE BOARD

The Board met Seven times during the financial year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

POLICY ON DIRECTOR’S APPOINTMENT AND REMUNERATION

The current policy is to have an appropriate mix of Executive and Non-executive & Independent and Women Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2018, the Board consists of 6 members, two of whom are Executive/Whole-time directors and four are Non-Executive directors. The Board periodically evaluates the need for change in its composition and size.

The policy of your Company on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013, and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 was adopted by the Board. It is affirmed that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company.

DECLARATION BY INDEPENDENT DIRECTORS

Your Company has received necessary declaration from each independent director under Section 149 of the Companies Act, 2013, confirming that he meets the criteria of independence laid down in Section 149 of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

As per the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Nomination and Remuneration Committee laid down criteria for performance evaluation of individual directors, the board and its committees. Accordingly, an annual evaluation was carried out for the Board’s performance, its Committees and individual directors.

Board performance evaluation is carried out through a structured questionnaire which provides a clear and valuable feedback for improving Board effectiveness and highlighting areas for further development.

The following are some of the broad issues that are considered in performance evaluation:

Criteria for evaluation of Board and its Committees:

- Ability to act on a fully informed basis, in good faith, with due diligence and in the best interest of the company and the stakeholders.

- Optimum combination of knowledge, skill, experience and diversity on the Board as well its Committees.

- Relationships and effective communication among the Board members.

- Effectiveness of individual non-executive and executive directors and Committees of Board.

- Quality of the discussions, general information provided on the company and its performance, papers and presentations to the Board.

- Risk management as well as processes for identifying and reviewing risks.

- Well- defined mandate and terms of reference of Committee.

Criteria for evaluation of Individual Directors:

- Attendance at Board as well as Committee Meetings

- Procurement of Information, preparation for Board Meetings and value of contribution at meetings

- Relationships with fellow Board members, the company secretary and senior management and mutual trust and respect they stimulated within the Board.

- Keeping update with the latest developments in the areas of governance and financial reporting

- Willingness to devote time and effort to understand the company and its business

- Providing necessary guidance using their knowledge and experience in development of corporate strategy, major plans of action, risk policy, and setting performance objectives.

- Independence exercised in taking decisions, listening to views of others and maintaining their views with resolute attitude

- Ability in assisting the Company in implementing the best corporate governance practices.

- Capability in exercising independent judgement to tasks where there is potential conflict of interest

- Commitment in fulfilling the director’s obligations fiduciary responsibilities.

None of the independent directors are due for reappointment.

TRAINING OF INDEPENDENT DIRECTORS

Every new independent director of the Board attends an orientation program. To familiarize the new inductees with the strategy, operations and functions of your Company, the executive directors / senior managerial personnel make presentations to the inductees about the Company’s strategy, operations, product and service offerings, markets, organization structure, quality and risk management etc.

APPOINTMENT/RE-APPOINTMENT

Dr. V Nagaraja Naidu (DIN: 00003730) Non-Executive Director of the Company retire by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting as per the provisions of Section 152 of the Companies Act 2013 and rules made thereof and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

RETIREMENTS AND RESIGNATIONS

During the year none of the Directors resigned from the Board.

KEY MANAGERIAL PERSONNEL

During the year under review, the Company is having the following persons as Key Managerial Personnel.

Name of the Official

DIN/M. No

Designation

Mrs. N. Bhuvaneswari

00003741

Vice Chairperson & Managing Director

Mrs. N. Brahmani

02338940

Executive Director

Mr. A Prabhakara Naidu

FCA 200974

Chief Financial Officer

Mr. Umakanta Barik

FCS 6317

Company Secretary

Dr. M Sambasiva Rao

President

COMMITTEES OF THE BOARD

Currently, the Board has Six committees: the Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Management Committee and Risk Management Committee.

A detailed note on the Board and its committees is provided under the Corporate Governance Report section in this Annual Report. The composition of the committees and compliances, as per the applicable provisions of the Act and Rules, are as follows:

Name of the Committee

Composition of the Committee

Highlights of duties, responsibilities and activities

Audit committee

Mr. D Seetharamaiah

Chairperson

Mr. N Sri Vishnu Raju

Dr V Nagaraja Naidu

Mr. Rajesh Thakur Ahuja

- All recommendations made by the audit committee during the year were accepted by the Board.

- Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

- Approval or any subsequent modification of transactions of the Company with related parties.

- Reviewing, with the management, the performance of statutory auditors and internal auditors, adequacy of internal control systems, etc.

Nomination and

Remuneration

Committee

Mr. N Sri Vishnu Raju

Chairperson

Mr. D Seetharamaiah

Mr. Rajesh Thakur Ahuja

- The committee oversees and administers executive compensation, operating under a written charter adopted by our Board of Directors.

- The nomination and remuneration committee has framed the nomination and remuneration policy.

Corporate Social

Responsibility

Committee

Mr. D Seetharamaiah

Chairperson

Mr. N Sri Vishnu Raju

Mrs. N Bhuvaneswari

- To formulate and recommend to the Board, a Corporate Social Responsibility (CSR) Policy indicating activities to be undertaken by the Company in compliance with provisions of the Companies Act, 2013 and rules made there under.

- To monitor the implementation of the CSR Policy of the Company from time to time

Stakeholders

Relationship

Committee

Dr V Nagaraja Naidu

Chairperson

Mr. D Seetharamaiah

Mr. N Sri Vishnu Raju

Mrs. N Bhuvaneswari

- The committee reviews and ensures redressal of investor grievances.

- The committee noted that all the grievances of the investors have been resolved during the year.

Risk

Mr. Rajesh Thakur Ahuja

- The purpose of the committee is to assist the Board in fulfilling its

Management

Chairperson

corporate governance with regard to the identification, evaluation

Committee

Mr. D Seetharamaiah

& mitigation of operational, strategic and environmental risks

Mr. N Sri Vishnu Raju

efficiently and effectively.

Mrs. N Bhuvaneswari

- The Company has developed and implemented a risk management framework that includes identification of elements of risk, if any, which in the opinion of the Board may threaten the existence of the Company.

Management

Mr. D Seetharamaiah

- Setting the strategic direction to guide and direct the activities

Committee

Chairperson

of the organization;

Mr. N Sri Vishnu Raju

- Ensuring the effective management of the organization and its

Mrs. N Bhuvaneswari

activities; and

- Monitoring the activities of the organization to ensure they are in keeping with the founding principles, objects and values.

POLICIES

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated the formulation of certain policies for all listed companies. All the corporate policies are available in the Company website (www.heritagefoods.in/Corportate/ policies). The policies are reviewed periodically by the Board and updated based on need and new compliance requirement.

In addition to its Code of Conduct and Ethics, key policies that have been adopted by the Company are as follows:

Name of the

Brief description

Web link

policy

Whistleblower

The Company has adopted the whistleblower mechanism for directors

http: //heritagefoods.

Policy

and employees to report concerns about unethical behaviour, actual or

in/ images/HFLWhistle

(Policy on vigil

suspected fraud, or violation of the Company’s code of conduct and

BlowerPolicy.pdf

mechanism)

ethics. It also provides for adequate safeguards against victimization of

employees who avail of the mechanism and also provide for direct access to the Chairperson of the Audit Committee. There has been no change to the Whistleblower Policy adopted by the Company during fiscal 2016.

Insider Trading

The Company has adopted a Code of Conduct to Regulate, Monitor

http://heritagefoods.in/

Policy and

& Report Trading by Insiders and Code of Practices and Procedures

images/COC.pdf

Code of

for Fair Disclosure of Unpublished Price Sensitive Information as per

http://heritagefoods.in/

Practices and

the SEBI (Prohibition of Insider Trading) Regulation 2015, with a view

Procedures for

to regulate trading in securities by the Directors and designated

images/COFD.pdf

Fair Disclosure

employees of the Company. The Code requires pre- clearance for

of Unpublished

dealing in the Company’s shares and prohibits the purchase or sale

Price Sensitive

of Company shares by the Promoters, Directors and the designated

Information

employees while in possession of unpublished price sensitive

information in relation to the Company and during the period when the Trading Window is closed and other certain situations. All Board Directors and the designated employees have confirmed compliance with the Code.

Nomination and Remuneration Policy

This policy formulates the criteria for determining qualifications, competencies, positive attributes and independence for the appointment of a director (executive / non-executive) and also the criteria for determining the remuneration of the directors, key managerial personnel and senior management of the Company. This policy also lays down criteria for selection and appointment of Board Members.

http://heritagefoods.in/ images/BD.pdf

Corporate Social Responsibility Policy

The policy outlines the Company’s strategy to bring about a positive impact on Society through programs relating to hunger, poverty, education, healthcare, environment and lowering its resource footprint.

http://heritagefoods.in/

images/HFL_CSR.pdf

Policy for Determining Material Subsidiaries

The policy is used to determine the material subsidiaries and material non-listed Indian subsidiaries of the Company and to provide the

governance framework for them.

http://heritagefoods.in/

images/Subsidiary_

Policy.

pdf

Related Party Transaction Policy

The policy regulates all transactions between the Company and its related parties.

http://heritagefoods.in/

images/RPT_Policy.pdf

Policy on Preservation of Documents

The policy deals with the preservation of corporate records of the Company and all its subsidiaries.

http://heritagefoods.in/

images/PD.pdf

Business Responsibility Policy

This Policy endorses the Company’s commitment to follow principles and core elements, in conducting its business, as laid down in the National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business.

http://heritagefoods.in/ images /HFL20BR20 POLICYpdf

Dividend Distribution Policy

This Policy is to ensure the right balance between the quantum of Dividend paid and amount of profits retained in the business for various purposes.

http://heritagefoods.in/

images/HFL_Dividend_

Distribution_Policy.pdf

AUDITORS & AUDITORS REPORT

Statutory Auditors:

M/s. Walker Chandiok & Co. LLP, Chartered Accountants (FRN 001076N/500013) was appointed as Statutory Auditors of the Company at the 25th Annual General Meeting held on August 23, 2017 to hold office till the conclusion of the 30th Annual General Meeting of the Company to be held in the year 2022.

Pursuant to notification no: G.S.R. 432 (E) issued by the Ministry of Corporate Affairs on May 7, 2018 amending section 139 of the Companies Act, 2013 and the Rules framed thereunder, the mandatory requirement for ratification of appointment of Statutory Auditors by the Members at every Annual General Meeting (AGM) has been omitted and hence the Board is not proposing to the members for ratification of appointment of Statutory Auditors at this AGM. The Board of Directors are empowered to fix the remuneration of the Statutory Auditor on yearly basis.

Secretarial Auditor:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Board of Directors has appointed M/s. Savita Jyoti Associates, Practicing Company Secretary (CP No:1796), Hyderabad as Secretarial Auditor to conduct the Secretarial Audit of the Company for the Financial Year ended 31st March, 2018. The Secretarial Audit Report for the Financial Year ended 31st March, 2018 is appended to this Report as Annexure-3.

The Secretarial Auditor’s Report is self-explanatory and do not call for any comments.

The Board has appointed M/s. Savita Jyoti Associates, Practicing Company Secretaries, as Secretarial Auditor of the Company for the financial year 2018-19 as per the provisions of the Companies Act, 2013 and Rules made thereof and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

The Company has devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by he Institute of Company Secretaries of India and that such systems are adequate and operating effectively.

SIGNIFICANT MATERIAL ORDERS PASSED BY THE REGULATORS

There is no significant order passed by the regulators or Courts during the year under review. However the Hon’ble NCLT Bench at Hyderabad & Mumbai approved the Composite Scheme of arrangement amongst Heritage Foods Ltd (HFL), Heritage Foods Retail Limited (HFRL) and Future Retail Ltd (FRL) on May 03, 2017 and May 11, 2017 respectively.

EXTRACTS OF ANNUAL RETURN

An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92 of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014, is provided in Annexure-4 to this report. It is also made available in the website of the Company i.e. www.heritagefoods.in.

INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Company has in place adequate internal financial controls with reference to financial statements. It has adopted necessary policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

During the year no fraud by the Company or on the Company by its officers or employees has been notices and reported.

INTERNAL AUDIT & CONTROL SYSTEMS

Your Company has a well-defined and documented internal audit & control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

These are supplemented by internal audit of your Company carried out by reputed firms of Chartered Accountants across India. Your Company has an Audit Committee consisting of Four Directors in whom all are Non Executive and three are independent Directors. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggests improvements if any for strengthening them. Your Company has a robust Management Information System which is an integral part of the control mechanism.

The Board of Directors on the recommendation of the Audit Committee has appointed Internal Auditors for the financial year 2018-19 as per the provision of Section 138 of the Companies Act, 2013 and Rules made thereof and as per the SEBI (LO&DR) Regulation, 2015.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company has been an early adopter of corporate social responsibility (CSR) initiatives. Along with sustained economic performance, environmental and social stewardship is a key factor for holistic business growth.

CSR activities, as per the provisions of the Companies Act, 2013 and rules made thereof, may be undertaken by the Company or through a registered trust or a registered society. The CSR Committee of the Board evaluated various options to implement the CSR activities and decided to contribute the mandated CSR amount to the NTR Memorial Trust, Hyderabad, to carry out the activities such as promoting education, enhancing the vocational skill & supply of clean drinking water etc., as part of the CSR activities of the Company. As the NTR Memorial Trust is operating since 1997 towards the improvement of health and health outcomes of the needy groups, meeting the educational needs of underprivileged students, advancing the concept of entrepreneurship and self-employment, and offering support and relief during disasters and lot more other initiatives for the up-liftment of the backward and needy population in the society.

These projects are in accordance with Schedule VII of the Companies Act, 2013 and the Company’s CSR Policy. During the last three years the Company has spent Rs.4 Crores on CSR activities. The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure-5 forming part of the Board’s Report.

HERITAGE FARMER WELFARE TRUST (HFWT)

Apart from the mandatory CSR activities under the Companies Act, 2013 your Company continues to voluntarily support the following social initiatives through Heritage Farmers Welfare Trust (HFWT).

- Veterinary care and cattle management practices through Heritage Mobile Veterinary Clinics, (equipped with necessary tools and trained human resources) for providing door-step veterinary services to the Milch Animals and empowering cattle owners with advanced technology and knowledge on best cattle management and feeding practices. The Mobile veterinary vans conduct free health camps in the needy villages.

- Extending Insurance coverage for accidental death of farmer members, Incentive for fodder development & reward for Meritorious Students from farmer’s families.

- The HFWT impact during the year for Mobile Veterinary clinic as follows:

BUSINESS RESPONSIBILITY REPORT (BRR)

Pursuant to regulation 34(2)(f) of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 the Annual Report shall contain a Business Responsibility Report (BRR) describing the initiatives taken by the Company from an environmental, social and governance perspective. BRR has been designed as a tool to help companies understand the principles and core elements of responsible business practices and start implementing improvements which reflect their adoption in the manner the company undertakes its business. In compliance with the regulation, the Business Responsibility Report is annexed in Annexure-6 to the board report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS & OUTGO

The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules, 2014 are provided in the Annexure-7 to the Board Report.

TRANSFER OF UN-CLAIMED DIVIDENDS

Pursuant to Section 124(5) of the Companies Act, 2013 [Section 205C (2) of the Companies Act, 1956] read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed/unpaid dividend amount of Rs.6,68,044/- (Rupees Six Lakhs Sixty Eight Thousand Forty Four Only) for the year 2009-10 was transferred to the Investor Education and Protection Fund during the financial year 2017-18.

In compliance with the provisions of Section 124 of the Companies Act, 2013, the Company has transferred 6,97,687 no’s of equity shares belongs to 726 shareholders to Investor Education and Protection fund Authority (IEPF) on December 7, 2017 of those shareholders who have not claimed the dividends for a continuous period of 7 years.

RISK MANAGEMENT

Your Company have constituted a Risk Management Committee pursuant to Section 134 (3) (n) of the Companies Act, 2013 & Regulation 21 of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company’s enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Risk Management Procedure will be reviewed by the Risk Management Committee and Board of Directors on a half-yearly basis at the time of review of Financial Results of the Company.

The policy is available in the Company website: www. heritagefoods.in>corporate>policies>RMPolicy

POLICY ON SEXUAL HARASSMENT

Your Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2017-18

No of complaints received : Nil

No of complaints disposed off : Nil

DIVIDEND DISTRIBUTION POLICY

Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, requires that the top 500 listed companies based on the market capitalization to formulate Dividend Distribution Policy. In compliance with the said requirement, the Company has formulated its Dividend Distribution Policy, the said policy is available on the Company’s website at: www.heritagefoods.in.

INDIAN ACCOUNTING STANDARDS (IND AS)

The Company has adopted Indian Accounting Standards (Ind AS) with effect from April 1, 2017 pursuant to Ministry of Corporate Affairs’ notification of the Companies (Indian Accounting Standards) Rules, 2015. The financials for the financial year 2017-18 were presented as per the Ind As format.

PREVENTION OF INSIDER TRADING CODE

As per SEBI (Prohibition of Insider Trading) Regulation, 2015, the Company has adopted a Code of Conduct for Prevention of Insider Trading. The Company has appointed Mr. Umakant Barik, Company Secretary of the Company as Compliance Officer, who is responsible for setting forth procedures and implementation of the code for trading in Company’s securities. During the year under review, there has been due compliance with the said code.

DIRECTOR’S RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 134 (3)(C) OF THE COMPANIES ACT, 2013

The financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis except the sale proceeds received under REC Mechanism of the Renewable Energy. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (‘the Act’), read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act and guidelines issued by the Securities and Exchange Board of India (SEBI). There are no material departures from prescribed accounting standards in the adoption of these standards.

The Directors confirm that:

- In the preparation of the annual accounts (Standalone & Consolidated) for the financial year 2017-18, applicable accounting standards have been followed along with proper explanation relating to material departures.

- They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2017-18 and of the profit and loss of the Company for that period.

- They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities,

- They have prepared the annual accounts of the company on a going concern basis.

- They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

- They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

GREEN INITIATIVES

The Company started a sustainability initiative with the aim of going green.

Electronic copies of the Annual Report 2017-18 including the Notice of the 26th Annual General Meeting will be sent to all members whose email addresses are registered with the Company/Depository Participant(s).

ACKNOWLEDGMENT

The Board takes this opportunity to thank all customers, farmers, vendors, investors, bankers and Statutory Authorities for their continued support during the year. The Board also wishes to place on record its sincere appreciation of the effort/ contribution made by its employees at all levels. The Company’s consistent growth was made possible by their hard work, solidarity, cooperation and support and look forward to their continued support in the future.

For and on behalf of

HERITAGE FOODS LIMITED

Registered Office:

6-3-541/C, Punjagutta,

Hyderabad - 500 082

CIN: L15209TG1992PLC014332 D. SEETHARAMAIAH

Ph : 04023391221/2 Chairperson

E-mail : [email protected] (DIN: 00005016)

Place : Hyderabad

Date : May 24, 2018


Mar 31, 2017

To the members,

The Directors have great pleasure in presenting the 25th Annual Report of the Company together with the Standalone & Consolidated Audited statement of accounts for the Financial Year ended 31st March, 2017.

Financial Results

(Rs,In Lakhs)

Particular

Standalone

Consolidated

FY 2016-17

FY 2015-16

FY 2016-17

FY 2015-16

Revenue from Operations (Gross)

227437.98

238162.13

264393.14

238162.13

Less: Excise Duty

97.82

103.80

104.22

103.80

Total Revenue from operations

227340.16

238058.33

264288.92

238058.33

Add: Other Income

445.17

654.96

599.55

654.96

Total Revenue

227785.33

238713.29

264888.47

238713.29

Total Expenditure

213677.65

224977.61

250157.78

224978.03

Profit /(Loss) before Finance Cost, Depreciation & amortization and Tax

14107.68

13735.68

14730.68

13735.26

Finance cost

1114.17

1549.27

1122.21

1549.27

Depreciation & Amortization

3251.87

3451.21

3780.63

3451.21

Profit /(Loss) before Extraordinary and Exceptional Item and Tax

9741.64

8735.20

9827.84

8734.78

- Exceptional Item Tax

-

136.95

-

136.95

Profit /(Loss) before Tax

9741.64

8598.25

9827.84

8597.83

Tax Expenses

- Current & prior period tax

2600.07

3068.44

2701.53

3068.44

- Deferred Tax

459.11

(13.34)

444.33

(13.34)

Net Profit /(Loss) for the Year

6682.46

5543.15

6681.98

5542.73

Performance of the Company

Your Company, during the year under review earned revenue from operations (Gross) of Rs,264288.92 Lakhs, achieved an increase of 11.02 % over the previous year. The profit before finance cost, depreciation and amortization was of Rs,14730.68 Lakhs (5.56% on total revenue) as against Rs,13735.26 Lakhs (5.75% on total revenue) in the previous year. The operating profit after depreciation was amounted to Rs,10950.05 Lakhs (4.13% to revenue) as against Rs,10147.10 Lakhs (4.25% of revenue) in the previous year.

Dividend

Your Directors have pleasure in recommending a dividend of Rs,4/- (40%) per equity share of ''10/- each for the financial year ended March 31, 2017, amounting to Rs,927.96 lakhs. The above dividend includes a special silver jubilee dividend of Rs,1.00/- (10%) per equity share of Rs,10 each for the financial year ended March 31, 2017. The dividend payout is subject to approval of members at the ensuing Annual General Meeting.

The Register of Members and Share Transfer Books will remain closed from Wednesday, August 16, 2017 to Wednesday, August 23, 2017 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2017. The Annual General Meeting is scheduled to be held on August 23, 2017

The dividend payout for the year under review has been finalized in accordance with shareholdersRs,aspirations and the Company''s policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

Transfer to Reserves

Your Company proposes to transfer Rs,1000 Lakhs to General Reserve. An amount of Rs,5682.46 Lakhs is proposed to be retained in the Surplus.

Share Capital

The paid up Equity Share Capital as at March 31, 2017 stood at Rs,23,19,90,000 divided into 2,31,99,000 equity shares of 10/- each. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or issued sweat equity share to its employees or directors. As on March 31, 2017, none of the Directors or the Company holds instruments convertible into equity shares of the Company.

Fixed Deposits

Your Company has not accepted any deposits from the public and as such, no amount of principal or interest was outstanding as at the Balance Sheet date.

Particulars of Loans, Guarantees or Investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report.

Particulars of Contract or Arrangements Made With Related Parties

All related party transactions that were entered into during the financial year were at arm''s length basis and were in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus the disclosure in form AOC-2 is not required. Further there are no materially significant related party transactions during the year under review with Promoters, Directors, Key Managerial Personnel and their relatives, which may have potential conflict with interest of the company at large.

The related party transactions if any are placed before the audit committee as also to the Board for approval. The details of the related party transactions during the year are part of the notes on Accounts forming part of the Annual Report.

Material changes and commitments affecting financial position between the end of the financial year and date of report

There are no material changes and commitments affecting financial position of the company between 31st March and the date of Board''s Report except to give effect the Composite Scheme of arrangement amongst Heritage Foods Ltd (HFL), Heritage Foods Retail Limited (HFRL) and Future Retail Ltd (FRL).

Variation in market capitalization

As at March 31,

Increase /

2017

2016

(decrease) in %

Market capitalization (Rs,in Crore)

2,497.14

1185.47

110.65

Price earnings ratio

37.37

21.39

15.98

Note: Data bases on share prices quoted on BSE

Management''s Discussion and Analysis

In terms of the provisions of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Management''s Discussion and Analysis is set out in this Annual Report.

Business Review

Your Company has Two Divisions in operation in different States in India as on March 31, 2017.

As a part of the strategic business restructuring the Retail, Bakery, Agri & VetCa divisions of the Company has transferred on a going concern basis as a slump sale to M/s. Heritage Foods Retail Limited (HFRL), a wholly owned subsidiary Company. Subsequent to that the Retail, Agri & Bakery verticals of HFRL shall be transferred to Future Retail Limited (FRL), Mumabi by way of demerger through a Composite Scheme of arrangement as per the provisions of Sections 391 to 394 and Sections 100 to 103 of the Companies Act, 1956 and/or Sections 230 to 232 and Section 66 of the Companies Act, 2013 (as applicable) and Section 52 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 1956 and Companies Act, 2013 (as may be applicable).

The Hon''ble NCLT Bench at Hyderabad & Mumbai approved the Composite Scheme of arrangement amongst Heritage Foods Ltd (HFL), Heritage Foods Retail Limited (HFRL) and Future Retail Ltd (FRL) on 03/05/2017 and 11/05/2017 respectively. The order copy has filed with respective Registrar of Companies (ROC) on 19th May, 2017 to give effect the Composite Scheme. The four divisions (viz., Retail, Bakery, Agri & Vetca) of your company has merged with the business of the HFRL a wholly owned subsidiary w.e.f. 1st November, 2016 (slump sale appointed date) as a slump sale basis with a consideration of Rs,135 Crores. HFRL shall issue 1,40,00,000 (One Crore forty lakhs only) equity shares of Rs,10 each with a premium of Rs,86.43 to the Company to discharge the slump sale consideration. There after the three divisions (viz., Retail, Bakery & Agri) of HFRL has demerged with the resulting Company i.e.

FRL w.e.f. 31st March, 2017 (demerged appointed date) . The FRL shall issue 1,78,47,420 equity shares of Rs,2 each with a premium of Rs,165.29 to the HFL being a shareholder of the HFRL to discharge the demerger consideration of Rs,295 Crores.

Your Company acquired the dairy business of Reliance Retail Ltd (RRL) in a slump sale. RRL operates a pan India dairy procurement, processing and distribution platform under two brands ''Dairy Life'' and ''Dairy Pure'' with wide variety of products such as packaged milk, flavored milk, butter, ghee, curd, dairy whitener, sweets and skimmed milk powder. This acquisition augurs well for your company as it gives new opportunities in states like Punjab, Uttarakhand and Rajasthan where your company is not present and strong synergies in markets like Mumbai and Delhi-NCR where your company already commenced its operation.

Dairy Business:

Your company sells dairy products under the "Heritage" brand across 10 states in India through 6,098 distributors and 1,457 ''Heritage Parlours''. Your Company enjoys a leadership position in Andhra Pradesh and Telangana and holds a sizable market share in Tamil-Nadu and Karnataka. 80% of the company''s dairy revenues come from South India and from here on further growth in this region will be targeted at by scaling Tier - II & Tier - III towns. Your Company is trying to make inroads into North and West India markets; It entered NCR Delhi & Maharashtra markets and is setting up its milk procurement infrastructure and capacities there.

The company launched several value added products Since 2007 and has increased its contribution to dairy revenues from 10.4% in FY11 to 23% in FY17. As on FY17, curd contributes 77% of total value added products'' revenue followed by Frozen Dessert, paneer, flavored milk and sweets.

Steady increase in contribution of Value added products

Your Company is also a market leader in the curd segment and is now looking to expand its product basket by entering into the fastest growing products like Cheese and Yoghurt.

Milk Production & Consumption in India: India has come a long way since the milk-deficit days to becoming the world''s largest producer as well as consumer of milk. Globally, the EU, India and the United States are currently the largest milk and dairy product producers and consumers. These countries account for 20.3%, 18.3% and 11.9% shares respectively in global dairy production.

There are two structural themes that are expected to pan out in the Indian dairy industry owing to favorable demographics which will drive multi-year growth in the industry. The tailwinds arising with the shift from ''unorganized'' to ''organized'' market and consumer up gradation from ''pouch milk/ powders'' to ''value-added dairy products'' (VADP) will provide strong growth opportunities.

In India, the unorganized segment comprising of ''local vendors'' and ''self-consumption'' commands a lion''s share of 80% by value. The organized segment is divided between ''cooperatives'' and ''private dairy companies''. The share of organized segment has gradually inched up from 16.7% in FY10 to 20.7% in FY17.

Shift from raw milk/ milk powders to Value Added Dairy Products (VADP): Raw milk, skimmed milk powders (SMP) and dairy whiteners (DW) are classified as traditional commodities with low margin dairy products. However, with rising disposable incomes and bourgeoning proportion of working women, there will be greater consumption of branded VADP like cheese, table butter, flavored milk, UHT milk, shrikhand, paneer, buttermilk, etc.

Your Company procures 1.03mn litres of milk daily from 3 lakh farmers across 8 states which are chilled in 144 bulk coolers and further processed and packaged in 15 packaging plants. 90% of milk is directly procured from farmers which ensures greater consistency in milk quality and consistency in supply. The company''s installed processing capacity is 1.53mn liters per day and chilling capacity is 1.73mn liters per day. After processing,

0.9mn litres of milk is sold across 11.5mn households on a daily basis and the remaining is converted into value added products (majorly curd and ice-cream) and sold across 10 states viz Andhra Pradesh, Delhi, Haryana, Karnataka, Kerala, Maharashtra, Odisha, Rajasthan, Telangana and Tamilnadu.

During the financial year 2016-17, Dairy Division has increased milk Chilling capacity by 1,00,000 LPD by commissioning of 16 units which includes Bulk mini chilling units, Mini Chilling units, chilling centres and Franchisee Bulk mini chilling units to increase the milk procurement and to maintain the quality. The Turnover has grown by 5.73% from Rs, 176880 Lakhs to Rs, 187010 Lakhs.

Renewable Energy Division:

The Renewable Energy Division strongly recognizes the responsibility towards protecting the environment. As a forward-looking enterprise, it is strongly committed to extending the Green'' footprint. In line with this thinking, the Division has set up the following plants:

> Commissioned 2.34 MW Solar Power Plant at Adavi Masjid Village, Mulugu Mandal, Medak Dist, Telangana on 29th September, 2013.

> Commissioned 1st Wind Power Plant of 2.1 MW Capacity at Chinahothur Village, Vajrakarur Mandal, Ananthapur District, Andhra Pradesh on 27th March 2016.

> Commissioned 2nd Wind Power Plant 2.1 MW Capacity at Sy No. 291, 292, Vajrakarur, Ananthapur District, Andhra Pradesh, India on 20th September, 2016.

> Commissioned (Off Grid) Distributed Captive Solar Power Plants at its six various locations/plants with total capacity of 1.66 KWp on 29/03/2017 with key objective to optimize energy mix by use of Clean & Green (Renewable) Energy sources to reduce carbon emissions and to secure Energy at Low Cost.

Renewable Energy Division of your Company had achieved the turnover of Rs, 521.30 Lakhs during the year under review.

Subsidiary / Associate Companies

Your Company is having two Subsidiaries Company''s namely M/s. Heritage Foods Retail Limited (CIN: U15400TG2008PLC062054) & M/s. Heritage Conpro Limited (CIN:U52100TG2011PLC072132) and one Associate Company M/s SKIL Raigam Power (India) Limited (CIN:U40102TG2009PLC063671).

M/s. Heritage Conpro Limited is not doing any business since its Incorporation, the company had resolved to voluntarily wind up pursuant to the provisions of Section 484 of the Companies Act, 1956 read with rule made there under and appointed the Liquidators for winding up the affairs of the company. All the required documents has been submitted by Official Liquidator awaiting for the final order from from the Hon''ble High Court of Judicature at Hyderabad for the State of Telangana and Andhra Pradesh .

During the year, the Board of Directors reviewed the activities of the subsidiaries, associate Companies and noted that the Heritage Foods Retail Limited, accounts has been consolidated from the effect date (i.e. 1st November, 2016) as per the Composite Scheme of Arrangement. The Associate Company namely M/s. SKIL Raigam Power (India) Limited is in process for various stages for implementation & completion of Hydel Power project. However in accordance with Section 129(3) of the Companies Act,

2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has prepared consolidated financial statements of its Subsidiary & Associate Company in accordance with relevant Accounting Standards Viz. AS-21, AS-23 & AS-27 issued by the Institute of Chartered Accountants of India and form part of the Annual Report. Further, a statement containing the salient features of the financial statement of the

Subsidiary & Associate Companies in the prescribed format AOC-1 is appended in financial statement of the report. The statement also provides the details of performance, financial positions of each of the subsidiary & Associate.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its Subsidiary & Associate, are available on our website of the Company www.heritagefoods.in. These documents will also be available for inspection during the business hours at our registered office in Hyderabad, India.

Quality

Your Company continues the journey of delivering value to consumers/customers through significant investments in quality programs. While sustaining existing external benchmarks and certifications, your Company have added new certifications and further enhanced the programs and initiatives to renew the commitment to the culture of quality.

Your Company adheres to international quality standard certifications such as ISO 22000:2005, (OHSAS) ISO 18001:2007, ISO 14001:2004, (ENMS) ISO 50001:2011 and HALAL CERTIFICATION HYDERABAD HFC 15-101 & 102. Your Company has also received an independent auditor''s assurance report on compliance to ISO 14001 & 18001 (EMS & OHSAS) 2nd Cycle Re-registration and same was submitted to certification body (SGS, Hyderabad).

The Quality department of your Company handles large change management initiatives to drive quality and productivity improvements across the Company, using various techniques.

Branding

On the eve of the silver jubilee of the company, the brand identity of your Company has undergone an evolutionary change. In evolving Heritage''s identity, one of the objectives was to create a bridge between the last 25 years and the future of the brand. The evolution of the brand is done keeping the key elements of the older identity intact i.e., the green and the red in the logo, the oval shape etc, the italics in the fonts etc. The other key task was visualize the brand promise of "Health & Happiness". "Health" is a glass of Heritage milk and "Happiness" is an expression. This identity is taken to all the brand faces of Heritage, may it be any form of mass media or permanent visibility. This unification of identity shall make it simpler for a Heritage consumer to identify Heritage at its key distribution points

Besides evolving Identity, there is a complete changeover of the packaging of Heritage range of products. The key objective here is to have one unified look, which helps to take the brand national and ensure that consumer experiences the brand promise irrespective of where the brand is consumed. We currently service 1.5 Million consumers on a daily basis and with the above initiative, we believe that the brand will be ready for its next million consumers.

Awards & Recognitions

During the financial year 2016-17 the Company has received the following awards and recognitions.

> The Company has been declared as the Winner of ''Golden Peacock Award for Excellence in Corporate Governance'' for the year 2016 by Institute Of Directors (IOD), India. The above award was received by Mrs. N Bhuvaneswari, Vice Chairperson & Managing Director of the Company from Ms. Baroness Sandip Verma, Global Chairperson, Advisory Council, Institute Of Directors, India and Chairperson, European External Affairs Committee, at a specially organized "Golden Peacock Awards Nite" presentation ceremony was held at London, United Kingdom, W1K 2HP, UK, in the presence of distinguished business leaders from INDIA & UK, during IOD India''s "16th London Global Convention on Corporate Governance & Sustainability" and Global Business Meet.

> The Uppal Plant of Dairy Division has received the 1st Prize in ''National Energy Conservation Award'' in Dairy sector from the Ministry of Power, Govt of India during the year 2016. this is the Sixth time that the energy conservation efforts of Heritage Foods are recognized by the Ministry. The Company had won such Awards earlier in 2008, 2010, 2012, 2014 and 2015.

> The Retail Division of the Company has received ''COCA COLA Golden Spoon Award'' 2016 for being the Most Admired Food & Grocery Retailer of the Calendar Year'' 2016.

> The Chief Financial Officer (CFO) of the Company has been conferred an Award by the London-based Chartered Institute of Management Accountants (CIMA), there by joining the elite list of CIMA''s "100 Most Influential CFOs" during the year 2016.

> The IT Head of the Company has been awarded among those conferred with the "100 Most Innovative CIO of India" by The World CSR day, Mumbai during the year 2016.

Human Resources and Industrial Relations

Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. To ensure good human resources management, your Company focused on all aspects of the employee lifecycle. This provides a holistic experience for the employee as well. During their tenure at the Company, employees are motivated through various skill-development, engagement and volunteering programs. Your

Company has a structured induction process at all locations and management development programs to upgrade skill of managers. Objective appraisal systems based on Key Result Areas are in place for senior management members.

Your Company is committed to nurturing, enhancing and retaining talent through superior Learning & Organizational Development. This is a part of Corporate HR function and is a critical pillar to support the organization''s growth and its sustainability in long run.

The total strength of your Company at the end of financial year 2016-17 was 2420.

Particulars of Employees

The table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure-1A to the Board''s report.

A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs, 102 lakh or more PA, or employed for part of the year and in receipt of Rs, 8.5 lakh or more in a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended from time to time, is enclosed as Annexure-1B to the Board''s report.

Corporate Governance

Corporate governance is an ethically driven business process that is committed to values aimed at enhancing an organization''s brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders'' expectations. It is imperative that your company affairs are managed in a fair and transparent manner. This is vital to gain and retain the trust of the stakeholders.

Your Company complies with the Securities and Exchange Board of India (SEBI)''s Regulations on corporate governance. Your Company has documented internal policies on corporate governance. During the year, Company continued to comply with the Companies Act, 2013. Company Corporate governance report for financial year 2016-17 forms part of this Annual Report. All Corporate policies are available in Company website i.e. www.heritagefoods.in Corporate Policies

Auditors'' certificate on Corporate Governance

As required by SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the auditors'' certificate on corporate governance is forming part of the Annual Report.

Board Diversity

Your Company recognizes and embraces the importance of a diverse board in its success. Company believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill and industry experience, cultural and geographical background, age and gender, which will help the Company retain its competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Policy is available in the Company website www.heritagefoods.in^corporate^policies^BD

Meetings of the Board

The Board met Seven times during the financial year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Policy on Director''s Appointment and Remuneration

The current policy is to have an appropriate mix of Executive and Non-executive & Independent and Women Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2017, the Board consists of 6 members, two of whom are Executive/Whole time directors and four are Non-Executive directors. The Board periodically evaluates the need for change in its composition and size.

The policy of your Company on directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013, and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 adopted by the Board. It is affirmed that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company.

Declaration by Independent Directors

Your Company has received necessary declaration from each independent director under Section 149 of the Companies Act, 2013, confirming that he/she meets the criteria of independence laid down in Section 149 of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Board Evaluation

As per the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Nomination and Remuneration Committee laid down criteria for performance evaluation of individual directors, the board and its committees. Accordingly, an annual evaluation was carried out for the Board''s performance, its Committees and individual directors.

Board performance evaluation is carried out through a structured questionnaire which provides a powerful and valuable feedback for improving Board effectiveness, maximizing strengths and highlighting areas for further development.

The following are some of the broad issues that are considered in performance evaluation:

Criteria for evaluation of Board and its Committees:

- Ability to act on a fully informed basis, in good faith, with due diligence and care and in the best interest of the company and the stakeholders.

- Optimum combination of knowledge, skill, experience and diversity on the Board as well its Committees.

- Relationships and effective communication among the Board members.

- Effectiveness of individual non-executive and executive directors and Committees of Board.

- Quality of the discussions, general information provided on the company and its performance, papers and presentations to the Board.

- Risk management as well processes for identifying and reviewing risks.

- Well- defined mandate and terms of reference of Committee.

Criteria for evaluation of Individual Directors:

- Attendance at Board as well as Committee Meetings

- Procurement of Information, preparation for Board Meetings and value of contribution at meetings

- Relationships with fellow Board members, the company secretary and senior management and mutual trust and respect they stimulated within the Board.

- Keeping update with the latest developments in the areas of governance and financial reporting

- Willingness to devote time and effort to understand the company and its business

- Providing necessary guidance using their knowledge and experience in development of corporate strategy, major plans of action, risk policy, and setting performance objectives.

- Independence exercised in taking decisions, listening to views of others and maintaining their views with resolute attitude

- Ability in assisting the Company in implementing the best corporate governance practices.

- Capability in exercising independent judgment to tasks where there is potential to conflict of interest

- Commitment in fulfilling the director''s obligations fiduciary responsibilities.

None of the independent directors are due for reappointment.

Training of Independent Directors

Every new independent director of the Board attends an orientation program. To familiarize the new inductees with the strategy, operations and functions of your Company, the executive directors / senior managerial personnel make presentations to the inductees about the Company''s strategy, operations, product and service offerings, markets, organization structure, quality and risk management etc.

Appointment/Re-Appointment

Dr. V Nagaraja Naidu (DIN: 00003730) Non-Executive Director of the Company retire by rotation and being eligible offer himself for re-appointment at the ensuing Annual General Meeting as per the provisions of Section 152 of the Companies Act 2013 and rules made thereof and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Retirements and Resignations

Mr. M Siva Rama Vara Prasad (DIN: 00170919) Non-Executive Independent Director of the Company had resigned from the Board w.e.f. 12th May, 2016 due to his personal reasons and other commitments. The Board placed on record the invaluable contribution made by him, towards the progress of the Company from the date of appointment until his resignation.

Mr. N. Lokesh (DIN: 02230945) Non-Executive Director of the Company had resigned from the Board w.e.f. 31st March, 2017 due to his personal reasons. The Board placed on record the invaluable contribution made by him, towards the progress of the company from the date of appointment until his resignation.

Key Managerial Personnel

During the year under review, the Company having the following persons as Key Managerial Personnel.

Name of the Official

DIN/M.No

Designation

Mrs. N. Bhuvaneswari

00003741

Vice Chairperson & Managing Director

Mrs. N. Brahmani

02338940

Executive Director

Mr. A Prabhakara Naidu

FCA 200974

Chief Financial Officer

Mr. Umakanta Barik

FCS 6317

Company Secretary

Committees of the Board

Currently, the Board has Six committees: the Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Management Committee and Risk Management Committee.

A detailed note on the Board and its committees is provided under the Corporate Governance Report section in this Annual Report. The composition of the committees and compliances, as per the applicable provisions of the Act and Rules, are as follows:

Name of the Committee

Composition of the Committee

Highlights of duties, responsibilities and activities

Audit

Mr. D Seetharamaiah, Chairperson

-

All recommendations made by the audit committee during the year were

committee

Mr. N Srivishnu Raju

accepted by the Board.

Mr. M Siva Rama Vara Prasad#

-

Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

Dr. V Nagaraja Naidu

-

Approval or any subsequent modification of transactions of the Company with

Mr. N Lokesh*

related parties.

Mr. Rajesh Thakur Ahuja

-

Reviewing, with the management, the performance of statutory auditors and internal auditors, adequacy of internal control systems, etc.

Name of the Committee

Composition of the Committee

Highlights of duties, responsibilities and activities

Nomination

Mr. N Srivishnu Raju

-

The committee oversees and administers executive compensation, operating

and

Chairperson

under a written charter adopted by our Board of Directors.

Remuneration

Mr. D Seetharamaiah

-

The nomination and remuneration committee has framed the nomination and

Committee

Mr. M Siva Rama Vara Prasad# Mr. N Lokesh*

Mr. Rajesh Thakur Ahuja

remuneration policy.

Corporate

Mr. D Seetharamaiah

-

To formulate and recommend to the Board, a Corporate Social Responsibility

Social

Chariperson

(CSR) Policy indicating activities to be undertaken by the Company in

Responsibility

Mr. N Srivishnu Raju

compliance with provisions of the Companies Act, 2013 and rules made there

Committee

Mrs. N Bhuvaneswari

-

under.

To monitor the implementation of the CSR Policy of the Company from time to time

Stakeholders

Dr. V Nagaraja Naidu

-

The committee reviews and ensures redressal of investor grievances.

Relationship

Chariperson

-

The committee noted that all the grievances of the investors have been

Committee

Mr. D Seetharamaiah Mr. N Srivishnu Raju Mrs. N Bhuvaneswari

resolved during the year.

Risk

Mr. M Siva Rama Vara Prasad#

-

The purpose of the committee is to assist the Board in fulfilling its corporate

Management

Chairperson

governance with regard to the identification, evaluation & mitigation of

Committee

Mr. Rajesh Thakur Ahuja

operational, strategic and environmental risks efficiently and effectively.

Chairperson Mr. D Seetharamaiah Mr. N Srivishnu Raju Mrs. N Bhuvaneswari

-

The Company has developed and implemented a risk management framework that includes identification of elements of risk, if any, which in the opinion of the Board may threaten the existence of the Company.

Management

Mr. D Seetharamaiah

-

Setting the strategic direction to guide and direct the activities of the

Committee

Chariperson

organization;

Mr. N Srivishnu Raju

-

Ensuring the effective management of the organization and its activities; and

Mr. N Lokesh*

Mrs. N Bhuvaneswari

-

Monitoring the activities of the organization to ensure they are in keeping with the founding principles, objects and values.

# Mr. M Siva Rama Vara Prasad Resigned from the Board & Committees w.e.f. 12th May 2016.

* Mr. N Lokesh Resigned from the Board w.e.f. 31st March, 2017

Policies

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated the formulation of certain policies for all listed companies. All the corporate policies are available in the Company website (www.heritagefoods.in/Corportate/policies). The policies are reviewed periodically by the Board and updated based on need and new compliance requirement.

In addition to its Code of Conduct and Ethics, key policies that have been adopted by the Company are as follows:

Name of the policy

Brief description

Web link

Whistleblower

Policy

(Policy on vigil mechanism)

The Company has adopted the whistleblower mechanism for directors and employees to report concerns about unethical behavior, actual or suspected fraud, or violation of the Company''s code of conduct and ethics. It also provides for adequate safeguards against victimization of employees who avail of the mechanism and also provide for direct access to the Chairperson of the Audit Committee. There has been no change to the Whistleblower Policy adopted by the Company during fiscal 2016.

http://heritagefoods.in/ images/HFL% 20Whistle%20 Blower%20Policy.pdf

Name of the policy

Brief description

Web link

Insider Trading Policy and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information

The Company has adopted a Code of Conduct to Regulate, Monitor & Report Trading by Insiders and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information as per the SEBI (Prohibition of Insider Trading) Regulation 2015, with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires preclearance for dealing in the Company''s shares and prohibits the purchase or sale of Company shares by the Promoters, Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed and other certain situations. All Board Directors and the designated employees have confirmed compliance with the Code.

http://heritagefoods.in/

images/COC.pdf

http://heritagefoods.in/

images/COFD.pdf

Nomination and

Remuneration

Policy

This policy formulates the criteria for determining qualifications, competencies, positive attributes and independence for the appointment of a director (executive / non-executive) and also the criteria for determining the remuneration of the directors, key managerial personnel and senior management of the Company. This policy also lays down criteria for selection and appointment of Board Members.

http://heritagefoods.in/

images/BD.pdf

Corporate Social

Responsibility

Policy

The policy outlines the Company''s strategy to bring about a positive impact on society through programs relating to hunger, poverty, education, healthcare, environment and lowering its resource footprint.

http://heritagefoods.in/ images/HFI__CSR.pdf

Policy for Determining Material Subsidiaries

The policy is used to determine the material subsidiaries and material non-listed Indian subsidiaries of the Company and to provide the governance framework for them.

http://heritagefoods.in/

images/Subsidiary_Policy.

pdf

Related Party Transaction Policy

The policy regulates all transactions between the Company and its related parties

http://heritagefoods.in/

images/RPT_Policy.pdf

Policy on Preservation of Documents

The policy deals with the preservation of corporate records of the Company and all its subsidiaries.

http://heritagefoods.in/

images/PD.pdf

Business

Responsibility

Policy

This Policy endorses the Company''s commitment to follow principles and core elements, in conducting its business, as laid down in the National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business

http://heritagefoods.in/ images /HFL%20BR%20 POLICY.pdf

Dividend

Distribution Policy

This Policy is to ensure the right balance between the quantum of Dividend paid and amount of profits retained in the business for various purposes.

http://heritagefoods.in/

images/HF!__Dividend_

Distribution_Policy.pdf

Auditors & Auditors Report Statutory Auditors:

As per Section 139 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, as amended from time to time, the term of M/s. Raju & Prasad, Chartered Accountants (F No: 003475S), Chartered Accountants, Hyderabad as the Statutory Auditors of the Company expires at the conclusion of the 25th Annual General Meeting of the Company.

The Board of Directors of the Company at their meeting held on 24th March, 2017, on the Recommendation of the Audit

Committee, have made its recommendation for appointment of M/s. Walker Chandiok & Co LLP, Chartered Accountants (FRN:001076N/N500013), 7th Floor, Block III, White House, Kundan Bagh, Begumpet, Hyderabad - 500016, as the Statutory Auditors of the Company by the Members at the 25th Annual General Meeting of the Company for an initial term of 5 years. Accordingly, a resolution, proposing appointment of M/s. Walker Chandiok & Co LLP, Chartered Accountants, as the Statutory Auditors of the Company for a term of five consecutive years i.e. from the conclusion of 25th Annual General Meeting, during the year 2017 till the conclusion of 30th Annual General Meeting, during the year 2022 of the Company pursuant to Section 139 of the Companies

Act, 2013, forms part of the Notice of the 25th Annual General Meeting of the Company. The Company has received their written consent and a certificate that they satisfy the criteria provided under Section 141 of the Act and that the appointment, if made, shall be in accordance with the applicable provisions of the Companies Act, 2013 and rules framed there under.

The Report given by M/s. Raju & Prasad, Statutory Auditors on the financial statement of the Company for the Financial year

2016-17 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report.

During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act. M/s. Raju & Prasad, over many years have successfully met the challenge that the size and scale of the Company''s operations pose for auditors and have maintained the highest level of governance, ethical standards, rigour and quality in their audit. The Board place on record its appreciation for the services rendered by M/s. Raju & Prasad, as the Statutory Auditors of the Company.

Secretarial Auditor:

M/s. Savita Jyoti Associates, Practicing Company Secretary (CP No:1796), was appointed to conduct the Secretarial Audit of the Company for the financial year 2016-17, as required under Section 204 of the Companies Act, 2013 and Rules made thereunder. The secretarial audit report for financial year 2016-17 issued by M/s. Savita Jyoti, Practicing Company Secretary in form MR-3 is provided in the Annexure-2 to the Board''s report.

The Secretarial Auditor''s Report is self-explanatory and do not call for any further comments.

The Board has appointed M/s. Savita Jyoti Associates, Practicing Company Secretaries, as Secretarial Auditor of the Company for the financial year 2017-18 as per the provisions of the Companies Act, 2013 and Rules made thereof and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Significant of Material Orders Passed by the Regulators

There is no significant order passed by the regulators or Courts during the year under review.

Extracts of Annual Return

An Extract of Annual Return in Form MGT-9 as per the provisions of Section 92 of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014, is provided in Annexure-3 to this report.

Internal financial control and its adequacy

Your Company has in place adequate internal financial controls with reference to financial statements. It has adopted necessary policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

Internal Audit & Control Systems

Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

These are supplemented by internal audit of your Company carried out by reputed firms of Chartered Accountants across India. Your Company has an Audit Committee consisting of Four Directors in whom all are Non Executive and three are independent Directors. The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggests improvements if any for strengthening them. Your Company has a robust Management Information System which is an integral part of the control mechanism.

The Board of Directors on the recommendation of the Audit Committee has appointed Internal Auditors for the financial year 2017-18 as per the provision of Section 138 of the Companies Act, 2013 and Rules made thereof and as per the SEBI (LO&DR) Regulation, 2015

Corporate Social Responsibility (CSR)

Your Company has been an early adopter of corporate social responsibility (CSR) initiatives. Along with sustained economic performance, environmental and social stewardship is a key factor for holistic business growth.

CSR activities, as per the provisions of the Companies Act, 2013 and rules made thereof, may be undertaken by the Company or through a registered trust or a registered society. The CSR Committee of the Board evaluated various options to implement the CSR activities and decided to contribute the mandated CSR amount to the NTR Memorial Trust, Hyderabad, to carry out the activities such as promoting education, enhancing the vocational skill & supply of clean drinking water etc., as part of the CSR activities of the Company. As the NTR Memorial Trust is operating since 1997 towards the improvement of health, education of the needy people in the society and running the school for the poor people and lot more other initiatives for the up-liftmen of the backward and needy population in the society.

These projects are in accordance with Schedule VII of the Companies Act, 2013 and the Company''s CSR Policy. The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure-4 forming part of the Board''s Report.

i. Heritage Farmer Welfare Trust (HFWT)

Apart from the CSR activities under the Companies Act, 2013 your Company continues to voluntarily support the following social initiatives through Heritage Farmers Welfare Trust (HFWT).

- Veterinary care and cattle management practices through Heritage Mobile Veterinary Clinic, (equipped with necessary tools and trained human resources) for providing door-step veterinary services to the Milch Animals and empowering cattle owners with advanced technology and knowledge on best cattle management and feeding practices. The Mobile veterinary vans conduct free health camp in the needy villages.

- Extending Insurance coverage for accidental death of farmer members, Incentive for fodder development & reward for Meritorious Students.

- The HFWT impact during the year for Mobile Veterinary clinic as follows:

No of Cattles Treated 159540

No of Milk Collection Centers Covered 4529

No of Cattle Health Camps Organized 2163

No of HFL Locations Covered

No of Artificial

No of Video Films

Inseminations

Shown

106

1561

1891

Business Responsibility Report

Pursuant to regulation 34(2)(f) of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 the Annual Report shall contain a Business Responsibility Report (BRR) describing the initiatives taken by the Company from an environmental, social and governance perspective. BRR has been designed as a tool to help companies understand the principles and core elements of responsible business practices and start implementing improvements which reflect their adoption in the manner the company undertakes its business. In compliance with the regulation, the Business Responsibility Report is annexed in Annexure-5 to the board report.

Energy Conservation, Technology Absorption & Foreign Exchange Earnings & Outgo

The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules, 2014 are provided in the Annexure-6 to the Board Report.

Transfer of Un-Claimed Dividends

During the year under review, there is no unclaimed/unpaid dividend amount due to transfer to the Investor Education and Protection Fund (IEPF) pursuant to Section 124(5) of the Companies Act, 2013 read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time, because of the company did not declare the dividend during the year 2008-09.

Risk Management

Your Company have constituted a Risk Management Committee pursuant to Section 134 (3) (n) of the Companies Act, 2013 & Regulation 21 of SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company''s enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Risk Management Procedure will be reviewed by the Risk Management Committee and Board of Directors on a half-yearly basis at the time of review of Financial Results of the Company.

The policy is available in the Company website: www.heritagefoods.in corporate policies RMPolicy

Policy on Sexual Harassment

Your Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2016-17

No of complaints received : Nil

No of complaints disposed off : Nil

Director''s Responsibility Statement as required under Section 134 (3)(c) of the Companies Act, 2013,

The financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis except the sale proceeds received under REC Mechanism of the Renewable Energy. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (''the Act''), read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act and guidelines issued by the Securities and Exchange Board of India (SEBI). There are no material departures from prescribed accounting standards in the adoption of these standards.

The Directors confirm that:

- In the preparation of the annual accounts (Standalone & Consolidated) for the financial year 2016-17, applicable accounting standards have been followed along with proper explanation relating to material departures.

- They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2016-17 and of the profit and loss of the Company for that period.

- They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities,

- They have prepared the annual accounts of the company on a going concern basis.

- They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

- They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Green Initiatives

The Company started a sustainability initiative with the aim of going green and minimizing our impact on the environment.

Electronic copies of the Annual Report 2016-17 including the Notice of the 25th Annual General Meeting will be sent to all members whose email addresses are registered with the Company /Depository Participant(s). For members who have not registered their email addresses, physical copies of the Annual Report 201617 includes the Notice of the 25th Annual General Meeting will be sent in the permitted mode. Members requiring physical copies can send a request to the Company.

Acknowledgement

The Board takes this opportunity to thank all customers, farmers, vendors, investors, bankers and Statutory Authorities for their continued support during the year. The Board also wishes to place on record its sincere appreciation of the effort/ contribution made by its employees at all levels. The Company''s consistent growth was made possible by their hard work, solidarity, cooperation and support and look forward to their continued support in the future.

For and on behalf of HERITAGE FOODS LIMITED

D Seetharamaiah

Registered Office: Chairperson

#6-3-541/C, Punjagutta, (DIN: 00005016)

Hyderabad - 500 082

CIN: L15209TG1992PLC014332

Ph: 04023391221/2

E-mail: [email protected]

Date: May 25, 2017


Mar 31, 2015

The Directors have great pleasure in presenting the 23rd Annual Report of the Company together with the Standalone & Consolidated Audited statement of accounts for the Financial Year ended 31st March, 2015.

Financial Results (Rs,in Lakhs)

Particular 2014-15 2013-14

Revenue from Operations (Gross) 207402.61 172291.58

Less: Excise Duty 105.96 87.59

Total Revenue from operations 207296.65 172203.99

Add: Other Income 702.66 495.40

Total Revenue 207999.31 172699.39

Total Expenditure 199093.36 162705.84

Profit /(Loss) before Finance Cost, 8905.95 9993.54

Depreciation & amortization and

Tax

Finance cost 1593.01 1322.12

Depreciation & Amortization 3399.03 2500.23

Profit /(Loss) before Extraordinary 3913.91 6171.20

Item and Tax

- Extraordinary Item Tax - 50.00

Profit /(Loss) before Tax 3913.91 6121.20

Tax Expenses

- Current & prior period tax 1168.91 1290.59

- Deferred Tax (76.02) 299.38

Net Profit /(Loss) for the Year 2821.02 4531.23

The above are standalone figures, as the subsidiary companies are yet to commenced business. Hence consolidated figures are not given.

Performance of the Company

Your Company, during the year under review earned revenue from operations (Gross) of Rs. 207402.61 Lakhs, achieved an increase of 20.38% over the previous year. The Gross profit was of Rs. 8905.95 (4.28% on total revenue) as against Rs. 9993.54 (5.79% on total revenue) in the previous year. The operating profit after depreciation was amounted to Rs. 5506.92 (2.64% to revenue) as against Rs. 7443.32 (4.31% of revenue) in the previous year.

Dividend

Your Directors have recommended a dividend of Rs. 3/- (30%) per equity share of Rs. 10/- each for the financial year ended March 31, 2015, amounting to Rs. 837.65 lakhs (Rs. 695.97 Lakhs dividend and Rs. 141.68 lakhs tax on dividend). The dividend payout is subject to approval of members at the ensuing Annual General Meeting. Dividend (including dividend tax) as a percentage of net profit after tax is 29.69 % as compared to 17.96% in the previous year.

The Register of Members and Share Transfer Books will remain closed from Thursday, 17th September, 2015 to Thursday 24th September, 2015 (both days inclusive) for the purpose of payment of the final dividend for the financial year ended 31st March 2015, and the Annual General Meeting. The Annual General Meeting is scheduled to be held on 24th September, 2015.

The dividend payout for the year under review has been formulated in accordance with shareholders' aspirations and the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

Transfer to Reserves

Your Company proposes to transfer Rs. 1000 Lakhs to General Reserve. An amount of Rs. 983.37 Lakhs is proposed to be retained in the Surplus.

Share Capital

The paid up Equity Share Capital as at March 31, 2015 stood at Rs. 23,19,90,000 divided into 2,31,99,000 equity shares of Rs. 10/- each. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or issued sweat equity share to its employees or directors. As on 31st March 2015, none of the Directors or the Company holds instruments convertible into equity shares of the Company.

Fixed Deposits

Your Company has not accepted any deposits from the public and as such, no amount of principal or interest was outstanding as of the Balance Sheet date.

Particulars of Loans, Guarantees or Investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report.

Particulars of Contract or Arrangements Made with Related Parties

All related party transactions that were entered into during the fi nancial year were at arm's length basis and were in the ordinary course of the business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus the disclosure in form AOC-2 is not required. Further there are no materially significant related party transactions during the year under review with Promoters, Directors, Key Managerial Personnel and their relatives, which may have potential conflict with interest of the company at large.

All related party transactions are placed before the audit committee as also to the Board for approval. A statement giving details of all related party transactions are placed before the Audit committee and Board for review and approval on a quarterly basis. The details of the related party transactions during the year are part of the notes on Accounts forming part of the Annual Report.

Material changes and commitments affecting financial position between the end of the financial year and date of report

There are no material changes and commitments affecting financial position of the company between 31st March and the date of Board's Report.

Variation in market capitalization

As at March 31, Increase

2015 2014 (decrease) in % Market Capitalization (Rs, in Crore) 764.17 464.21 64.61

Price earnings ratio 27.08 10.25

Note: Data bases on share prices quoted on BSE

Management's Discussion and Analysis

In terms of the provisions of Clause 49 of the Listing Agreement, the Management's Discussion and Analysis is set out in this Annual Report.

Business Review

Your Company has five Divisions in operation in different States in India.

Dairy Business:

With the economic slowdown, most sectors have been struggling and have reported subdued growth in the last couple of years, except the dairy sector, which has witnessed double digit growth with demand for milk and milk products rising in the country.

The Dairy sector shot up 12.6 per cent from a year ago this financial year and is expected to grow at 15.6 per cent in 2015- 16 driven by strong sector growth both in demand and prices, continued policy and monetary support from the Centre and an expected improvement in the economy.

Domestic prices of milk have remained firm in 2014-15 despite the collapse of global milk and dairy product prices in 2014. The demand for milk and milk-based products remained high due to changing dietary habits and rising buying power. As a result, dairy products witnessed a steep rise in prices in 2014.

The dairy sector will reap benefits from the federal government's increased focus on dairy development, enhanced availability of quality fodder and promotion of bovine breeding, among other aspects of raising milk productivity.

However, despite being the world's largest milk producer, India is not a significant player in the global dairy market. India's dairy exports have remained slow due to a drop in international prices, sluggish global demand, rising cost of domestic milk production and the abolition of skimmed milk powder export incentives by the government in July 2014.

Although FY16 is likely to open up new export markets for India in view of Russia approaching Indian dairy Companies.

Operation Flood' and other initiatives by, several States and central government to improve the livestock productivity and increase the availability of quality fodder helped India to become the world's largest milk producer. The milk production is expected to increase to 151 million tonnes by FY16 from 138 million tonnes in FY14.

During the financial year 2014-15, Dairy Division has increased milk Chilling capacity by 35,000 LPD by commissioning of 22 units which includes Bulk mini chilling units, Mini Chilling units, chilling centres and Franchisee Bulk mini chilling units and Franchisee units to increase the milk procurement and to maintain the quality. The Turnover has grown by 17.14% from Rs. 132819.16 Lakhs to Rs. 155585.71 Lakhs.

Retail Division:

Indian Retail sector has been at the helm of India's growth story. The sector accounts for 22% of the gross domestic product (GDP) and contributes to 8% of the total employment. Indian Retail sector continues to grow despite irregular global economic trends. A report has estimated that the total retail sales in India to grow from $411 billion in 2011 to $804 billion by 2015. Robust economic growth, high disposable income with the end-consumer and rapid construction of organized retail infrastructure are key factors behind the forecast.

Over the last decade, the Indian Retail industry has grown phenomenally with a remarkable shift towards organized retailing formats. However, more than 90% of the Indian retail sector still falls in the unorganized sector category. While, the market of organized retail segment despite the downturn is growing exponentially as economic growth brings more people into the consuming classes and organized retail lures more shoppers, its share remains at nascent 7.50%. Meanwhile, online retail business, which is relatively a new phenomenon in India, a format, which has high potential for growth in the near future, has share of 0.50%.

As observed in past years, the organized retail space in the first decade of this century was viewed as offering enormous potential for growth in India. However, post FY08 the industry witnessed a sharp moderation in expectations with most retailers across formats facing significant head winds in terms of like-to- like growth and viability of stores. Following the pronounced slowdown, the industry witnessed a modest recovery in FY10. This recovery gathered further momentum in the first three quarters of FY11 and yielded strong double-digit like-to-like growth across most credible retail formats. Consumer sentiment thereafter was impacted in FY12 and continued to be muted till the second quarter of FY14 with high infl ation expectations, pronounced interest rates and economic uncertainty being key contributing factors. In the recent quarters consumer sentiment improved, which was seen with retailers reporting an improving trend.

Growing Purchasing Power of Indian Middle Class: This is yet another driving force for the organized retail industry. Most research studies suggest rising incomes in the next decade. This is likely to continue propelling the rise of the middle class whose consumption will become the largest in the country. Therefore, targeting the mid-market seems to offer substantial revenue potential. The number of households with annual income brackets in the range of Rs. 2 lakhs to Rs. 10 lakhs is expected to increase significantly in the next decade.

During the Financial year 2014-15, Retail Division turnover has grown by 30.70% from Rs. 37793 Lakhs to Rs. 49397 Lakhs. The Institutional sales segment achieved sales of Rs. 3049 Lakhs and sales delivered by General Trade FMCG distribution business of Rs. 191 Lakhs. For comparable stores in both the years Retail business has grown by 32.32 %, and also the new stores which are opened this year have delivered more throughput than previous year.

Agri Division:

India has no doubt provided opportunities for multinationals to participate in industrial development with new technologies and resources. However, we cannot neglect agriculture and expect economic progress sans rural development. The opportunities in agri-business are enormous and can be encashed with locally available technologies.

With plenty of labour, land and water resources along with tropical weather conditions, India can compete with other developed countries and capture the global market, with improved agricultural practices and water resources management. These crops can be fruits, vegetables, fl owers and medicinal plants having good export market. The surplus land can also be utilised to cultivate crops like maize and sugarcane and the produce can be diverted to industrial production of alcohol, a substitute for imported petroleum. Such industrial products having good demand can provide assured market and remunerative price to the growers.

The farmers should be oriented to make a swift forecast of the demand for various commodities and exploit the opportunities. There is good scope for setting up market outlets to reach the customers without involving middlemen. Business houses can establish a direct link with farmers' organisations for procuring raw materials. Such agencies can support farmers with seeds of improved varieties, finance and other critical inputs for optimising their crop yield.

Your Company, during the year under review apart from the sourcing the fruits & vegetables and custom farming, started the Veterinary care business with an aim to provide the quality feed , fodder and vet medicines to the farmers to increase the productivity of the animals.

Agri Division of your Company had achieved the turnover of Rs. 8400 Lakhs and 52459 MT with respect to Value & Volume. There is an improvement in Volume of 22.49% over the financial year 2013-14.

Bakery Division:

The Bakery division of your Company had achieved the turnover of Rs. 589 Lakhs in financial year 2014-15 against Rs. 366 lakhs in financial year 2013-14.

Renewable Energy Division:

The Renewable Energy Division of your Company strongly committed to extending the 'Green' footprint. In line with this thinking, Company has embarked on a clean Energy initiative with a 2.34 MW Solar Power Project which provides captive power to Dairy Plant in Hyderabad.

Renewable Energy Division of your Company had achieved the turnover of Rs. 257 Lakhs during the year under review.

Subsidiary / Associate Companies

Your Company is having two Subsidiaries Company's namely M/s. Heritage Foods Retail Limited (CIN:U15400TG2008PLC062054) & M/s. Heritage Conpro Limited (CIN:U52100TG2011PLC072132) and one Associate Company M/s SKIL Raigam Power (India) Limited (CIN:U40102TG2009PLC063671).

During the year, the Board of Directors reviewed the activities of the subsidiaries, associates Companies and noted that these companies are yet to start the commercial productions. However in accordance with Section 129(3) of the Companies Act, 2013 and Listing Agreement with Stock Exchanges, the Company has prepared consolidated financial statements of all its Subsidiaries & Associates in accordance with relevant Accounting Standards Viz. AS-21, AS-23 & AS-27 issued by the Institute of Chartered Accountants of India and form part of the Annual Report. Further, a statement containing the salient features of the fi nancial statement of the Subsidiaries & Associate Companies in the prescribed format AOC-1 is appended as Annexure-1 to the Board's report. The statement also provides the details of performance, fi nancial positions of each of the subsidiaries & Associate.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its Subsidiaries & Associate, are available on our website www.heritagefoods.in. These documents will also be available for inspection during the business hours at our registered Office in Hyderabad, India.

During the year, Company has not made any investment in the Subsidiaries & Associate Companies.

Quality

Your Company continues the journey of delivering value to consumers/customers through significant investments in quality programs. While sustaining existing external benchmarks and certifi cations, your Company have added new certifications and further enhanced the programs and initiatives to renew the commitment to the culture of quality.

Your Company adheres to international quality standard certifications such as ISO 22000, (OHSAS) ISO 18001:2007, ISO 14001:2004, SO 2720 and (ENMS) ISO 50001. Your Company has also received an independent auditor's assurance report on compliance to ISO 14001 & 18001 (EMS & OHSAS) 2nd Cycle Re-registration and same was submitted to certifi cation body (SGS, Hyderabad).

The Quality department of your Company handles large change management initiatives to drive quality and productivity improvements across the Company, using various techniques.

Branding

The Heritage brand is a key intangible asset of your Company. The branding initiative is designed to reposition the Company as the next-generation company that would help enterprises renew themselves while creating new avenues to generate value. Marketing reach of your Company extends nationally through advertisements, public relations and digital marketing initiatives. Your Company also organizes several events in various localities to create awareness about the products of the Company.

Mission & Vision Statement

The Board of Director of your Company adopted the Mission & Vision statement -2020 of the Company with object to accelerate the growth of the Company aiming to be a nationally recognized brand with healthy & fresh products with a revenue of Rs. 6000 Cr by 2020. The full text of the Mission & Vision and Value statement is the farming part the Annual Report.

Awards & Recognitions

During the financial year 2014-15 the Company has received the following awards and recognition.

- The Retail division of your Company has bagged "Most Admired Retailer of the Year 2014 in Food & Grocery category from India Retail Forum Mumbai, during September, 2014.

- The Dairy Division of the Company has received the 1st prize in prestigious 'National Energy Conservation Award' 2014 in Dairy sector from Ministry of Power, Govt. of India during December, 2014. This is the 4th time that the Company has been recognised with this award (previously the Company won the award, 1st prize in the year-2012, 2nd prize in the year-2010 and 1st prize in the year-2008).

- The Retail Division of your Company was awarded most prestigious 'COCA COLA Golden Spoon Award' 2015 for being the IMAGES Most Admired Food & Grocery Retailer of the Year - Regional Chain' at India Food Forum, Mumbai,during the month of January,2015

- Your Company was listed among Prestigious top-500 Indian Companies list for the year 2014 compiled by The Economic Times, on the basis of Industry Respect and Key Financial Parameters.

Human Resources and Industrial Relations

Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. To ensure good human resources management, your Company focus on all aspects of the employee lifecycle. This provides a holistic experience for the employee as well. During their tenure at the Company, employees are motivated through various skill- development, engagement and volunteering programs. Your Company has a structured induction process at all locations and management development programs to upgrade skill of managers. Objective appraisal systems based on Key Result Areas are in place for senior management members.

Your Company is committed to nurturing, enhancing and retaining top talent through superior Learning & Organizational Development. This is a part of Corporate HR function and is a critical pillar to support the organization's growth and its sustainability in long run.

The total strength of your Company at the end of financial year 2014-15 was 4244, with an increase of 352 as compared with the end of the previous financial year.

Particulars of Employees

The table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in Annexure-2A to the Board's report.

A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 60 lakh or more PA, or employed for part of the year and in receipt of Rs. 5 lakh or more in a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure-2B to the Board's report.

Corporate Governance

Corporate governance is an ethically driven business process that is committed to values aimed at enhancing an organization's brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders' expectations. It is imperative that your company affairs are managed in a fair and transparent manner. This is vital to gain and retain the trust of the stakeholders.

Your Company complies with the Securities and Exchange Board of India (SEBI)'s guidelines on corporate governance. Your Company has documented internal policies on corporate governance. During the year, Company continued to comply with the Companies Act, 2013. Company Corporate governance report for financial year 2014-15 forms part of this Annual Report. All Corporate policies are available in Company website i.e. www.heritagefoods.in Corporate Policies

Auditors' certificate on Corporate Governance

As required by Clause 49 of the Listing Agreement, the auditors' certificate on corporate governance is forming part of the Annual Report.

Board Diversity

Your Company recognizes and embraces the importance of a diverse board in its success. Company believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill and industry experience, cultural and geographical background, age and gender, which will help the Company retain its competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Policy is available in the Company website www.heritagefoods.in.corporate.policies.BD

Meetings of the Board

The Board met five times during the financial year, the details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013.

Policy on Directors' Appointment and Remuneration

The current policy is to have an appropriate mix of Executive and Non-executive & Independent and Women Directors to maintain the independence of the Board, and separate its functions of governance and management. As on March 31, 2015, the Board consists of 9 members, three of whom are executive / whole- time directors and six are Non-Executive directors. The Board periodically evaluates the need for change in its composition and size.

The policy of your Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013, adopted by the Board. It is affirmed that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company.

Declaration by Independent Directors

Your Company has received necessary declaration from each independent director under Section 149 of the Companies Act, 2013, that he/she meets the criteria of independence laid down in Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Board Evaluation

Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework as suggested by Nomination & Remuneration Committee adopted by the Board. The Board approved the evaluation results as collated by the nomination and remuneration committee.

None of the independent directors are due for re-appointment.

Training of Independent Directors

Every new independent director of the Board attends an orientation program. To familiarize the new inductees with the strategy, operations and functions of your Company, the executive directors / senior managerial personnel make presentations to the inductees about the Company's strategy, operations, product and service offerings, markets, organization structure, quality and risk management etc.

Further, at the time of appointment of an independent director, your Company issues a formal letter of appointment outlining his/her role, function, duties and responsibilities as a director.

Appointment/Re-Appointment

Sri N Lokesh (DIN: 02230945) Non-Executive Directors of the Company retire by rotation and being eligible offer himself for re-appointment at the ensuing Annual General Meeting as per the provisions of Section 152 of the Companies Act 2013 and rules made thereof.

During the year Sri K Durga Prasada Rao (DIN06888949) has been appointed as a Whole Time Director effective from 1st August, 2014 as per the provisions of 196 & 197 and rules made thereof and read with Schedule V of the Companies Act, 2013.

During the year Sri M Siva Rama Vara Prasad (DIN: 00170919) has been appointed as Non-Executive Independent Director w.e .f . 1st August 2014 in accordance with Section 149,152,161(1) read with Schedule IV and other applicable provisions of the Companies Act, 2013 rules made thereof.

Retirements and Resignations

During the year A Appa Rao (DIN: 00003745), Non Executive Independent Director of the Company had passed away on 30th April, 2014. On sudden / untimely death of A Appa Rao, the Board of Directors had expressed their deep condolence to the departed soul. The Board placed on record the invaluable contribution made by him towards the progress of the company from the date of appointment (27th January 2000) until his death.

During the year Dr N R Siva Swamy (DIN:00003749) Non- Executive Independent Director of the Company had resigned from the Board w.e.f. 16th July, 2014 due to his personal reasons and other commitments. The Board placed on record the invaluable contribution made by him, towards the progress of the company from the date of appointment until his resignation.

Sri N P Ramakrishna (DIN: 00003751) Non-Executive Director of the Company retire by rotation and being eligible for re- appointment but he expressed his intention not to seek re- appointment. The vacancy in the Board caused by his retirement shall not be filled up for the time being. The members of the Board place on record their deep sense of appreciation for services rendered by Sri N P Ramakrishna during his tenure as member of the Board.

Key Managerial Personnel

During the year under review, the Company has appointed following persons as Key Managerial Personnel.

Name of the Official DIN/M. No Designation

Smt N Bhuvaneswari 00003741 Vice Chairperson & Managing Director

Smt N Brahmani 02338940 Executive Director Sri A Prabhakara Naidu FCA 200974 Chief Financial Officer

Sri Umakanta Barik FCS 6317 Company Secretary

Committees of the Board

Currently, the Board has Six committees: the Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Management Committee and Risk Management Committee.

A detailed note on the Board and its committees is provided under the Corporate Governance Report section in this Annual Report. The composition of the committees and compliances, as per the applicable provisions of the Act and Rules, are as follows:

Name of the Composition of the Highlights of duties, responsi- bilities and activities Committee Committee

Audit committee Sri D Seetharamaiah - All recommendations made by the audit committee during the year were Chairperson accepted by the Board.

Sri N Sri Vishnu Raju - Reviewing, with the management, the quarterl financial statements before Dr A Appa Rao* submission to the Board for approval.

Dr N R Siva Swamy# - Approval or any subsequent modification of transactions of the Company

Sri M Siva Rama Vara Prasad with related parties

Dr V Nagaraja Naidu

Sri N Loksh - Reviewing, with the management, the performance of statutory auditors and internal auditors, adequacy of internal control systems, etc.

Nomination and Sri N Sri Vishnu Raju - The committee oversees and administers executive compensation, Remuneration Chairperson operating under a written charter adopted by our Board of Directors.

Committee Sri D Seetharamaiah - The nomination and remuneration committee has framed the nomination Dr A Appa Rao* and remuneration policy.

Dr N R Siva Swamy#

Sri M Siva Rama Vara Prasad

Sri N Lokesh

Corporate Social Sri D Seetharamaiah - To formulate and recommend to the Board, a Corporate Social Responsibility Chariperson Responsibility (CSR) Policy indicating activities to be undertaken by the

Committee Sri N Sri Vishnu Raju Company in compliance with provisions of the Companies Act, 2013 and Smt N Bhuvaneswari rules made there under.

- To monitor the implementation of the CSR Policy of the Company from time to time

Stakeholders Dr V Nagaraja Naidu - The committee reviews and ensures redressal of investor grievances.

Relationship Chariperson - The committee noted that all the grievances of the investors have been Committee Sri D Seetharamaiah resolved during the year.

Dr A Appa Rao*

Sri N Sri Vishnu Raju

Smt N Bhuvaneswari

Management Sri D Seetharamaiah - Setting the strategic direction to guide and direct the activities of the Committee Chariperson organization;

Dr A Appa Rao* - Ensuring the effective management of the organization and its activities;

Sri N Sri Vishnu Raju and

Sri N Lokesh - Monitoring the activities of the organization to ensure they are in keeping Smt N Bhuvaneswari with the founding principles, objects and values.

Risk Management Sri M Siva Rama Vara Prasad - The purpose of the committee is to assist the Board in fulfilling its corporate Committee Chairperson governance with regard to the identification, evaluation & mitigation of Sri D Seetharamaiah operational, strategic and environmental risks effi- ciently and effectively.

Sri N Sri Vishnu Raju - The Company has developed and implemented a risk management Smt N Bhuvaneswari framework that includes identification of elements of risk, if any, which in

Sri K Durga Prasada Rao the opinion of the Board may threaten the existence of the Company.

* Dr A Appa Rao, Passed away on 30th April, 2014 & Ceased to be Director from the Board & Committees w.e.f. 30th April, 2014.

# Dr. N R Siva Swamy Resigned from the Board w.e.f. 16th July, 2014.

Auditors & Auditors Report Statutory Auditors:

At the Annual General Meeting held on 26th September, 2014, M/s. Raju & Prasad, Chartered Accountants (F No: 003475S), Hyderabad were appointed as statutory auditors of the Company to hold office till the conclusion of the 25th Annual General Meeting to be held in the calendar year 2017. In terms of the first provision to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Raju & Prasad, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

The notes on Standalone & Consolidated Financial statement referred to in the Standalone & Consolidated Auditor's Report are self-explanatory and do not call for any further comments.

Secretarial Auditor:

M/s. Savita Jyothi, Practicing Company Secretary (CP No:1796), was appointed to conduct the Secretarial Audit of the Company for the fi nancial year 2014-15, as required under Section 204 of the Companies Act, 2013 and Rules made thereunder. The secretarial audit report for financial year 2014-15 issued by M/s. Savita Jyothi, Practicing Company Secretary in form MR-3 is provided in the Annexure-3 to the Board's report.

The Secretarial Auditor's Report is self-explanatory and do not call for any further comments.

The Board has appointed M/s. Savita Jyothi, Practicing Company Secretaries, as Secretarial Auditor of the Company for the financial year 2015-16 as per the provisions of the Companies Act, 2013 and Rules made thereof and the applicable provisions of Listing Agreement.

Cost Audit Report:

The Cost Audit Report for the previous financial year 2013- 14 signed by M/s Sagar & Associates, Cost Accountant (F No: 00118), Hyderabad was filed in extensible Business Reporting Language (XBRL) made on 3rd September 2014, within due date.

Significant of Material Orders Passed by the Regulators

There is no order passed by the regulators or Courts during the year under review.

Extracts of Annual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013 an extract of the annual return is prescribed in form MGT-9 is provided in Annexure-4 to this report.

Internal Audit & Control Systems

Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

These are supplemented by internal audit of all divisions of your Company carried out by reputed firms of Chartered Accountants across India. Your Company has an Audit Committee consisting of Five Directors in whom all are Non Executive and three are independent Directors. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit fi ndings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggests improvements if any for strengthening them. Your Company has a robust Management Information System which is an integral part of the control mechanism.

The Board of Directors on the recommendation of the Audit Committee has appointed Internal Auditors for the financial year 2015-16 as per the provision of Section 138 of the Companies Act, 2013 and Rules made thereof and as per the provisions of the Listing Agreement with Stock Exchanges.

Corporate Social Responsibility (CSR)

Your Company has been an early adopter of corporate social responsibility (CSR) initiatives. Along with sustained economic performance, environmental and social stewardship is a key factor for holistic business growth.

CSR activities, as per the provisions of the Companies Act, 2013 and rules made thereof, may be undertaken by the Company or through a registered trust or a registered society. The CSR Committee of the Board evaluated the various options to implement the CSR activities and decided to transfer the mandated CSR amount to the NTR Memorial Trust, Hyderabad, to carry out the activities such as promoting education, enhancing the vocational skill & supply of clean drinking water etc., as part of the CSR activities of the Company. As the NTR Memorial Trust is operating since 1997 towards the improvement of health, education of the needy people in the society and running the school for the poor people and lot more other initiative for the up-liftmen of the backward and needy population in the society. The Company works with NTR Memorial Trust, Hyderabad towards promoting education, enhancing vocational skill and supply of clean water, apart from its own trust namely Heritage Farmers Welfare Trust

These projects are in accordance with Schedule VII of the Companies Act, 2013 and the Company's CSR Policy. The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure-5 forming part of the Board's Report.

Apart from the CSR activities under the Companies Act, 2013 your Company continues to voluntarily support the following social initiatives through Heritage Farmers Welfare Trust (HFWT).

- Veterinary care and cattle management practices through

Heritage Mobile Veterinary Clinic, (equipped with necessary tools and trained human resources for providing door-step veterinary services to the Milch Animals and empowering cattle owners with advanced technology and knowledge on best cattle management and feeding practices through entertainment cum education mode). The Mobile veterinary van reaches to needy places for educational video film in the evening and free health camp on the next day morning in a village.

- Extending Insurance coverage for natural death, Incentive for fodder development & reward for Meritorious Students.

- Extended relief activities and distributed cattle feed with subsidy in Srikakulam, Vijayanagaram and Visakhapatnam during the Cyclone HUDHUD.

Your Company's CSR committee comprises Sri D Seetharamaiah (Chairperson), Sri N Sri Vishnu Raju, and Smt N Bhuvaneswari. The committee is responsible for formulating the CSR policy and monitoring the CSR expenditure of the Company.

The policy is available in the Company website www.heritagefoods.in.corporate.policies.CSR

Energy Conservation, Technology Absorption & Foreign Exchange Earnings & Outgo

The particulars as prescribed under Sub-section (3)(m) of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules, 2014 are provided in the Annexure-6 to the Board Report.

Transfer of Un-Claimed Dividends

Pursuant to Section 124(5) of the Companies Act, 2013 [Section 205C (2) of the Companies Act, 1956] read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed/unpaid dividend amount of Rs. 7,00,965/- (Rupees Seven Lakh Nine Hundred Sixty Five Only) for the year 2006-07 was transferred to the Investor Education and Protection Fund during the financial year 2014-15 and the unclaimed/unpaid dividend for the year 2007-08 is due for transfer to the fund during the current Financial year 2015-16.

Risk Management

During the year, your Directors have constituted a Risk Management Committee pursuant to Section 134 (3) (n) of the Companies Act, 2013 & Clause 49 of the listing agreement, which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, fi nancial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Risk Management Procedure will be reviewed by the Risk Management Committee and Board of Directors on a half-yearly basis at the time of review of Financial Results of the Company.

The policy is available in the Company website:

www.heritagefoods.in.corporate.policies.RMPolicy

Vigil Mechanism / Whistle Blower Policy

During the year, the Board of Directors of your Company have adopted Whistle Blower Policy as per the provisions of Section 177 (9) of Companies Act, 2013 and as per the Amendment to the Clause 49 of the Listing Agreement as amended form time to time. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behaviour, actual or suspected fraud or violation of code of conduct or ethics of the Company. It also provides for adequate safeguards against victimization of employees who avail of the mechanism and also provide for direct access to the Chairperson of the Audit Committee. The guidelines are meant for all members of the Organization from the day they join and are designed to ensure that they may raise any specific concern on integrity, value adherence without fear of being punished for raising that concern.

The Whistle Blower Policy is available in the company's website: www.heritagefoods.in.corporate.Policy.WBPolicy

Prevention of Insider Trading:

The Company has adopted a Code of Conduct to Regulate, Monitor & Report Trading by Insiders and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information as per the SEBI (Prohibition of Insider Trading) Regulation 2015, with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Promoters, Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed and other certain situations. The Board is responsible for implementation of the Code.

All Board Directors and the designated employees have confirmed compliance with the Code

The Code of Conduct to Regulate, Monitor & Report Trading by Insiders as per the SEBI (Prohibition of Insider Trading) Regulation 2015 is available in the Company website: www.heritagefoods.in.corporate.Policies.Code of Conduct

The Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information as per the SEBI (Prohibition of Insider Trading) Regulation 2015 is available in the Company website: www.heritagefoods.in.corporate. Policies-Code of fair disclosure

Nomination and Remuneration Policy

The Board of Directors of your Company has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of

the Company. This policy also lays down criteria for selection and appointment of Board Members.

The Policy is available in the company's website:

www.heritagefoods.in.corporate.R&MPolicy

Policy on Sexual Harassment

Your Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2014-15

No of complaints received : Nil

No of complaints disposed off : Nil

Director's Responsibility Statement as required under Section 134 (3)(c) of the Companies Act, 2013,

The financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis except the sale proceeds received under REC Mechanism of the Renewable Energy. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 ('the Act'), read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified ) and guidelines issued by the Securities and Exchange Board of India (SEBI). There are no material departures from prescribed accounting standards in the adoption of these standards.

The Directors confirm that:

- In the preparation of the annual accounts for the financial year 2014-15, applicable accounting standards have been followed along with proper explanation relating to material departures.

- They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the Financial year 2014-15 and of the profit and loss of the Company for that period.

- They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities,

- They have prepared the annual accounts of the company on a going concern basis.

- They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

- They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Green Initiatives

The Company started a sustainability initiative with the aim of going green and minimizing our impact on the environment.

Electronic copies of the Annual Report 2014-15 and Notice of the 23rd Annual General Meeting were sent to all members whose email addresses are registered with the Company / Depository Participant(s). For members who have not registered their email addresses, physical copies of the Annual Report 2014-15 and the Notice of the 23rd Annual General Meeting are send in the permitted mode. Members requiring physical copies can send a request to the Company.

Acknowledgement

The Board takes this opportunity to thank all customers, farmers, vendors, investors, bankers and Statutory Authorities for their continued support during the year. The Board also wishes to place on record its sincere appreciation of the effort/ contribution made by its employees at all levels. The Company consistent growth was made possible by their hard work, solidarity, cooperation and support and look forward to their continued support in the future.

For and on behalf of

HERITAGE FOODS LIMITED



D SEETHARAMAIAH

Chairperson

DIN: 00005016

Registered Office:

6-3-541/C, Punjagutta,

Hyderabad – 500 082

CIN : L15209TG1992PLC014332

Ph : 04023391221/2

E-mail : hfl @heritagefoods.in

Date : 22nd July, 2015


Mar 31, 2014

Dear members,

The Directors have great pleasure in presenting the 22nd Annual Report of the Company together with the Audited statement of accounts for the Financial Year ended 31st March, 2014.

FINANCIAL RESULTS (Rs. in Lakhs) Particular 2013-14 2012-13

Revenue from Operations (Gross) 172291.58 160259.49 Less: Excise Duty 87.59 78.21 Add: Other Income 495.40 419.95

Total Revenue 172699.39 160601.23

Total Expenditure 162705.84 150072.33

Profit / (Loss) before Finance 9993.54 10528.90 Cost, Depreciation & amortization and Tax

Finance cost 1322.12 1670.20 Depreciation & Amortization 2500.23 2202.03

Profit / (Loss) before 6171.20 6656.67 Extraordinary Items and Tax

-Extraordinary Item Tax 50.00 291.34

Profit / (Loss) before Tax 6121.20 6365.33

-Current Tax 1291.05 1275.80

-Prior period Tax (0.46) (44.39)

-Deferred Tax 299.38 137.76

Net Profit / (Loss) for the Year 4531.23 4996.16

The above are standalone figures, as the Subsidiary Companies & Associate Company are yet to commence business. Hence consolidated figures are not given.

PERFORMANCE OF THE COMPANY

Your Company, during the year under review earned revenue from operations (Gross) of Rs. 172291.58 Lakhs achieved an increase of 7.51 % over the previous year. Your Company registered a net profit of Rs. 4531.23 Lakhs.

DIVIDEND

Your Directors have recommended a dividend of Rs. 3.00 (30%) per equity share of Rs. 10/- each for the financial year ended March 31, 2014, amounting to Rs. 814.25 lakhs (Rs. 695.97 Lakhs dividend and Rs. 118.28 lakhs tax on dividend). The dividend payout is subject to approval of members at the ensuing Annual General Meeting.

The dividend will be paid to members whose names appear in the Register of Members as on the record date in respect of shares held in dematerialised form & Physical form.

The dividend payout for the year under review has been formulated in accordance with shareholders'' aspirations and the Company''s policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

INCREASE OF AUTHORISED CAPITAL

During the year the Company has increased the Authorized Share Capital of the Company from Rs. 20,00,00,000/- (Rupees Twenty Crores Only) divided into 1,80,00,000 (One Crore Eighty Lakhs) Equity Shares of Rs. 10/- each and 20,00,000 (Twenty Lakhs) Preference Shares of Rs. 10/- each to Rs. 50,00,00,000/- (Rupees Fifty Crores Only) divided into 4,80,00,000 (Four Crores Eighty Lakhs) Equity Shares of Rs. 10/- each and 20,00,000(Twenty Lakhs only) Preference Shares of Rs. 10/- each

ISSUE OF BONUS EQUITY SHARES

During the year under report the Board of Directors of the Company approved/allotted Bonus Shares to the existing Equity Shareholders of the company as on the record date i.e 29th July 2013 in proportion of 1 (One) Bonus Equity Share of Rs. 10/- (Rupees Ten Only) each credited as fully paid-up for every 1 (One) eligible existing fully paid-up Equity Shares of Rs. 10/- (Rupees Ten Only ) each by capitalizing of Rs. 11,59,95,000/- (Rupees Eleven crores Fifty Nine lakhs Ninety Five thousand only) out of the sum outstanding to the credit of security premium account/General Reserve of the Company.

After the allotment of Bonus shares, the Paid up Capital of the Company has increased from 11,59,95,000/-(Rupees Eleven Crores Fifty Nine Lakhs Ninety Five Thousand only) divided into 1,15,99,500 (One Crore Fifteen Lakh Ninty Nine Thousand Five Hundred) Equity Shares of Rs. 10/- each, to 23,19,90,000/- (Rupees twenty Three Crores Ninteen Lakhs Ninty Thousand only) divided into 2,31,99,000 (Two Crore Thity one Lakhs Ninty Nine thousand only) Equity Shares of Rs. 10/- each.

CHANGE OF NAME OF THE COMPANY

During year the shareholders of the Company had approved the change of name of the company from "Heritage Foods (India) Limited" to "Heritage Foods Limited" by deleting the word ''(India)'' in the existing name of the Company. The Company has received the fresh incorporation Certificate with the change of name from Registrar of Companies, Andhra Pradesh, Hyderabad and the company had also received necessary approvals for change of name from the Stock Exchanges (Bombay Stock Exchange Ltd and National Stock Exchange of India Limited) where the shares of the Company are listed. The change of name of the Company as aforesaid does not change the legal status or constitution of the Company, nor does it affect any rights or obligations of the Company.

CHANGE OF CORPORATE IDENTIFICATION NUMBER (CIN) OF THE COMPANY

Due to the division of state (united Andhra) into State of Telangana and State of Andhra Pradesh on June 2nd 2014,The Ministry of Corporate Affairs, Govt. of India, had changed /allotted the New Corporate Identification Number (CIN) of the Company from L15209AP1992PLC014332 to L15209TG1992PLC014332.

TRANSFER TO RESERVES

The Company proposes to transfer Rs. 1000.00 Lakhs to General Reserve.

Dairy Business: Dairy industry is of crucial importance to the growth of Indian economy. Dairy comes under fragmented industry as per the definition of Dairy by uber guru on strategy Michael Porter, which means "local requirements have to be met through local supplies as the production is scattered and available locally". The strategy for dairy development till date lies with decentralising the production and centralizing the processing and marketing.

India has one of the largest livestock populations in the world which contains Fifty percent of the buffaloes and twenty percent of the cattle in the world are found in India. Milk is one of the most important item of common vegetarian diet of Indian people. With an estimated 86.8 million tons of annual milk production from animals managed by nearly 70 million farmers. Milk and milk products are rated as one of the most promising sectors. The total milk production is over 72 million tonnes whereas the demand is estimated at around 80 million tonnes. The per capita milk availability is about 296 grams per day.

India is the world''s largest consumer of dairy products, consuming almost 100% of its milk produce (about 15% of world''s production). Going forward, according to industry reports, the current market size of US$10bn of the Indian dairy industry is expected to grow at a CAGR of 13-15% till FY 2020. Robust growth is expected on the back of various reasons- A) Milk considered as an inevitable part of Indian diet B) Rising health consciousness C) Heightened consumer interest in protein diets; all coupled with D) Rising disposable incomes.

According to the Indian Dairy Association (IDA), the organised sector (cooperatives, producer companies and private players) handles 30% of the marketable milk suppliers. However in the interest of both producers and consumers, it is necessary to increase the share of the organised sector. Hence, the National Dairy Plan (NDP) has set a target to increase this share to 65% by 2030. Consequently, efforts towards increasing the organised sector''s share are expected to benefit our Compny and drive its future growth.

The Company has its major milk sales concentrated in four states i.e Andhra Pradesh, Telangana, Tamil Nadu and Karnataka, contributing 93% to the revenue. Barring to expand the boundaries might have an impact on the margins of the company eventually. Also, the unrest owing to separation of Telangana as an independent State can hinder the inter-state milk supply (a perishable commodity) and thereby affect the company''s sales.

During the financial year 2013-14, Dairy Division has increased milk Chilling capacity by 138000 LPD by commissioning 26 units which includes Bulk mini chilling units, Mini Chilling units, chilling centres and Franchisee Bulk mini chilling units and Franchisee units to increase the milk procurement and to maintain the quality. The Turnover has grown by 4.69% from Rs. 126862 Lakhs to Rs. 132819 Lakhs.

Retail Division: Retail-which literally means to put on the market, is a very important aspect of every city. Without a well organized retail industry we would not have our necessities and luxuries fulfilled. Though organized retailing industry began much earlier in the developed nations, India has not actively participated. However with its vast expanse and young population, India in the 21st century emerges as a highly potential retail market. The journey of retailing in India has been riveting and the future promises further growth.

At present the Retail industry in India is accelerating. Though India is still not at an equal pace with other Asian counterparts, it is geared to become a major player in the Retail Market. Also with a highly diverse demography, India provides immense scope for companies brining in different products targeting different consumers.

According to the Global Retail Development Index, India is positioned as the foremost destination for retail investment and business development. The factor that is presently playing a significant role here is the fact that a large section of Indian population is in the age group of 20-34 with a considerably high purchasing power; this has caused the increase in the demand in the urban market resulting in consistent growth in the Retail business.

As the market becomes more and more organized the Indian retail industry will gain greater worth. The Retail sector in the small towns and cities will increase by 50 to 60 % pertaining to easy and inexpensive availability of land and demand among consumers.

Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and Jewellery, are slowly becoming lifestyle products that are widely accepted by the urban consumers.

The Retail Division of your Company achieved a sale of Rs. 37793 Lakhs during the Financial Year 2013-14. The Institutional sales segment achieved Rs. 2257 Lakhs and sales delivered by General Trade FMCG distribution business of Rs. 945 Lakhs. For comparable stores in both the years Retail business has grown by 10.45 %, and also the new stores which are opened this year have delivered more throughput than previous year.

Agri Division: Agriculture is the third largest sector of India''s economy after services and industry. It Contributes 25% of Gross Domestic Product (GDP) of the country. The Current average growth rate of the agriculture sector is 2.2%. The sector which requires consistent monitoring, creating a conducive environment for farmers to increase their productivity and sell their products at competitive prices. There is still a lot of scope for increasing the productivity in India by adopting scientific methods of cultivation. During the past five years agriculture sector has witnessed spectacular advances in the production and productivity of food grains, oilseeds, commercial crops, fruits, vegetables, food grains, poultry and dairy. India has emerged as the second largest producer of fruits and vegetables in the world besides being the largest overseas exporter of cashews and spices.

Agri Division of your Company had achieved the turnover of Rs. 6783 Lakhs and 42550 MT with respect to Value & Volume. However, there is an improvement in Volume by 62% over the financial year 2012-13.

Bakery Division:

Bakery Division of your Company had achieved the turnover of Rs. 366 Lakhs.

Renewable Energy Division:

It is great pleasure to inform you that your Company had Set up/Commissioned 2.34 MW solar power plant at, Masjid Adavi Village, Mulugu Mandal, Medak Dist, Telangana on 29th September, 2013, to meet for the captive power requirement.

The 2.34 MWp Solar Power Plant is equipped to supply 3.75 million units of clean and green energy annually. It is expected to displace nearly 3,300 MT of CO2 annually. The plant, spread across an area of 14 acres of land comprises of 9,360 Solar PV modules using multi crystalline technology.

The SWOT Analysis:

Strengths

* The vast livestock population of the country could prove to be a vital asset for the country and unlike many other natural resources which will deplete over the years, a sustainable livestock production system will continue to propel Indian economy.

* Purchasing power of the consumers is on the upswing with growing economy & continually increasing population of middle class.

* Milk consumption in India is a regular part of the dietary programme irrespective of the region and hence demand is likely to rise continuously.

* Vast pool of highly trained and qualified technical manpower is available at all levels to support R&D as well as industry operations

* The income of an average Indian is increasing and thus there is a proportional increase in the purchasing power.

* Indian economy and its policies are also becoming more and more liberal making way for a wide range of companies to enter Indian market.

* Employment opportunities both direct and indirect have been increased. Farmers get better prices for their products through improvement of value added food chain,

* A high growth industry has significant future potential.

* Technology proven, with low operation and maintenance costs, and scalable.

* Availability of soft loans and government incentives for growth and expansion

Weaknesses

* Though cross breeding programmes have significantly improved animal productivity, milk production system in many parts of the country is still largely dominated by low yielding animals.

* Poor condition of roads and erratic power supply remain a major challenge for procurement and supply of good quality raw milk.

* Maintenance of cold chain is still a major handicap. For organized marketing of milk, the milk produced is required to be transported to nearby processing plant which incurs cold storage and transportation costs which are quite high.

* It will mainly cater to high-end consumers placed in metros and will not deliver mass consumption goods for customers in villages and small towns.

* Retail chain are yet to settle down with proper merchandise mix for the outlets.

* Small size outlets are also one of the weaknesses in the Indian retailing

* Owing to high capital costs, the business needs external incentives to be economically feasible, thus increasing dependence on governmental policies.

* The capital intensive nature of the business might favour larger businesses over smaller ones.

* The distributed and intermittent nature of solar energy makes it difficult for utilities to rely on solar PV for their base load.

Opportunities

* Expanding market will see creation of enormous job and self employment opportunities.

* Economy is growing at the rate of nearly 8% of GDP. Consequently, the investment opportunities are also increasing continually.

* Demand for dairy products is income elastic. Continued rise in middle class population will see shift in the consumption pattern in favour of value added products besides the growth in demand for liquid milk.

* Greatly improved export potential for indigenous as well as western milk products.

* Opening of the world market offers opportunities for utilization of byproducts of the dairy industry for manufacturing value added products for import substitution.

* Difficult to target all segments of society,

* Emerge of hyper and super markets trying to provide customer with value, variety and volume,

* The unorganized sector has dominance over the organized sector because of low investment needs.

* Governments ambitious targets and attractive policies opens up many avenues for investment,

* Opportunities exist all along the solar PV business value chain, not just for power plants.

* It can become one of the largest industries in terms of numbers of employees and establishments,

Threats

* Excessive grazing pressure on marginal and small community lands has resulted in almost complete degradation of land.

* Indiscriminate crossbreeding for raising milk productivity could lead to disappearance of valuable indigenous breeds.

* There is a gross lack of awareness among farmers about the quality parameters, including microbiological and chemical contaminants as well as residual antibiotics.

* Entry of multinationals could result in a large portion of milk being diverted towards value added products which, though it augers well for the producers, is likely to affect the availability of liquid milk supply for mass consumption especially for the poor urban class

* Rural retailing is still unexploited Indian market.

* Off-peak seasons reduce cash flow.

* Industry is new, so finding skilled workforce could be a problem.

EXEMPTION FROM ATTACHING THE BALANCE SHEETS, ETC. OF THE SUBSIDIARY COMPANIES WITH THE BALANCE SHEET OF THE COMPANY

The Ministry of Corporate Affairs ("MCA") has granted a general exemption under Section 212(8) of the Companies Act, 1956 from attaching copies of the Balance Sheet, Statement of Profit and Loss, Directors'' Report and Auditors'' Report of its subsidiary companies with the Balance Sheet of the Company, subject to fulfillment of certain conditions.

In terms of the said circular, copies of the Balance Sheet, Statement of Profit and Loss, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies have not been attached to the Balance Sheet of the Company. The Company has presented Consolidated Financial Statements comprising Heritage Foods Ltd (HFL) and its subsidiaries duly audited by the Statutory Auditors of the Company. The Consolidated Financial Statements prepared by the Company are in compliance with the Accounting Standard (AS-21) as prescribed by the Companies (Accounting Standards) Rules, 2006 and the Listing Agreement with the Stock Exchanges. The annual accounts and related documents of all the Subsidiary Companies are made available for inspection to the shareholders of the Company and its subsidiaries at the Registered Office of the Company from Monday to Friday between 11.00 A.M. to 1.00 P.M. The Company will also make available physical copies of such documents on request by any Member of the Company (or its subsidiaries) interested in obtaining the same and the same would also be made available on the website of the Company

DIRECTORS

Dr. A. Appa Rao (DIN: 00003745), Non Executive Independent Director of the Company had passed away on 30th April, 2014. On sudden / untimely death of Dr A. Appa Rao, the Board of Directors had expressed their deep condolence to the departed soul. The Board placed on record the invaluable contribution made by him towards the progress of the company from the date of appointment (27th January 2000) until his death.

Dr.VNagaraja Naidu (DIN: 00003730), Non-Executive Director of the Company retires by rotation and being eligible offer himself for reappointment at the ensuing Annual General Meeting as per the provisions of Section 152 of the Companies Act 2013 and rules made thereof.

The Board of Directors of the Company has appointed Sri D.Seetharamaiah (DIN: 00005016), Director as Non-Executive Independent Director (designated as Chairman of the Company) for a term upto 5 years as per the provisions of Section of 149 & 152 of the Companies Act, 2013 and rules made thereof from the conclusion of this Annual General Meeting till the conclusion of 27th Annual General Meeting to be held in 2019, not liable to retire by rotation.

The Board of Directors at their meeting held on 22nd October, 2013 appointed N. Sri Vishnu Raju (DIN: 00025063) as an Additional Director in accordance with Section 161 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and rules made thereof and in terms of the Articles of Association of the Company. N. Sri Vishnu Raju is proposed to be appointed for a term upto 5 Years as a Non-Executive Independent Director from this Annual General Meeting till the conclusion of 27th Annual General Meeting to be held in 2019, not liable to retire by rotation.

The Board of Directors at their meeting held on 30th July, 2014, has appointed Sri. M. Siva Rama Vara Prasad (DIN: 00170919) as an Additional Director in accordance with Section 161 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and rules made thereof and in terms of the Articles of Association of the Company. Sri. M.Siva Rama Vara Prasad is proposed to be appointed for a term upto 5 Years as a Non- Executive Independent Director from this Annual General Meeting till the conclusion of 27th Annual General Meeting to be held in 2019, not liable to retire by rotation.

The Board of Directors at their meeting held on 30th July, 2014 appointed Sri. K. Durga Prasada Rao (DIN: 06888949) as an Additional Director w.e.f. 1st August, 2014 in accordance with Section 161 read with Schedule V and other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Qualification of Directors) Rules, 2014 and in terms of Articles of Association of the Company. Sri. K.Durga Prasada Rao has been appointed as a Whole Time Director for a term upto 5 years effective from 1st August, 2014 as per the provisions of Sections 196 & 197 and rules made thereof and read with Schedule V of the Companies Act, 2013.

The Board at its meeting held on 30thJuly, 2014 on recommendation of Nomination & Remuneration Committee and subject to the approval of the members at the ensuing Annual General Meeting had re-appointed Smt. N. Bhuvaneswari as whole time Director designated as Vice Chairperson & Managing Director of the Company, for a period of 5 (five) years with effect from 1st July, 2014 as per the provisions of Sections 196 & 197 and rules made thereof and read with Schedule V of the Companies Act, 2013.

The Board at its meeting held on 30th July, 2014 on recommendation of Nomination & Remuneration Committee and subject to the approval of the members at the ensuing Annual General Meeting had re-appointed Smt. N. Brahmani as whole time Director designated as Executive Director of the Company, for a period of 5 (five) years with effect from 1st June, 2014 as per the provisions of Sections 196 & 197 and rules made thereof and read with Schedule V of the Companies Act, 2013.

During the year under report Dr Arvind Pandalai (DIN: 00352809), who was appointed as an Additional Director by the Board of Directors at their meeting held 22nd October 2013 has submitted his resignation from the office of Director due to his personal reasons and resigned from the Board on 23rd October 2013.

Dr. N.R Sivaswamy (DIN: 00003749), Non - Executive Independent Director of the Company had resigned from the Board w.e.f 16th July, 2014 due to his personal reasons and other commitments. The Board placed on record the invaluable contribution made by him, towards the progress of the company from the date of appointment until his resignation.

The Board of Directors of the Company appointed Smt N.Bhuvaneswari, Vice Chairperson & Managing Director, Smt N.Brahmani, Executive Director, Sri A Prabhakara Naidu, Chief Financial Officer (CFO) and Sri Umakanta Barik, Company Secretary as Key Managerial Persons (KMP) as per the provisions of Section 203 of the Companies 2013, during the year under review.

Brief resume of the Directors proposed to be appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership/ chairmanship of the Board/Committee as stipulated by Clause 49 of the listing agreement with the stock exchange are provided elsewhere in the Annual Report.

AUDITORS AND AUDITORS'' REPORT

Statutory Auditors: M/s. Raju & Prasad, Chartered Accountants, Hyderabad, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

As per the Section 139 of the Companies Act 2013 M/s. Raju & Prasad, Chartered Accountants, Hyderabad Statutory Auditors of the Company will be appointed for a period of three years from the conclusion of this Annual General Meeting till the conclusion of the Twenty Fifth Annual General Meeting and the Company has received letters from them to the effect that their reappointment, if made, would be within the prescribed limits under section 141 of the Companies Act 2013 and rules made thereof The Notes on Financial Statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.

Secretarial Auditor: As a measure of good corporate governance practice and as per the Section 204 of the Companies Act, 2013 and rules made thereof , the Board of Directors of the Company appointed Ms. Savita Jyoti, Practicing Company Secretary, to conduct Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2014, is provided in the Annual Report.

Cost Auditor: The Central Government had approved the appointment of M/s. Sagar & Associates, Cost Accountants, Hyderabad as Cost Auditor of the Company for the financial year 2013-14. The Cost Audit Report will be filed with Central Government within 180 days from the close of the Financial Year. The Cost Audit Report for the previous financial year 2012-13 signed by M/s. Sagar & Associates. Cost Accountants, Hyderabad was filed in extensible Business Reporting Language (XBRL) mode on September 06, 2013, within due date.

INTERNAL AUDIT & CONTROL SYSTEMS

Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

These are supplemented by internal audit of all divisions of the Company carried out by reputed firms of Chartered Accountants. Your Company has an Audit Committee consisting of Five Directors; in whom two are Non Executive and remaining of them are Non-Executive Independent Directors. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggests improvements if any for strengthening them. The Company has a robust Management Information System which is an integral part of the control mechanism. The Board of Directors has appointed Internal Auditors for the FY 2014-15, as per the provision of Section 138 of the Companies Act, 2013 and rules made thereof

CONSTITUTION & RESTRUCTURING OF COMMITTEES:

i. Constitution of Corporate Social Responsibility Committee: The Board of Directors at their meeting held on 21st March 2014 has constituted the Corporate Social Responsibility Committee (CSR Committee) w.e.f. 1st April, 2014, as per the provisions of the Section 135 and other applicable provisions of the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules 2014 comprising of Sri. D. Seetharamaiah as the Chairman and N. Sri Vishnu Raju & Smt N. Bhuvaneswari as members.

The said Committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities etc.

ii. Stakeholders Relationship Committee: During the year the Board of Directors of the Company has changed/altered the name of the Share Transfer and Investor Grievance Redressal Committee to Stakeholders Relationship Committee w.e.f. 1st April,2014, as per the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

iii. Nomination & Remuneration Committee: During the year the Board of Directors of the Company had changed/ altered the name of the Remuneration Committee to Nomination & Remuneration Committee w.e.f. 1st April, 2014 as per the provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

The details of the Committee members are provided in the corporate information Page.

INDUSTRIAL RELATIONS

Industrial relations in all the locations of your Company remained cordial and peaceful throughout the year.

INSURANCE

All the assets and insurable interest of your Company including inventories, buildings, plant & machineries etc., are adequately insured.

AWARDS & RECOGNITIONS

It is great honour to state that during the year Smt.N.Bhuvaneswari, Vice Chairperson & Managing Director of your Company, named as one of the most powerful business women in India, and placed at 45th Rank in the list of Fortune-50 Most Powerfull Business Women in India for the year 2013.

During the year your Company enlisted into the list of top 500 companies across the Country and also recognized as one of the top 16 Companies based in Hyderabad, that figured in top 500 Companies in India, listed by Economic Times for the year 2013. Your Company has positioned at 477th rank in the List of ET- top 500 Companies in India.

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are required are annexed to the Directors'' Report. Having regard to the provisions of Section 219(1) (b) (iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

TRANSFER OF UN-CLAIMED DIVIDENDS

Pursuant to Section 205C (2) of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed dividend amount of Rs. 6,51,006/- (Rupees Six Lakh Fifty one Thousand and Six Only) for the year 2005-06 was transferred to the Investor Education and Protection Fund during the year and the unclaimed dividend for the year 2006-07 is due for transfer to the fund during the current Financial year.

FIXED DEPOSITS

The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS

In compliance with the requirements of Clause 49 of the Listing Agreement, a separate Report contains a detailed Management Discussion and Analysis, forms an integral part of this Report.

CORPORATE GOVERNANCE

In compliance with the requirements of Clause 49 of the Listing Agreement, a separate Report on Corporate Governance along with the Auditors Certificate on its compliance forms an integral part of this Report.

CSR ACTIVITIES

As a corporate citizen with enduring relationships in rural India, your Company has a history of collaboration with communities to enhance dairy productivity and the rural resource base. Inspired by the vision of making a contribution to the improvement of quality of life of dairy farmers your Company has started implementing the CSR activities through registered trust namely Heritage Farmers Welfare trust (HFWT). The trust has chosen Health, Safe drinking water and Livelihoods as the thrust areas for discharging its activities. Apart from the above thrust areas, your company strives to serve the society through various other measures like distribution of clothes and relief materials during natural calamities etc.

In the month of October, 2013 the Cyclone Phailin has hit Gopalpur in Odisha and Sompeta, Tekkali and Gara mandals of Srikakulam district in Andhra Pradesh and devastated trees, crops and cattle. To help the needy people your Company through its trust reached the victims and interacted with the people to understand their concerns and announced cyclone relief package, and started conducting 42 free veterinary health camps and supplied 1020 subsidised cattle feed bags those needy villages.

The Trust has Launched 6 Heritage Mobile Veterinary Clinic (HMVC) for providing door- step veterinary services to the Milch Animals and empowering cattle owners with advanced technology and knowledge on best cattle management and feeding practices through entertainment cum education mode. It is a Mobile Clinic equipped with necessary tools and trained human resources on Veterinary treatment and cattle management practices.

During the year your Company has started:-

Fodder resource development: Various locations of the Company distributed the fodder strips to the producers / farmers free of cost to produce consistency in milk production apart from improvement in the general health of the animals and quality of milk.

Veterinary Health Care Services: Various preventive and curative health care services are offered including medicines for free of cost by veterinary doctors through Heritage Mobile Veterinary Clinics.

Feed Ingredients supply: In view of the non-availability of good quality animal feed, the trust initiated to supply good quality of feed ingredients to the farmers at subsidized price.

Insurance: Group Personal Accident Scheme with Medical Extension & Disability Compensation — to the MCC Members and the Farmers Members enrolled in the Heritage Farmers Welfare Trust

DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that,

* In the preparation of the annual accounts, applicable accounting standards have been followed along with proper explanation relating to material departures.

* They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the Financial year 2013-14 and of the profit for that period;

* They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

* They have prepared the annual accounts of the company on a going concern basis.

ACKNOWLEDGEMENT

The Board takes this opportunity to thank all its employees for their dedicated service and firm commitment to the goals of the Company. The Board also wishes to place on record its sincere appreciation for the wholehearted support received from shareholders, distributors, farmers, bankers and all other business associates, and from the neighborhood communities of the various locations. We look forward to continued support of all these partners in progress.

Your Directors look forward to the future with confidence.

For and on behalf of HERITAGE FOODS LIMITED Registered Office:

#6-3-541/C, Punjagutta, Hyderabad - 500 082 CIN : L15209TG1992PLC014332 Ph : 04023391221/2 e-mail : [email protected] D. SEETHARAMAIAH Chairman Date : 30th July, 2014 (DIN: 00005016)


Mar 31, 2013

Dear Members,

The Directors have great pleasure in presenting the 21st Annual Report of the Company together with the Audited statement of accounts for the Financial Year ended 31st March, 2013.

FINANCIAL RESULTS

The financial performance for the Financial Year 2012-13 is summarised in the following table:

(Rupees in Lakhs)

Year ended Year ended Particular March 31, March 31, 2013 2012

Revenue from Operations (net) 160181.28 139340.57

Other Income (net) 419.95 320.73

Total Income 160601.23 139661.30

Operating Expenditure 150072.33 134207.70

Profit before Finance Cost, Depreciation & Amortization and Tax 10528.90 5453.59

Finance cost 1670.20 1977.28

Depreciation & Amortization 2202.03 2118.65

Profit before Taxes and Extraordinary items 6656.67 1357.67

Extraordinary Items 291.34 0.00

Profit before Taxes 6365.33 1357.67

Tax Expenses 1369.17 424.24

Net Profit for the Year 4996.16 933.42

The above are standalone figures, as the subsidiary companies are yet to commence business. Hence consolidated figures are not given.

PERFORMANCE OF THE COMPANY

Your Company, during the year under review earned revenue from operations (net) of Rs.160181.29 Lakhs representing an increase of 14.96% over the previous year. Your Company has registered a net profit of Rs.4996.16 Lakhs, as compared to previous year''s net profit of Rs.933.42 Lakhs.

The increase in the profitability is due to economies of scale, leveraging on a pan India presence of milk products leading to increased turnover and better margins, rationalization of logistics costs, elimination of wastages and effective cost control measures.

DIVIDEND

Your Directors have recommended a dividend of Rs.3 per Equity Share (30%) face value of Rs.10/- each for the Financial Year ended March 31, 2013, amounting to Rs.405.13 Lakhs (T346.28 Lakhs as dividend and Rs.58.85 lakhs tax on dividend). The dividend will be paid, subject to the approval of the members at the ensuing Annual General Meeting to those members whose names appear in the Register of Members as on record date.

The dividend payout for the year under review has been formulated in accordance with shareholders'' aspirations and the Company''s policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

SHARE CAPITAL

The Paid up Capital of the Company has increased from Rs.11,52,95,000/- (Rupees Eleven Crore Fifty Two Lakhs Ninty Five Thousand only) divided into 1,15,29,500 (One Crore Fifteen Lakh Twenty Nine Thousand Five Hundred ) Equity Shares of Rs.10/- each to. Rs.11,59,95,000/-(Rupees Eleven Crores Fifty Nine Lakhs Ninety Five Thousand only) divided into 1,15,99,500 (One Crore Fifteen Lakh Ninty Nine Thousand Five Hundred) Equity Shares of Rs.10/- each, due to allotment of 70,000 (Seventy Thousand only) Sweat Equity Shares during the year. The details of the above issue is as follows as per the provisions of Act

Number of shares issued to an employee of the company 70,000 (Seventy Thousand only) face value of Rs.10/- each to Dr. M. Sambasiva Rao, President of the Company

The pricing formula the pricing of the Share arrived as per the SEBI (Issue of Sweat equity shares) Regulations, 2002

The total number of shares arising as a result of issue of sweat equity shares 70,000 (Seventy Thousand only) face value of Rs.10/- each

Money realized or benefit accrued to the company from the issue of sweat equity shares

The share issued to Dr. M. Sambasiva Rao, Employee of the company designated as president for a consideration other than cash in recognition of value addition to the business of the Company and for creating the aspiration and motivation to achieve the further growth of the company.

Diluted earnings per share after issuance of sweat equity shares 43.28

Your Board of Directors had obtained a certificate from the M/s. Raju & Prasad Statutory Auditors of the Company regarding the issue of Sweat Equity shares in accordance with the SEBI (Issue of Sweat Equity Shares) Regulations 2002 & applicable provisions of the Companies Act 1956. The copy of the certificate is forming part of the Annual Report.

CHANGE OF NAME OF THE COMPANY

The Board of Directors had approved to change the name of the company from "Heritage Foods (India) Limited" to "Heritage Foods Limited" by deleting the word ''(India)'' in the existing name of the Company subject to approval of share holders and statutory Authorities. The Company has received the approval for name availability from Registrar of Companies, Andhra Pradesh, Hyderabad. The change of name of the Company as aforesaid does not change the legal status or constitution of the Company, nor does it affect any rights or obligations of the Company.

TRANSFER TO RESERVE

The Company proposes to transfer Rs.2500.00 Lakhs to General Reserve.

BUSINESS REVIEW

Dairy Business: Dairy industry is of crucial importance to the growth of Indian economy. Our country is the world''s largest milk producer, accounting for more than 17% of world''s total milk production. It is also the world''s largest consumer of dairy products, consuming almost 100% of its own milk production. Dairy products are a major source of nutritious food to millions of people in India and the only acceptable source of animal protein for large vegetarian segment of Indian population. Dairying has been considered as one of the activities aimed at alleviating the poverty and unemployment especially in the rain- fed and drought-prone rural regions. In India, about three-fourth of the population live in rural areas. The progress in this sector will result in a more balanced development of the rural economy, particularly among the landless, small or marginal farmers.

Considering the current scenario, the Milk demand is expected to reach 180MiHion MT by 2021-22.An Annual Incremental growth of 5-6million MT is estimated over the next 10 years to meet the growing demand of Milk in the country. The Industry is to witness a boom in the demand for milk in the next decade due to the following factors:

- Milk serves as an important source of protein for a sizeable portion of India''s large vegetarian population

- Rising income and aspiration levels further accelerated by impact of the 6th pay commission in urban India.

- Advent of urbanization leading to demand for greater variety of value added dairy products.

- Rising health consciousness driving product innovations in the global dairy market like pro-biotics and other fortified dairy products.

During the financial year 2012-13, Dairy Division of your Company has increased milk procurement capacity by 72000 LPD by commissioning of 21 units which includes Bulk Coolers/Mini Chilling Units and Franchisee units to increase the milk procurement and to maintain the quality. The Turnover has grown by 15.96% from Rs.109397.20 Lakhs to Rs.126862.15 Lakhs. The liquid milk Turnover grown by 12.08% and Value Added Products by 27.43%.

Retail Business: The Indian Retail Industry is the largest among all the industries, accounting for over 10% of the country''s GDP and around 8% of the employment. The Retail Industry in India has comeforth as one of the most dynamic and fast paced industries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break-even.

Recently the Government of India had allowed Foreign Direct Investment (FDI) upto 51% in multi brand retail and the impact of this policy is to be seen yet.

Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and Jewellery are widely accepted by the urban consumers.

The Retail Division of your Company has achieved a sale of Rs.32657.46 Lakhs during the year 2012-13. The Institutional sales segment achieved a sales of 2063 Lakhs and sales delivered by General Trade FMCG distribution business of Rs.1438 Lakhs. For comparable stores in both the years Retail business has grown by 6.51%. Average bill value has grown by 14% and also the new stores which are opened this year have delivered more throughput.

Your company entered in the trading & manufacturing (except Bread) of Bakery products. The business shall be nurtured during the current financial year. Bakery product sales remain same over the last financial year with the improvement in Dairy & Retail Channel. The direct sales channel de grew as it discontinued few kiosk models out of IT Parks and Fresh Outlets due to non viability.

Agri Division: Agriculture is the third largest sector of India''s economy after services and industry. It requires consistent monitoring, creating a conducive environment for farmers to increase their productivity and sell their products at competitive prices. There is still a lot of scope for increasing the productivity in India by adopting scientic methods of cultivation. India has emerged as the second largest producer of fruits and vegetables in the world besides to being the largest overseas exporter of cashews and spices.

Agri Division of your Company had achieved the turnover of Rs.3993.67 Lakhs and 26479 MT with respect to Value and Volume. There is an improvement in Volume of 62% over the financial year 2011-12.

EXEMPTION FROM ATTACHING THE BALANCE SHEETS, ETC. OF THE SUBSIDIARY COMPANIES WITH THE BALANCE SHEET OF THE COMPANY

The Ministry of Corporate Affairs ("MCA") has vide its Circular No. 02/2011 dated 8th February, 2011, granted a general exemption under Section 212(8) of the Companies Act, 1956 from attaching copies of the Balance Sheet, Statement of Profit and Loss, Directors'' Report and Auditors'' Report of its subsidiary companies with the Balance Sheet of the Company, subject to fulfillment of certain conditions.

In terms of the said circular, copies of the Balance Sheet, Statement of Profit and Loss, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies have not been attached to the Balance Sheet of the Company. The Company has presented Consolidated Financial Statements comprising Heritage Foods (India) Ltd and its subsidiaries duly audited by the Statutory Auditors of the Company. The Consolidated Financial Statements prepared by the Company are in compliance with the Accounting Standard AS-21 as prescribed by the Companies (Accounting Standards) Rules, 2006 and the Listing Agreement with the Stock Exchanges. The statement required under Section 212 of the Companies Act, 1956 is attached to the annual accounts of the Company. The annual accounts and related documents of all the Subsidiary Companies shall be made available for inspection to the shareholders of the Company and its subsidiaries at the Registered Office of the Company from Monday to Friday between 11.00 a.m. to 1.00 p.m. The Company will also make available physical copies of such documents upon request by any Member of the Company (or its subsidiaries) interested in obtaining the same and the same would also be made available on the website of the Company.

DIRECTORS

Sri D.Seetharamaiah, Chairman and Sri N.P Ramakrishna, Directors retire by rotation and being eligible offer themselves for reappointment at the ensuing Annual General Meeting.

The Board at its meeting held on May 30, 2013 on recommendation of Remuneration Committee and subject to the approval of the members at the ensuing Annual General Meeting had appointed Smt. N.Bhuvaneswari as Vice Chairperson & Managing Director of the Company, for a period of 5 (five) years with effect from 1st July, 2013.

During the year on the recommendation of Remuneration Committee, the Board of Directors had recommended to the Shareholders for the re-appointment and revision of remuneration of Sri. Nara Lokesh as Executive Director of the Company for a period of three years w.e.f 1st October, 2012. The Shareholders had approved the appointment through postal Ballot, the result of which was declared on 08th December, 2012.

Smt. N.Brahmani was appointed as an Additional Director of the Company w.e.f 22nd April 2013, to hold office upto date of the ensuing Annual General Meeting. Notice was received from members under Section 257 of the Companies Act, 1956 proposing her candidature as the Director of the Company. The Board at its meeting held on May 30, 2013, on recommendation of Remuneration Committee and subject to the approval of the members at the ensuing Annual General Meeting had appointed Smt. N.Brahmani as a Wholetime Director designated as an Executive Director of the Company, for a period of 5 (five) years with effect from 1st June, 2013.

Sri N.Lokesh has submitted his resignation from the office of Executive Director, but he will continue as non Executive Director in the Board of the Company, with the same terms as applicable to the Non-executive Directors of the Board. The Members of the Board place on record their deep sense of appreciation for services rendered by Sri N. Lokesh during his tenure as an Executive Director of the Company.

AUDITORS AND AUDITORS'' REPORT

Statutory Auditors: M/s. Raju & Prasad, Chartered Accountants, Hyderabad, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received letters from them to the effect that their reappointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of Section 226 of the said Act.

The Notes on Financial Statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.

Cost Auditor: M/s. Sagar & Associates, Cost Accountants, Hyderabad were appointed as the Company''s Cost Auditors subject to the consent of the Government of India to conduct an audit of Cost Accounting records relating to Packaged Food Products and for issuance of Cost Audit Report for the financial year 2013 - 2014.

Secretarial Auditor: As a measure of good corporate governance practice, the Board of Directors of the Company appointed Ms. Savita Jyoti, Practicing Company Secretary, to conduct Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2013, is provided in the Annual Report.

INTERNAL AUDIT & CONTROL SYSTEMS

Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks & balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control systems are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

These are supplemented by internal audit carried out by reputed firms of Chartered Accountants. Your Company has an Audit Committee consisting of four Directors; all of them are Non- Executive Independent Directors. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control system and suggest improvement(s) if any. The Company has a robust Management Information System which is an integral part of the control mechanism.

CORPORATE SOCIAL RESPONSIBILITY

The core theme of your company''s Corporate Social Responsibility policy (CSR Policy) is giving back to the society from which it draws its resources by extending a helping hand to the needy and the underprivileged. To implement the CSR policy effectively, the Company makes need based allocation of funds from its earnings through Heritage Farmers Welfare Trust (The Trust). The trust has chosen Health, Safe drinking water and Livelihoods as the thrust areas for discharging its Corporate Social Responsibility. Apart from the above thrust areas, your company strives to serve the society through various other measures like distribution of clothes and relief materials during natural calamities etc.

Your Company has been extending help to villages where the Company plants are located, as part of our Corporate Social Responsibility. Your Company had started through the trust, free veterinary services through mobile veterinary clinic with a fully equipped instruments and trained Doctors/Staff, and through audio visuals presentations. Your company organized several free health camps at various places at part of the CSR activities during the year under review.

INDUSTRIAL RELATIONS

Industrial relations in all the locations of your Company remained cordial and peaceful throughout the year.

OTHER EVENTS

The following unfortunate incidents happened after close of the Financial year before the date of the Board''s Report.

On Sunday the 07th April 2013 at the refrigeration section 2 (under trial commissioning) at Bayyavaram packing station, Vishakhapatnam district, fire broke due to an electro-mechanical failure, resulting in loss of life of three workers employed by M/s. Thermal Engineers and contractors, excuting the works and damaging the assets worth around Rs.30 Lakhs. There is proper insurance coverage for the assets. In addition to the financial assistance available under workmen''s compensation act covered by the contractor, the company has decided to extend an additional financial assistance of Rs.10 Lakhs per each family of the deceased. One willing member of each family will be provided regular employment in Company and further support towards education of the children will also be extended.

Another incident occurred at Pamarru Packing Station at Endagandi Village, East Godavari District on 06th of May 2013. Two Children brought their Cattle for grazing at open land of the company outside the compound wall, unfortunately these two children had got in to the pond adjacent to the open land for swimming and drowned. The Company had extended a financial assistance of Rs.5 Lakhs to each family of deceased persons.

Another incident occurred on 21st of May 2013 at Pamarru Packing station. One of the workers had attempted to unplug the electronic weighing machine without switching of the supply and died due to electric shock. The Company had extended a financial assistance of Rs.10 Lakhs to deceased family and offered regular employment to one of his family members.

There was no impact on the performance/operations of the Plants/Company. Your company has taken various preventive measures, such as safety training to the employees, warning boards at appropriate places, safety rules displayed at the prominent places of the plants.

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended from time to time, the names and other particulars of the employees required are annexed to the Directors'' Report. Having regard to the provisions of Section 219(1) (b) (iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

TRANSFER OF UN-CLAIMED DIVIDENDS

Pursuant to Section 205C (2) of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time, the unclaimed dividend of Rs.9,74,208 (Rupees Nine Lakh Seventy Four Thousand and Two Hundred and Eight Only) for the year 2004-05 was transferred to the Investor Education and Protection Fund during the year and the unclaimed dividend for the year 2005-06 is due for transfer to the fund.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public during the year under review.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS

An Annexure to this Report contains a detailed Management Discussion and Analysis, which, inter alia, covers the following:

- Over view of the Economy

- Industry structure and development

- Opportunities and Threats

- Risks and Concerns

- Internal control systems and their adequacy

- Discussion on financial and operational performance

- Segment-wise performance

CORPORATE GOVERNANCE

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

The Certificate from the Statutory Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49 of the lising Agreement is attached to this Report.

DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that,

- In the preparation of the annual accounts, applicable accounting standards have been followed along with proper explanation relating to material departures.

- They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year 2012-13 and of the profit for that period;

- They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

- They have prepared the annual accounts of the company on a going concern basis.

ACKNOWLEDGEMENT

The Board takes this opportunity to thank all its employees for their dedicated service and firm commitment to the goals of the Company. The Board also wishes to place on record its sincere appreciation for the wholehearted support received from shareholders, suppliers, farmers, customers, bankers and all other business associates, and from the neighborhood communities of the various locations.

Your Directors look forward to the future with confidence.

For and on behalf of the Board of Directors

Place: Hyderabad D. SEETHARAMAIAH

Date: 30th May 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting the 20th Annual Report of the Company together with the audited statement of accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS

The financial performance for the Financial Year 2011-12 is summarised in the following table:

(Rs. in Lakhs)

Particulars 2011-12 2010-11

Total Income from operations 139340.57 109608.61

Total Expenditure 136332.90 108020.76

Profit from operations before other Income, finance costs & exceptional 3007.67 1587.84 items

Other Income 320.73 480.66

Profit from ordinary activities after 1357.57 294.61

1357.57 294.61

Finance costs and exceptional items

Profit from ordinary activities before 1357.67 294.61

1357.67 294.61 Tax

Net Profit for the period 933.42 111.93

Basic and diluted EPS before 8.10 0.97 Extraordinary items for the period

The above figures are standalone figures, as the subsidiary companies, are yet to commence business; hence consolidated figures are not given.

DIVIDEND

Your Directors have recommended a dividend of Rs. 2 per Equity Share (20%) for the financial year ended March 31, 2012, amounting to Rs. 268.00 lakhs (Rs.. 230.59 Lakhs dividend Rs.. 37.41 lakhs tax on dividend). The dividend will be paid to members whose names appear in the Register of Members as on record date if, approved at the forth coming Annual General Meeting.

The dividend payout for the year under review has been formulated in accordance with shareholders' aspirations and the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company to be met by internal cash accruals.

RESULTS FROM OPERATIONS

The Financial Year 2011-12 was a challenging year. The global economy, continue to witness lower growth, resulting primarily from the Euro Zone debt crisis. India being one of the growth engines of the global economy was forced to tighten liquidity to tame rising inflation. Despite of these constraints and the challenging environment, the Company performed reasonably well and the highlights of the performance are as under:

- Revenue from operations increased by 27 % to Rs. 139340.57 lakhs

- Profit from operations before other income, finance costs & exceptional items increased by 89% to Rs. 30.07 Crores

- Profit from ordinary activities after finance costs and operational items increased by 361% to Rs. 13.57 Crores

- Net Profit increased by 733 % to Rs. 9.33 Crores BUSINESS REVIEW

Dairy Business: The Dairy Industry plays a vital role in the development of Agriculture Sector. Demand for milk and milk products is increasing day by day. Milk and milk products are second largest agricultural commodity produced in our country next to rice. Milk is the only agro-based commodity that offers immediate marketability and consistent revenue to the farmers. Considering the demand for milk and milk products, there is still a lot of scope for increasing the milk production in India by adopting scientific methods of breeding and nutrition.

During the financial year Dairy Division has increased milk handling capacity by 1,06,000 LPD by commissioning of 33 units which includes Bulk Coolers / Mini Chilling Units and Franchisees units to increase the milk procurement and to maintain the quality. The Turnover has grown by 21.2% from Rs. 860.60 Crores to Rs..1093.97 Crores. The liquid milk Turnover grown by 22.7% and Value Added Products by 60%. During the year Dairy Division has exported 25 Metric Tonnes of butter to Kingdom of Bahrain.

During the year the Dairy Division of the company has taken- up effective measures to reduce / minimize inward freight cost by altering the route distances or re-organizing milk routes and closure of unviable milk routes. Several steps were taken up to improve the clean milk production across all locations, reduced the operational costs as compared to previous year. The Kalluru Chilling Centre has been upgraded as a Packing Station and commenced packing operations w.e.f 27th June' 2011. To encourage the farmers for increasing their milk production, technical inputs program is being implemented across the location which includes animal health camps, supply of feed and fodder seeds, Vaccination etc.

During the financial year Heritage Institute of Milk Sciences (HIMS) first batch of 23 students have successfully completed their Dairymen course and were placed at various locations in Dairy Division. Second batch of 26 students have completed the theory classes. Admission process for the 3rd batch has been initiated in the months of April/May 2012.

Retail Business: Organized retail represents a large untapped market in India that is likely to see tremendous growth in the coming years. The Retail Industry in India is evolving as one of the most dynamic and fast growing industry. New entrants are bound to see large returns. However, they must adapt themselves to the unique state of retail in India where infrastructure and regulations provide little support. They must also understand the tastes of the Indian consumers, who have only recently started treating retail as a form of leisure.

Your Retail Division achieved a sale of Rs. 250.28 crores during the year 2011-12. The Institutional sales segment achieved a sales of 18.75 Crores and sales delivered by General Trade FMCG distribution business of Rs..13.31 crores. For comparable stores in both the years Retail busness has grown by 8%. On all inclusive store bases we have grown by 17%. Average bill value has grown

by 14% and also the new stores which are opened this year have delivered more throughput than previous year.

Private Label Strategy is built around providing exceptional value to customers. It was focused on optimising private Label sales mix, which witnessed tremendous customer acceptability across categories like instant food, snacks, beverages, culinary etc. During the year Retail Division has initiated several measures through private label to create new business comprising general trade, parlor etc., During the year the private label products reached to 149 distributors and 20649 Outlets.

Your company entered with the trading & manufacturing (except Bread) of Bakery products. The business shall be nurtured during the financial year. Bakery product Sales remains same over the last financial year with the improvement in Dairy & Retail Channel. The direct sales channel de grew in sales as it discontinued few kiosk models out of IT Parks and Fresh Outlets due to non viability.

Agri Division: The agriculture sector requires consistent monitoring, creating a conducive environment for farmers to increase their productivity and sell their products at competitive prices. There is still a lot of scope for increasing the productivity in India by adopting scientific methods of cultivation and farming.

Agri Division had achieved the turnover of Rs.. 33.04 Crores and 31749 MT with respect to Value & Volume. However, there is an improvement in Volume of 18% over the financial year10-11.

The present fill rate is 69% against the requirement of Retail Business & efforts are being made to deliver 75% supply across regions, Developing new sourcing bases in coordination with other retailers to meet the Retail requirement of off season & non local SKU's, Procurement of SKUs at competitive price through all available channels.

Agri Division has planned for extension of services i.e. Strengthened extension activities to the custom farmers and facilitating farmers to get crop loans, subsidies on power tiller and drip irrigation schemes, weekly training classes for field staff on Pests and disease control, trained the farmers and field staff on Soil treatment & Land Management and the importance of Crop Rotation and water conversation.

SUBSIDIARY COMPANIES

During the year under review the Company has two subsidiary Companies namely M/s. Heritage Foods Retail Limited and M/s. Heritage Conpro Limited. M/s SKIL Raigam Power (India) Limited ceased to be a subsidiary of the Company as per the provision of the Section 4 of the Companies Act, 1956. In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies need not be attached with the Balance Sheet of the Company. However the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The Company will make available the annual accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Clause 32 of the Listing Agreement with Stock Exchanges and in accordance with the Accounting Standard AS- 21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

ENVIRONMENT AND SAFETY

The Company is conscious of the importance of environmentally clean and safe operations. The Company's policy requires the conduct of all operations in such a manner so as to ensure safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources to the extent possible.

DIRECTORS

Dr. A. Appa Rao and Dr. V. Naga Raja Naidu Directors retire by rotation and being eligible; offer themselves for reappointment at the ensuing Annual General Meeting.

During the year on the recommendation of Remuneration Committee, the Board of Directors had recommended to the Shareholders for the re-appointment of Smt. Nara Bhuvaneswari as Vice Chairperson & Managing Director of the Company for a period of three years w.e.f 1st April, 2012. The Shareholders had approved the appointment through postal Ballot, the result of which was declared on 9th May, 2012.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors: M/s. Raju & Prasad, Chartered Accountants, Hyderabad Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received letters from them to the effect that their reappointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for re-appointment within the meaning of Section 226 of the said Act.

The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. Cost Auditor: As per the requirement of the provisons of Sec. 209(1 )(d) and Section 233B of the Companies Act, 1956 and pursuant to the Companies (Cost Accounting Records) Rules, 2011, your Company carries out an audit of Cost Accounting records relating to Packaged Food Products for the year 2011-12. Subject to the approval of the Central Government, the Company has appointed M/s. Sagar & Associates, Cost Accountants, as Cost Auditor of the Company for the Financial Year 2012-13.

Secretarial Auditor: As a measure of good corporate governance practice, the Board of Directors of the Company appointed Ms. Savita Jyothi, Practicing Company Secretary, to conduct Secretarial Audit. The Secretarial Audit Report for the financial year ended March 31, 2012, is provided in the Annual Report.

The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Securities Contracts (Regulation) Act, 1956, Depositories Act, 1996 and all the Regulations and Guidelines of the Securities and Exchange Board of India (SEBI) as applicable to the Company, including The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 and Listing Agreements with the Stock Exchanges.

CORPORATE SOCIAL RESPONSIBILITY

Your Company is committed to good corporate citizenship and makes constant efforts to build and nurture long lasting relationships with members of the society in general and the communities around its operating facilities in particular.

The core theme of this company's CSR Policy is giving back to the society from which it draws its resources by extending a helping hand to the needy and the underprivileged. To implement the CSR policy effectively, the company makes need based allocation of funds from its earnings through trust. The trust has chosen Health, Education and Livelihoods as the thrust areas for discharging its Corporate Social Responsibility. Apart from the above thrust areas, your company strives to serve the society through various other measures distribution of clothes and relief materials during natural calamities etc..

Your Company has started supporting small scale Industry Producers, through the Private Labels and encouraged them by marketing the products through Heritage Fresh and Heritage Parlours.

INTERNAL CONTROL SYSTEMS

Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks and balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account. The Internal control system are improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements.

There is a proper definition of roles and responsibilities across the organization to ensure information flow and monitoring. These are supplemented by internal audit carried out by reputed firms of Chartered Accountants. Your Company has an Audit Committee consisting of four Directors, all of them are independent directors. The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically appraised of the internal audit findings and corrective actions taken. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control system and suggests improvements, if any for strengthening them. The Company has a robust Management Information System which is an integral part of the control mechanism.

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are required to be annexed to the Directors' Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

DEPOSITORY SYSTEM

As the Shareholders are aware, your Company's Shares are tradable in electronic form and the Company has established connectivity with both the Depositories i.e. National Securities Depository Limited and Central Depository Services (India) Limited. In view of the advantages offered by the Depository System, the shareholders are requested to avail the facility of dematerialization of the Company's shares.

TRANSFER OF UN-CLAIMED DIVIDENDS

Pursuant to Section 205C (2) of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed dividend amount of Rs. 7,30,198 (Rupees Seven Lakhs Thirty Thousand and One Hundred and Ninety Eight Only) for the year 2003-04 was transferred to the Investor Education and Protection Fund during the year and the unclaimed dividend for the year 2004-05 is due for transfer to the fund.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public during the year.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis on the Industry structure, developments, opportunities, threats and review of operational performance and risk as required under Clause 49 of the Listing Agreement with the Stock Exchanges forms part of the Annual Report.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements as set out by the Securities and Exchange Board of India (SEBI). The Company has also implemented several best Corporate Governance practices.

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

The requisite Certificate from the Statutory Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49 is attached to this Report.

DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that,

- In the preparation of the annual accounts, applicable accounting standards have been followed along with proper explanation relating to material departures.

- They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the Financial year 2011-12 and of the profit for that period;

- They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

- They have prepared the annual accounts of the company on a going concern basis.

APPRECIATION

Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors, farmers, distributors, franchise and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the executives, staff and workers of the Company.

Your Directors look forward to the future with confidence.

For and on behalf of

HERITAGE FOODS (INDIA) LIMITED

Place: Hyderabad D. SEETHARAMAIAH

Date: 30th July, 2012 Chairman


Mar 31, 2011

Dear Members,

The Directors have pleasure in presenting the 19th Annual Report of the Company together with the audited statement of accounts for the year ended 31st March, 2011.

Your Directors believe that the Company remained sensitive to the need for effi cient and sustainable utilization of resources and following its basic approach to business to Create Shared Value, it continued to inspire happiness to its shareholders and the communities where it operates. Your Company continued to invest resources both in terms of talent and capital in the areas of water, Nutrition and rural development because these are also the areas where stakeholders' interest and the interests of society strongly intersect and where your company can create signifi cant value for both, in an inclusive manner.

FINANCIAL RESULTS

The financial performance for the Finanacial Year 2010-11 is summarised in the following table:

(Rs. in lakhs) Particulars 2010-11 2009-10

Net Sales / Income from 109608.61 90038.47 Operations

Add: Other Income 516.89 292.59

Total Income 110125.50 90331.06

Less: Total Expenditure 106199.89 85628.49

Profit before Interest, 3925.61 4702.57 Depreciation and Tax

Less: Interest 1596.57 1667.47

Depreciation & Amortisation 1993.98 1964.25

Profit before tax 335.06 1070.85

Less: Provision for current taxation 64.04 195.52

Less: Provision for deferred taxation 119.73 302.95

Profit/(loss) after tax 151.29 572.38

Less: Prior period expenses & 39.36 12.79 taxation

Profit after prior period expenses 111.93 559.59

Balance brought forward 267.59 –

Amount available for 379.52 559.59 appropriation

Appropriations

General Reserve 15.00 50.00

Dividend 138.35 207.53 Tax on Dividend 22.45 34.47

Balance carried to Balance Sheet 203.72 267.59

Total 379.52 559.59

The above figures are standalone figures, as three subsidiary companies are yet to commence business; hence consolidated figures are not given.

DIVIDEND

The Board of Directors are happy to recommend a dividend of Rs. 1.20 per Equity Share (12 percent) aggregating to Rs. 138.35 lakhs (excluding dividend tax) for the year 2010-11. The dividend, if approved at the forthcoming Annual General Meeting, will be paid to all eligible equity shareholders.

OPERATING RESULTS

During the year under review your Company registered a total income of Rs. 110125.50 lakhs as compared to previous years of Rs. 90331.06 lakhs. Your Company registered a Profit before interest depreciation and Tax (PBIDT) of Rs. 3925.61 lakhs as compared to previous year's PBIDT of Rs. 4702.57 lakhs.

OPERATIONS

Your Company is aware that the emerging and the increasing competition requires us to be even more efficient, as we go forward. The process of sales automation that was initiated earlier is now fully implemented and provides a robust and integrated distribution management solutions, that support our efficiency in primary and secondary sales.

We strive to improve the availability of our products with a clear focus on building distribution by going deep & wide across urban and rural geographies. This has resulted in improving our reach through more than 1000 franchisee outlets by end of this financial year. Your company is committed to continuous excellence in the operations. During the year the focus was on building additional capacity through the willing and able distributors who are long- term associates of your Company and provide the front line fi eld force the support and know-how to improve their capability.

Your Company has been growing at a healthy rate in recent years with continuing focus across its businesses. This market leadership position and India's positive economic environment coupled with a progressive population provides opportunities for growth. Your Company is therefore, accelerating investment in capacities to provide consumers a wide product range, from Popularly Positioned Products for low-income consumers to premium offerings. In the recent past some signifi cant investments have already been initiated. Your Directors are hopeful that the Government continues to support the Food Processing Sector so that your Company can continue to expand manufacturing, employment opportunities and to provide consumers with affordable products. In order to fi nance this accelerated capital expenditure trajectory your company would have a judicious mix of ‘internal Accruals' and ‘Debt'.

BUSINESS REVIEW

Dairy Business: The Dairy Industry plays a vital role in the development of Agriculture Sector. Milk is the only agro-based commodity that offers immediate marketability and consistent revenue to the farmers. Considering the demand for milk and milk products, there is still a lot of scope for increasing the milk production in India by adopting scientifi c methods of breeding and nutrition.

Your Company is well aware of the industrial scenario and being alert, focuses mainly on long term goals, steady and profi table development. Its strong brand coupled with the varied product portfolio enables it to meet adverse conditions confidently and overcome it. Your Company therefore remains confi dent of its long term business prospects and its ability to provide a fair return to the shareholders.

During the current financial year, your Company proposes to invest over Rs. 2549 lakhs for setting up of New units like Bulk coolers in various regions like Ongole, Tirupathi, Vizag, Hyderbad and Vijayawada and for setting up packing facilities at Kavali and Guraja in AP and at Nagarcoil, Tirunelveli District in Tamilnadu and other supporting facilities to improve the performance and effective utilisation of existing installed capacities of existing packing and processing plants.

Retail Business: Demand for organic food and processed food is increasing in conventional food supply stores because of development of private labels and increasing interest of large retailers to sell organic products. The organic food and beverages market is also expected to benefi t from subsidies, financial aids and R&D programs conducted by different government and non- government organizations such as FIBL (Switzerland), APEDA (India) and USDA (U.S.) to support conventional farmers to switch to organic farming.

Your company's plan to enhance the portfolio of the existing brands by bringing in more product categories and sub-categories under "Heritage" which draws 15% of its turnover from Private Label. Your Company plans to double the contributions from private labels in the next financial year.

FMCG Private Labels comprise about 5% of a store's sale. Your company had increased the percentage of its own brands in the stores, it also initiated to local advertising through hoardings and radio jingles.

Your company entered with the trading & manufacturing (except Bread) of Bakery products. The business shall be nurtured during the financial year. Your Company's Private Label Strategy is built around providing exceptional value to customers. It was focused on optimising private Label sales mix, which witnessed tremendous customer acceptability across categories like instant food, snacks, beverages and culinary etc.

Agri Division: The Agriculture sector recorded a growth of 0.2% of GDP inspite of worst ever monsoon. However, last year's drought impacted agricultural production.The agricultural sector requires consistent monitoring, creating a conducive environment for farmers to increase their productivity and sell their products at competitive prices. There is still a lot of scope for increasing the productivity in India by adopting scientific methods of cultivation and farming. Your Company has undertaken custom-farming activity directly with farmers for certain fruits, vegetables and expanded the cold storage facilities at its pack-houses.

SUBSIDIARY COMPANIES

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India the Balance Sheet,

Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. Financial information of the Subsidiary Companies, as required by the said exemption, is disclosed in the Annual Report.The audited annual accounts and related information of subsidiaries as applicable will be made available upon request.

In our earlier communication we had communicated that the company had entered in power sector through its Subsidiary Company. During the year the Company has completed the project viability report and appointed a consulting Company for preparing detailed project report. Once the detailed project report is received by the Company the process for financial closure will be commenced. The detailed project report is expected to be ready in the third quarter of 2011-12.

CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Clause 32 of the Listing Agreement with Stock Exchanges, applicable provisions of the Companies Act, 1956 and as per Accounting Standard (AS) 21, (AS) 17 and other applicable accounting standards, Consolidated Financial Statements and the Segment Reporting for the year ended on 31st March 2011 are provided in the Annual Report.

ENVIRONMENT

Your Company is sensitive to the fragility of non-renewable resources and continues to work towards creating and increasing awareness for environmental sustainability. Emphasis on conservation of resources is a priority within the factories. There is a continuous effort to minimise consumption of natural resources and reduce waste and omission, while maximising production.

At the same time wastewater discharge per tonne of produce is reduced by almost 60% as a result of the reusing of water and more efficient processes that reduce water need. The carbon footprint has been significantly reducing through focus on technologies that improve combustion and emphasis on utilising renewable fuels such as coconut shells and process waste to replace non-renewable fuels. In recognition of our efforts, the Ministry of Energy, Govt. of India, had awarded first prize on conservation of energy in Dairy Sector during the year under report. This is the second time we had received the award from Ministry of Energy, Govt. of India in a period of last three years.

SUPPLY CHAIN

The current volatile and complex economic environment requires efficient and cost effective processes. During the year 2010-11 your Company has ensured timely and efficient supply of materials to run the factories, accelerating the development of local suppliers. The distribution of finished goods to consumers across the country continues to be cost effective.

HUMAN RESOURCES

Your Company strongly believes that people are its assets and they are key to drive competitive advantage. Recognising the importance of Human Resources, all efforts have been put by your Company to ensure that best talent is recruited, trained and retained. During the year, your Company has put emphasis on performance driven culture and appropriate HR tools and processes have been deployed to ensure clear linkage with rewards.

TRADE RELATIONS

Your Company believes in fostering trust and mutual respect in employee relations. Your Company engaged employees with trust and respect by continuously transparently sharing information through various forums, dialogue and other communication means. These efforts have received excellent reciprocation from employees and in its Industrial Relations.

Your Company maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the Industry.

Your Company continued to receive co-operation and unstinted support from the distributors, retailers, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavor to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumer interest.

DIRECTORS

In accordance with Article 107 of the Articles of Association of your Company and provisions of Section 255, 256 and other applicable provisions, if any, of the Companies Act, 1956, Dr. N. R. Siva Swamy and Sri K. Kannan retire by rotation and being eligible for re-appointment. Dr. N.R. Siva Swamy offer himself for re-appointment but Sri. K. Kannan expressed his intention not to seek re-appointment. The vacancy in the Board caused by his resignation will not be filled up for the time being. The members of the Board place on record their deep sense of appreciation for services rendered by Sri K. Kannan during his tenure as member of the Board.

During the year on the recommendation of Remuneration Committee, the Board of Directors had recommended to the Shareholders for the re-appointment of Sri. N. Lokesh as Executive Director of the Company with remuneration payable of Rs. 3.35 (Rupees Three Lakhs Thirty Five Thousand Only) Lakhs Per month (Exclusive of all perquisites) for a period of three years w.e.f 1st July, 2011.

AUDITORS

M/s. Raju & Prasad, Chartered Accountants, Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The company has received letters from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.

The notes on accounts referred to in the Auditors' Report are self – explanatory and therefore do not call for any further comments.

CORPORATE SOCIAL RESPONSIBILITY

The strong 19-year plus legacy of your Company has seen evolve with much in Corporate Social Responsibility (CSR) as in business. The CSR philosophy of your Company is embedded in its commitment to all stakeholders, farmers, consumers, employees, the environment and the society. Your Company believes that it is this commitment, which will deliver competitive, profi table and sustainable growth.

Your Company has started supporting small scale Industry Producers, through the Private Labels and encouraged them by marketing the products through Heritage Fresh and Heritage Parlours. Sanitation, malnutrition, water scarcity and lack of health facilities are just some of the challenges that are facing the Indian villages. As a part of Corporate Social Responsibility your Company has initiated some of the activities such as sanitation, drinking water supply, health facilities and other community development activities through the Heritage Farmers Welfare Trust.

INTERNAL CONTROL SYSTEMS

Your Company has implemented SAP based ERP in Dairy business during the year, which not only adds to the controls, but has led to faster information, analysis and improved decision making.

Your Company has a well-defined and documented internal control system, which is adequately monitored. Checks and balances and control systems have been established to ensure that assets are safe guarded, utilized with proper authorization and recorded in the books of account.

There is a proper definition of roles and responsibilities across the organization to ensure information flow and monitoring. These are supplemented by internal audit carried out by Chartered Accountant firms. Your Company has an Audit Committee consisting of four Directors, all of whom are independent directors. The Committee reviews the internal audit reports, statutory audit reports, the quarterly and annual financial statements.

PERSONNEL

Your directors would like to place on record their deep sense of appreciation of the devoted services of the executives, staff and workers of your Company. In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended from time to time, the names and particulars of the employees are required to be set out in the Annexure to the Directors report. Having regard to the provisions of Section 219 (1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.

DEPOSITORY SYSTEM

As the Shareholders are aware, your Company's Shares are tradable in electronic form and the Company has established connectivity with both the Depositories i.e. National Securities Depository Limited and Central Depository Services (India) Limited. In view of the advantages offered by the Depository System, the shareholders are requested to avail the facility of dematerialization of the Company's shares.

TRANSFER OF UN-CLAIMED DIVIDEND

Pursuant to Section 205C (2) of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 as amended from time to time the unclaimed dividend amount of Rs. 9,39,728 (Rupees Nine Lakhs Thirty Nine Thousand Seven Hundred and Twenty Eight Only) for the year 2002-03 was transferred to the Investor Education and Protection Fund during the year and the unclaimed dividend for the year 2003-04 is due for transfer to the fund.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public during the year.

CONSERVATION OF ENERGY/TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information required under Section 217 (1) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 as amended from time to time is given in the Annexure forming part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis on the Industry structure, developments, opportunities, threats and review of operational performance and risk as required under Clause 49 of the Listing Agreement with the Stock Exchanges forms part of the Annual Report.

CORPORATE GOVERNANCE

In compliance with the requirements of Clause 49 of the Listing Agreement with Stock Exchanges, a separate report on Corporate Governance along with Auditors certificate on its compliance are given in the Annual Report.

SECRETARIAL AUDIT REPORT

In tune with your Company's belief in transparent Corporate Governance practices, Your Company has voluntarily subjected to Audit of all its secretarial records maintained under various statutes and rules, regulations, bye-laws etc. made there under.

The Secretarial Audit report, given by Ms. Savita Jyoti, Practicing Company Secretary, forms part of the Annual Report.

DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that,

- In the preparation of the annual accounts, applicable accounting standards have been followed.

- They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit for that period;

- They have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

- They have prepared the annual accounts of the company on a going concern basis.

APPRECIATION

Your Directors thank the Company's Bankers and the Financial Institutions for their help and co-operation extended throughout the year. Your Directors place on record their appreciation for the support and co-operation that the Company received from its stakeholders, customers and suppliers. Your Directors also record their appreciation for the excellent operational performance of the staff of the Company that contributed to the achievements of the Company. The Directors also acknowledge with much gratitude, the continued trust and confidence reposed by the franchises of the Company.

Your Directors look forward to the future with confidence.

For and on behalf of HERITAGE FOODS (INDIA) LIMITED

D. SEETHARAMAIAH Chairman

Place : Hyderabad Date : 28th July, 2011


Mar 31, 2010

The Directors have pleasure in presenting the 18th Annual Report of the Company together with the audited statement of accounts for the year ended 31st March 2010.

FINANCIAL RESULTS

The financial performance for the Finanacial year 2009-10 is summarised in the following table:

(Rupees in lakhs) Particulars 2009-10 2008-09 Net Sales / Income from Operations 90038.47 79602.86 Add:Other Income 292.59 322.56

Less:Total Expenditure 85628.49 79925.42 Profit before Interest,Depreciation and Tax 4702.57 342.86 Less: Interest 1667.47 1458.31 Depreciation & Amortisation 1964.25 1722.43 Profit before tax 1070.85 (2837.87) Less:Provision for current taxation 195.52 0.00 Less:Provision for deferred taxation 302.95 612.89 Less:Provision for Fringe Benefit Tax 0.00 45.02 Profit/(loss) after tax 572.38 (3495.77) Less:Prior period expenses & taxation 12.79 65.52 Profit after prior period expenses 559.59 (3561.29) Balance brought forward 0.00 1210.70 Amount available for appropriation 559.59 (2350.59) Appropriations General Reserve 50.00 0.00 Dividend 207.53 0.00 Tax on Dividend 34.47 0.00 Balance carried to Balance Sheet 267.59 (2350.59) Total 559.59 (2350.59)

The above figures are standalone figures, as two subsidiary companies which are yet to commence the business therefore consolidated figures are not given.

DIVIDEND

The Board of Directors are happy to recommend a dividend of Rs. 1.80 per Equity Share (18 percent) aggregating to Rs. 2.42 Crores (including dividend tax) for the year 2009-10. The dividend, if approved at the forthcoming Annual General Meeting, will be paid to all eligible equity shareholders on or after 30th July 2010(within the statutory time limit of 30 days). The dividend pay out for the year under review has been formulated in accordance with the Companys policy of striving to pay stable dividend linked to performance. Your Directors believe that this would increase shareholders value and eventually lead to a higher return and wealth creation to all the stakeholders.

OPERATING RESULTS

During the year under review your Company registered a turnover (Net Sales) of Rs 900.38 crores an increase of 13.11% over that of the previous year. Your Company registered a gross profit of Rs.47.03 Crores, as compared to previous years profit of Rs 3.43 Crores.

OPERATIONS

The financial year 2009-10 was significant for the company in terms of growth. The company has further strengthened its leadership position in the fields of Dairy, Retail and Agri Divisions. Last half of the year has witnessed a unexpected floods in the state of Andhra Pradesh, where your company has substantially operation with respect to Dairy and Retail Division and there is no material impact of the operations of the business of the company due to floods in the state of Andhra Pradesh during the year under review.

EQUITY SHARE CAPITAL

The Authorised Capital of the Company is Rs.20, 00,00,000 (Rupees Twenty Crores only) divided into 1,80,00,000 (One Crore Eighty Lakhs) Equity Shares of Rs.10 (Rupees Ten only) each and 20,00,000 (Twenty Lakhs) Preference Shares of Rs.10 (Rupees Ten only) each. 2,60,500 convertible warrants issued/ allotted to Smt.N.Bhuvanewari and 8,00,000 convertible warrants issued / allotted to Sri Nara Lokesh were forfeited during the year under review due to non-payment of balance amount within the time prescribed.

BUSINESS REVIEW

Dairy Business: During the year milk and various milk products were launched and new areas in the States of Maharastra, Kerala and Orissa have been covered. New facilities for making various products such as Cup curd, Doodh Peda, Paneer, Ice Cream, Ghee are added in the existing plants. Your Companys market share with respect to milk and milk products in South India increased during the year under review.

During the current financial year, your Company proposes to invest over Rs.22.95 Crores for setting up of supporting facilities to improve the performance and effective utilisation of existing installed capacities of packing and processing plants. To increase the revenue share from products, your Company is establishing / increasing the production capacities for value added products and planning to tie up for UHT packaging for Milk, Cream and Flavoured Milk.

The major thrust areas in the current financial year would be in the domestic Dairy Ingredients, Milk Products and Ice Cream apart from Milk. This will help your Company to diversify its product profile and enable it to maintain its leadership position.

Retail Business: The retail industry is going through difficult time in the country in general and with the global meltdown adversely affecting the Indian economy In response to the difficult external environment, your company focused on factors that are under its control viz: i) restricting the roll out of new stores to ensure alignment with business model ii) monitoring and control of inventory and iii) vigorous pursuit of various cost reduction initiatives undertaken

including closure / shifting of non performing and unviable stores, rationalising manpower in line with sales, rent/size reduction in stores, reduction in rent/surrender of office space, brokerage and restrictions on travel etc. All these efforts not only helped the company in minimizing the cash burden in the short term but has built a strong foundation to enable delivery of improved performance on sustainable basis in the future. Your company also taken the steps to take the advantages of Hygenic, good quality and modern bakery products demand to met at the retail stores and outside of the retail stores through bakery division of the company.

Private Label: Your Company is renowned for its high quality, private label offering. This is a key driver of footfalls at Heritage retail stores. A key focus is to further improve private label offering by introducing new unique products. Your company is committed to significantly increase the share of private labels of its total business and has initiated countrywide marketing and promotional efforts in this direction.

Brand enhancement: Your Company has the benefit of a strong 18 years old brand which is uniquely positioned in the minds of the South Indian consumer.

Agri Division: Your Company has undertaken custom farming activity directly with farmers for certain fruits, vegetables and established two pack houses and cold storage facilities, one is near Hyderabad and the other in Chittoor District of Andhra Pradesh.

SUBSIDIARY COMPANIES

Ministry of Corporate Affairs, Government of India has granted approval that the requirement to attach various documents in respect of subsidiary companies, as set out in sub-section (1) of Section 212 of the Companies Act, 1956, shall not apply to the Company. Accordingly, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. Financial information of the subsidiary companies, as required by the said approval, is disclosed in the Annual Report. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Clause 32 of the Listing Agreement with Stock Exchanges, applicable provisions of the Companies Act, 1956 and as per Accounting Standard (AS) 21, (AS) 17 and other applicable accounting standards, Consolidated Financial Statements and the Segment Reporting for the year ended on 31st March 2010 have been provided DIRECTORS

In accordance with Article 107 of the Articles of Association of your Company and provisions of Section 255, 256 and other applicable provisions, if any, of the Companies Act, 1956, Sri D.Seetharamaiah and Sri N.P.Ramakrishna retire by rotation and being eligible, offer themselves for re-appointment.

AUDITORS

M/s. Raju & Prasad, Chartered Accountants, Statutory Auditors of the company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The company has received letters from the Auditors to the effect that their re- appointment, if made, would be within the prescribed limits under section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said act.

The notes on accounts referred to in the Auditors Report are self - explanatory and therefore do not call for any further comments. CORPORATE SOCIAL RESPONSIBILITY

Your Company has co-ordinated various Community Development Activities during the year. Your Company has organized free eye camps at various places and has made arrangements for clean drinking water, Ready to eat food packets, clothes etc., in flood-affected areas in the states of Andhra Pradesh and Karnataka.

Your company created/ generated small ENTREPRENEURS through the Heritage Parlour where the huge employment potential was generated. Your company also helped the MARGINAL AND SMALL FARMERS cultivate in a modern Agri format by using latest technology and cost effective under the custom firming format. During the year your company also established a trust for the welfare of the farmers for providing the facilities such as education, health, drinking water and commodity development activities. INTERNAL CONTROL SYSTEMS

The company has established a good system of internal controls in all spheres of its activities. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding the assets from unauthorised uses (or losses), executing the operations with proper authorisation and ensuring compliance of corporate policies.

The company has also appointed Chartered Accountant firms across the business locations to oversee and carryout internal audit of the companys activities. The audit is based on the internal audit plan, which is reviewed each year in consultation with the Statutory Auditors and the Audit Committee.

The Audit committee met the Companys Statutory Auditors to ascertain inter alia, their views on the adequacy of the internal control systems in the company and keep the Board of Directors informed of its observations from time to time. INDUSTRIAL RELATIONS

Industrial relations in all the units and branches remained cordial and peaceful throughout the year.

DEPOSITORY SYSTEM

As the Shareholders are aware, your Companys Shares are tradable in electronic form and the Company has established connectivity with both the Depositories i.e. National Securities Depository Limited and Central Depository Services (India) Limited. In view of the advantages offered by the Depository System, the shareholders are requested to avail of the facility of dematerialization of the Companys shares.

CONSERVATION OF ENERGY/TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars required in accordance with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are furnished in the prescribed format as Annexure -1 to this report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Management Discussion and Analysis on the Industry structure, developments, opportunities, threats and review of operational performance and risk as required under clause 49 of the listing agreement with the stock exchanges, is given as a separate statement in the Annual Report.

TRANSFER OF UN-CLAIMED DIVIDENDS

Pursuant to section 205C (2) of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of Investors) Rules, 2001 the unclaimed dividend amount for the year 2001-02 was transferred to the Investor Education and Protection Fund during the year and the unclaimed dividend for the year 2002-03 is due for transfer in July 2010.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public

during the year.

CORPORATE GOVERNANCE

Our efforts are widely recognized by investors in India and overseas. For fiscal year 2010, the compliance report is provided in the Corporate Governance section of the Annual Report. The auditors certificate on compliance with the mandatory provisions of Corporate Governance is also provided in the Annual Report.

COMPLIANCE CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009

During the year, the Ministry of Corporate Affairs, Government of India, published the Corporate Governance Voluntary Guidelines 2009. These Guidelines have been published keeping in view the objective of encouraging the use of better practices through voluntary adoption, which not only serves as a benchmark for the corporate sector but also helps them in achieving the highest standard of corporate governance. These guidelines provide corporate India a framework to govern themselves voluntarily as per the highest standards of ethical and responsible conduct of business. The Ministry hopes that adoption of these guidelines will also translate into a much higher level of stakeholders confidence, which is crucial to ensure the long-term sustainability and value generation by business. The guidelines broadly focuses on areas such as Board of Directors, responsibilities of the Board, audit committee functions, roles and responsibilities, appointment of auditors, Compliance with Secretarial Standards and a mechanism for whistle blower support.

SECRETARIAL AUDIT REPORT

In tune with your Companys belief in transparent Corporate Governance practices, Our Company has voluntarily subjected to Audit of all its secretarial records maintained under various statutes and rules, regulations, bye-laws etc. made there under. The

Secretarial Audit report, given by Ms. Savita Jyoti, Practicing Company Secretary, forms part of the Annual Report.

PERSONNEL

Your directors would like to place on record their deep sense of appreciation of the devoted services of the executives, staff and workers of your Company. In terms of the provisions of section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are required to be set out in the Annexure to the Directors report. Having regard to the provisions of Section 219 (1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.

DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, it is hereby confirmed that,

(i) In the preparation of the annual accounts, applicable accounting standards have been followed.

(ii) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2010 and of the profit or loss of the Company for the year ended on that date;

(iii) The Directors have taken Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

(iv) The Directors have prepared the annual accounts of the company on a going concern basis.

ACKNOWLEDGEMENTS

Your Directors thank the Companys Bankers and the Financial Institutions for their help and co-operation extended throughout the year. Your Directors place on record their appreciation for the support and co-operation that the Company received from its stakeholders, customers and suppliers. Your Directors also record their appreciation for the excellent operational performance of the staff of the Company that contributed to the achievements of the Company. The Directors also acknowledge with much gratitude, the continued trust and confidence reposed by the franchisees of the Company.

For and on behalf of HERITAGE FOODS (INDIA) LIMITED Place : Hyderabad D. SEETHARAMAIAH Date :27 May, 2010 Chairman

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