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Directors Report of Prabhat Dairy Ltd.

Mar 31, 2018

The Directors are pleased to present the Twentieth Annual Report on the business and operations of the Company together with the Audited Financial Statements of your Company for the year ended March 31, 2018.

1. Corporate Overview

Prabhat Dairy Limited ("Your Company" or "The Company") is a leading and consistently growing Indian Dairy Company which has started its identity and continued having a strong long term association with leading institutional clientele and now since last four years making its niche under its own brand with consumers. Prabhat has its manufacturing facilities at Shrirampur, Dist, Ahmednagar and at Vashi, Navi Mumbai and corporate office at Vashi, Navi Mumbai.

2. Financial Results (Standalone and Consolidated)

A summary of the Company''s Financial Results for the Financial Year 2017-18 is as under:

(Amount - Rs.In Lakhs)

Particulars	Standalone		Consolidated
	March 31, 2018	March 31, 2017	March 31, 2018	March 31, 2017
Revenue from Operations	144,191.18	113,115.89	155,401.23	140,986.50
Other Income	883.48	1,711.59	264.90	126.46
Total Income	145,074.66	114,827.48	155,666.13	141,112.96
Total Expenses	143,006.49	111,819.15	150,299.94	135,571.27
EBITDA	5,630.15	6,080.35	13,616.28	12,805.42
Depreciation and Amortisation	1,903.15	1,604.83	4,907.15	4,320.22
EBIT	3,727.00	4,475.52	8,709.13	8,485.20
Interest and Finance Cost	1,658.83	1,467.19	3,342.94	2,943.51
EBT (before exceptional item)	2,068.17	3,008.33	5366.19	5,541.69
Exceptional item - VAT refund under mega status benefit to Subsidiary	-	-	-	1,891.47
PBT	2,068.17	3,008.33	5,366.19	7,433.16
Taxes	177.77	278.33	638.67	2,738.90
Profit / (Loss) after Tax	1890.40	2,730.00	4,727.52	4,694.26
Other Comprehensive Income / (Loss), net of tax	4.03	20.04	8.77	33.84
Total Comprehensive Income / (Loss)	1,894.43	2,750.04	4,736.29	4,728.10
Earnings per Share (in Rs.)	1.94	2.82	4.85	4.84

3. Financial Performance

Your Company reported revenue from operations on a standalone basis of Rs.144,191.18 Lakhs compared with Rs.113,115.89 Lakhs in the previous year thereby registering a growth of 27.47%. The gross margin at standalone basis remained at 12.12% during the year under review. The operating profit stood at Rs.3727.00 Lakhs as against Rs.4,475.52 Lakhs in the previous year. The net profit stood at Rs.1,890.40 Lakhs against Rs.2,730.00 Lakhs reported in the previous year.

The consolidated revenue from operations for FY 2018 was Rs.155,401.23 Lakhs (previous year: Rs.140,986.50 Lakhs) registering growth of 10.22%. The consolidated gross margin remained at 22.01% as against 19.44% in the previous year thereby recording a growth of about 25% which is on account of underlying volume growth in the business and the Company is getting the benefit of operating leverage. The consolidated operating profit stood at Rs.8,709.13 Lakhs (Previous year: Rs.8,485.20 Lakhs). The consolidated profit after tax stood at Rs.4,727.52 Lakhs (previous year: Rs.4,694.26 Lakhs in which an exceptional income of Rs.1,891.47 Lakhs is included). The consolidated cash profit stood at Rs.9,643.44 Lakhs (previous year: Rs.9,048.32 Lakhs). The consolidated networth stood at Rs.73,085.37 Lakhs (Previous year: Rs.68,821.60 Lakhs). The outstanding loans have reduced substantially to Rs.20,734.88 Lakhs as on March 31, 2018 as compared to Rs.35,829.95 Lakhs as on March 31, 2017 and thereby the debt equity ratio of the company has improved substantially. The fixed assets turnover ratio has been improved to 3.36 from 3.19 times in the previous year. The earnings per share of Rs.4.85 is almost equivalent to previous year of Rs.4.84. The cash earnings per share is Rs.9.87 (Previous Year : Rs.9.26). During the year the consolidated net cash flows from operating activities was Rs.21,805.42 Lakhs (Previous Year: Rs.1,995.83 Lakhs). During the year under review, no exceptional item in the form of income from mega project is recorded as done in previous year.

During the year under review, though there has been a remarkable volume growth in the business, the same has not been reflected in the earnings since the price growth was neutral to negative. The volume of cheese business as stepped up during the year. In addition to cheese, the Company has seen growth in curd sales. The Company has also outsourced manufacturing of some of its products like shrikhand, ice-cream, etc. The Company has also witnessed a significant jump in quantity of milk sales, however due to reduction in milk prices, the said quantity increase is not getting reflected by way of increase in revenues. The Company has also seen increase in sale of WMP with better realization. The Company is still selling ice-cream as a pilot project. The Company has started tetra pack which comes under UHT. Going ahead, the Company''s product bandwidth is milk, cheese and curd while also keeping the basket of other products. The Company is confident that its strategy of product mix is going well which is evident from growth on volume of business. The Company is continuing its efforts to bring operational efficiencies so as to achieve more realisations. During the year, cash flows from operations have increased significantly on account of low tax burden which is due to deferred tax assets and earlier the Company has made huge provisions for taxation which the management has now decided to write back. During the year, the Company has invested only in enhancement of procurement network i.e. BMCs, invested a small amount for packaging machines, enhancement of capacity of milk powder plant and some for utilities. The Company has been sanctioned a cold chain subsidy of Rs.10 Crore by the Ministry of Food Processing Industries under cold chain scheme out of which the Company has already received Rs.2.50 Crore.

The Company is also focusing on changing its customer profile by way of either reducing or keeping stagnant its business with wholesale customers and strengthening its corporate / institutional clientele. The Company is also making its best efforts to reduce the working capital cycle by reducing the credit period to customers.

In a nutshell, the year showed signs of possible recovery in the global economy as well as an uptick in capacity utilisation in the domestic sector. Your Company also registered significant growth in volumes inspite of low prices during some part of the year.

4. Material Changes and Commitments

There have been no material changes and commitments affecting the financial position of the Company, which have accrued between the end of the financial year and the date of this Report.

5. Dividend And Reserves

I n order to conserve the resources for business of the Company, your Directors do not recommend any dividend for the year 2017-18 nor do they propose for transfer of any amount towards reserves.

6. Share Capital

The paid up equity share capital as at March 31, 2018 stood at Rs.9767.61 Lakhs. During the year under review, there was no public, rights, preferential or bonus issue. Also, the Company has not issued any shares with differential voting rights nor has granted any stock options or sweat equity. As on March 31, 2018, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

7. Finance and Accounts

During the year under review, the rating agency ICRA maintained the "A " rating for the Company''s long term and short term borrowings.

As mandated by the Ministry of Corporate Affairs, the financial statements for the year ended March 31, 2018 has been prepared in accordance with the Indian Accounting Standards (IND AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014. The estimates and judgements relating to the Financial Statements are made on a prudent basis, so as to reflect in a true and fair manner, the form and substance of transactions and reasonably present the Company''s state of affairs, profits and cash flows for the year ended March 31, 2018.

8. Performance of Subsidiary Companies

As on March 31, 2018, your Company has the following 2 subsidiaries:

1. Cheese Land Agro (India) Pvt. Ltd.

2. Sunfresh Agro Industries Pvt. Ltd. (material subsidiary)

The Company does not have any associate or joint venture company.

There has not been any material change in the nature of the business of the subsidiaries. As required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013, the Consolidated Financial Statements of your Company and all its subsidiaries are provided in this Annual Report. The Consolidated Financial Statements have been prepared in accordance with Indian Accounting Standard (Ind AS) 110 notified under section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 and shown the financial resources, assets, liabilities, income, profits and other details of your Company and its subsidiaries as a single entity. Since both the subsidiaries are wholly owned subsidiaries, there has been no minority interest. The particulars of subsidiaries as on March 31, 2018 have been included in Form MGT - 9 which is annexed to this Report as Annexure - 1. The Consolidated Financial Statements of the Company are prepared in accordance with the relevant Indian Accounting Standards issued by the Institute of Chartered Accountants of India and forms an integral part of this Report. The performance and financial position of subsidiaries included in the Consolidated Financial Statements is provided in accordance with the provisions of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014 as a separate statement annexed to the Notes on Accounts containing the salient features of the financial statements of the Company''s subsidiaries in Form AOC -1 and forms an integral part of this Report.

The Company will make available separate audited financial statements of the subsidiaries to any member upon request. These documents / details are available on the Company''s website at www.prabhatdairy.in and will also be available for inspection by any Member of the Company at its registered office and corporate office.

The policy for determining material subsidiaries formulated by the Board of Directors is disclosed on the Company''s website and is accessible on http:// www.prabhatdairy.in/InvestorDesk.

9. Management Discussion and Analysis Report

The Management Discussion and Analysis Report on the operations of the Company, as required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is provided in a separate section and forms an integral part of this Report.

10. Corporate Governance

As per Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on corporate governance practices followed by the Company, together with a certificate from the Company''s Auditors confirming compliance forms an integral part of this Report.

11. Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT-9, as required under Section 92 of the Companies Act, 2013, is annexed as Annexure - 1 and forms an integral part of this Report.

12. Directors

I n accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company''s Articles of Association, Mr. Vivek S. Nirmal, Joint Managing Director retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his reappointment for the consideration of the Members of the Company at the ensuing Annual General Meeting. Brief profile of Mr. Vivek S. Nirmal has been given in the Notice convening the 20th Annual General Meeting.

Mr. Haresh Shah has resigned as an Independent Director of the Company on account of his other professional commitments and business exigencies effective from May 14, 2018. The Board places on record its sincere appreciation for the services rendered by Mr. Haresh Shah during his tenure as an Independent Director of the Company.

Your Board based on the recommendation of Nomination and Remuneration Committee, has coopted Mr. Anoop Krishna as an Additional Independent Director of the Company effective from July 30, 2018 in accordance with the provisions of section 161 and 149 of the Companies Act, 2013. Mr. Anoop Krishna holds office till the date of the ensuing Annual General Meeting pursuant to the provisions of section 161 of the Companies Act, 2013. The Company has received a notice under section 160 of the Companies Act, 2013 from a member of the Company proposing the candidature of Mr. Anoop Krishna for confirmation/ appointment as an Independent Director of the Company in the ensuing Annual General Meeting. Your Board recommends to appoint/confirm the appointment of Mr. Anoop Krishna as an Independent Director in the ensuing Annual General Meeting.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company has formulated a policy on ''Familiarisation Programme for Independent Directors'' which is available on the Company''s website at www. prabhatdairy.in/InvestorDesk.

13. Number of Meetings of the Board

A calendar of meetings is prepared and circulated in advance to the Directors. The details of the number of meetings of the Board of Directors held during the financial year 2017-18 forms part of the Corporate Governance Report.

14. Secretarial Standards

The Institute of Company Secretaries of India had revised the Secretarial Standards on meetings of the Board of Directors (SS-1) and Secretarial Standards on general meetings (SS-2) with effect from October 1, 2017. The Company has complied with the applicable Secretarial Standards.

15. Key Managerial Personnel

The following are the Key Managerial Personnel of the Company:

(a) Mr. Sarangdhar R. Nirmal, Chairman and Managing Director

(b) Mr. Vivek S. Nirmal, Joint Managing Director

(d) Ms. Priya Nagmoti, Company Secretary

16. Committees of the Board

The Board of Directors has the following Committees:

(a) Audit Committee

(b) Nomination and Remuneration Committee

(d) Corporate Social Responsibility Committee

The details of the Committees along with their composition, number of meetings held and attendance at the meetings are provided in the Corporate Governance Report.

17. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a structured questionnaire was prepared after taking into consideration the various aspects of the Board''s functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance. The performance evaluation of the Independent Directors was completed during the year under review. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors and Non-Executive Directors. The Board of Directors expressed their satisfaction with the evaluation process.

18. Particulars of Loans, Guarantees or Investments by the Company

During the year under review, on September 4, 2017, the Company has subscribed to 11,553,980 (One Crore Fifteen Lacs Fifty Three Thousand Nine Hundred and Eighty) 0.01% Non-Cumulative Redeemable Preference Shares of Rs.10/- each of Sunfresh Agro Industries Pvt. Ltd., a wholly owned step down subsidiary of the Company at a price of Rs.100/- (Rupees One Hundred only) per share. The said shares are redeemable at the end of fifth year or at the end of seventh year at the option of the Company at a redemption price of Rs.137/-(Rupees One Hundred and Thirty Seven only) per share or Rs.155/- (Rupees One Hundred and Fifty Five only) per share respectively.

On December 22, 2017, the Company has subscribed to 29,00,000 Equity shares of Rs.10/- each at a price of Rs.112/- per share issued on a rights basis by Cheese Land Agro (India) Pvt. Ltd., a wholly owned subsidiary of the Company.

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to Financial Statements.

19. Vigil Mechanism / Whistle Blower Policy

The Company has a vigil mechanism named ''Whistle Blower Policy'' to deal with instances of fraud, mismanagement, etc. and provides an opportunity to the employees and Directors of the Company to report genuine concerns or grievances for redressal. The Whistle Blower Policy has been posted on the website of the Company viz. www.prabhatdairy.in/Investor Desk. During the year under review no complaint was received by your company under the vigil mechanism.

20. Nomination and Remuneration Policy

The Board of Directors 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 details of this policy have been posted on the website of the Company viz. www.prabhatdairy. in/InvestorDesk.

21. Related Party Transactions

All transactions entered with Related Parties for the year under review were on arm''s length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 and the Rules made thereunder are not attracted. Further, there are no material related party transactions during the year under review with the Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All related party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. All Related Party Transactions are placed before the Audit Committee for approval. Prior Omnibus approval of the Audit Committee was obtained on a yearly basis for transactions which were of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all Related Party Transactions are placed before the Audit Committee for review on a quarterly basis.

The particulars of Related Party Transactions in prescribed Form AOC - 2 are annexed as Annexure - 7 and forms an integral part of this Report.

The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company viz. www.prabhatdairy.in/ InvestorDesk. None of the Directors has any pecuniary relationship or transactions vis-a-vis the Company except remuneration and sitting fees.

22. Significant and Material Orders Passed by the Regulators or Courts

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

23. Directors'' Responsibility Statement

To the best of our knowledge and belief and according to the information and explanations obtained by us in normal course of our discharge of duties, your Directors make the following statement in terms of Section 134(3)(c) of the Companies Act, 2013:

(i) that in the preparation of the Annual Accounts for the year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) the directors had 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 March 31, 2018 and of the profit of the Company for the year ended on that date;

(iii) that the Directors 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;

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

(v) that the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls ate adequate and were operating effectively; and

(vi) that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

24. Auditors

(a) Statutory Auditor

M/s. MSKA & Associates (formerly known as MZSK & Associates), Chartered Accountants (ICAI Firm Registration No. 105047W) are the statutory auditors of the Company and they have been appointed to hold office till the conclusion of the Twenty Fourth Annual General Meeting of the Company. Their appointment as the statutory auditors will be ratified at the ensuing Annual General Meeting pursuant to the provisions of Section 139 of the Companies Act, 2013, and Rules made thereunder.

As required under the Listing Regulations, M/s. MSKA & Associates (formerly known as MZSK & Associates), the auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

There is no audit qualification, reservation or adverse remark in the Auditors'' Report on the financial statements of the Company for the year under review.

(b) Cost Auditor

As per the requirement of Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Company has been carrying out audit of cost records relating to various milk products which are subject to cost audit every year.

The Board of Directors, on the recommendation of the Audit Committee, has appointed M/s. JNP & Associates, Cost Accountants (Firm Registration No. 000572) as Cost Auditor to audit the cost records of the Company for the Financial Year 2018-19. As required under the Companies Act, 2013, a resolution seeking members'' approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting for their ratification.

(c) Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made thereunder, the Board has appointed M/s. Shravan A. Gupta & Associates, a firm of Company Secretaries in Practice (ICSI C.P. No. 9990), to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed as Annexure - 2 and forms an integral part of this Report.

There is no secretarial audit qualification for the year under review.

25. Internal Control Systems and their Adequacy

Your Company has an effective internal control and risk mitigation system, which is constantly assessed and strengthened with new/revised standard operating procedures. The Company''s internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to M/s. Kirtane & Pandit LLP, a reputed firm of Chartered Accountants. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism.

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. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Audit Committee.

26. Risk Management

Risk management is embedded in your Company''s operating framework. Your Company believes that managing risks helps in maximizing returns. The Company''s approach to addressing business risks is comprehensive and includes periodic review of such risks and a framework for mitigating controls and reporting mechanism of such risks. The risk management framework is reviewed periodically by the Board and the Audit Committee. Some of the risks that the Company is exposed to are:

Financial risks

Given the interest rate fluctuations, the Company has adopted a prudent and conservative risk mitigation strategy to minimize financial, liquidity and interest cost risks.

Credit risks

There may be situations in any business where the Company may not be able to make recoveries from its customers and in order to mitigate these risks the Company is adopts a judicious process of evaluating a customer before giving credit.

Commodity price risks

The Company is exposed to the risk of price fluctuations of raw materials as well as finished goods. The Company, proactively manages these risks through cost plus contracts, inventory management and proactive vendor development practices. The Company''s reputation for quality, product differentiation and service, coupled with the existence of long term relationship with its institutional customers mitigates the impact of price risk on finished goods.

Quality Risks

The products manufactured by the Company are perishable in nature and requires proper storage and distribution network, otherwise the risks of contamination is there. The Company has taken effective steps by way of monitoring quality right from receiving raw materials till production and dispatch and also provides required training at distribution centres to maintain product quality intact. The Company has also taken product liability insurance to partly cover these risks.

Regulatory risks

The Company is exposed to risks attached to various statutes, laws and regulations. The Company is mitigating these risks through regular review of legal compliances carried out through internal as well as external compliance audits.

Technology Risks

The Company is exposed to risks associated with adoption of technology. The Company is mitigating these risks through regular review of latest technologies available in the market and globally and accordingly take the decision without any delay.

Human resource risks

Retaining the existing talent pool and attracting new talent are major risks. The Company has initiated various measures including rolling out strategic talent management system, training and integration of learning and development activities. The Company also identify, nurture and groom managerial talent within the Group to prepare them for future business leadership.

Strategic risks

Emerging businesses, new product development, geographical expansion, etc. are normal strategic risks faced by the Company. However, the Company has well defined processes and procedures for obtaining approvals for investments in new products, entering new markets, etc.

27. Corporate Social Responsibility (CSR)

As a part of its initiative under the "Corporate Social Responsibility" (CSR) drive, the Company has undertaken projects in the areas of animal welfare, rural development projects, self sustaining livelihood projects, women empowerment, enhancing vocational skills, etc. The Company''s key objective is to make a difference to the lives of the underprivileged and help bring them to a self - sustaining level. These projects are largely in accordance with Schedule VII of the Companies Act, 2013 and the Company''s CSR policy.

The Report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure - 3 and forms an integral part of this Report.

The details of the CSR Committee and CSR Policy are available on the Company''s website at www. prabhatdairy.in/InvestorDesk.

28. Environment and Safety

The Company is conscious of the importance of environmentally clean and safe operations. The Company''s policy requires conduct of operations in such a manner so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources.

29. Anti-Sexual Harassment Policy

The 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. All employees (permanent, contractual, temporary, trainees) are covered under this policy. To build awareness in this area, the Company has been carrying out induction/ refresher programmes in the organisation on a periodical basis.

An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

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

- Number of complaints received - Nil

- Number of complaints disposed off - N.A.

30. Human Resources and Industrial Relations

The Company takes pride in the commitment, competence and dedication of its employees in all areas of the business. The 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 (KRAs) are in place for senior management staff. The Company is committed to nurturing, enhancing and retaining its talent through superior learning and organizational development. This is a part of our Corporate HR function and is a critical pillar to support the organization''s growth and its sustainability in the long run.

31. Statutory Information

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as Annexure - 4 and forms an integral part of this Report.

The Disclosure required under Section 197(12) of the Companies Act, 2013 read with the Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure - 5 and forms an integral part of this Report. A statement comprising the names of top 10 employees in terms of remuneration drawn and every person employed throughout the year, who were in receipt of remuneration in terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure - 6 and forms an integral part of this report. The above Annexure 6 is not being sent along with this annual report to the members of the Company in line with the provision of Section 136 of the Companies Act, 2013. Members who are interested in obtaining these particulars may write to the Company Secretary at the Registered Office of the Company. The aforesaid Annexure is also available for inspection by Members at the Registered Office of the Company, 21 days before and upto the date of the ensuing Annual General Meeting during the business hours on working days. None of the employees listed in the said Annexure - 6 is a relative of any Director of the Company. None of the employees hold (by himself or along with his spouse and dependent children) more than two percent of the equity shares of the Company.

The Company had no unpaid / unclaimed deposits as on March 31, 2018. The Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014 during the year under review.

32. Business Responsibility Reporting

The Business Responsibility Report as required by Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is not applicable to your Company for the financial year 2017-18.

33. Cautionary Statement

Statements in this Directors'' Report and Management Discussion and Analysis describing the Company''s objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company''s operations include raw material availability and its prices, cyclical demand and pricing in the Company''s principal markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

34. Appreciation

Your Directors wish to place on record their appreciation, for the value added contributions made by the employees at all levels but for whose hard work, and support, your Company''s achievements would not have been possible. Your Directors also wish to place on record their appreciation for the continued support extended by the Company''s customers, dealers, agents, suppliers, investors, bankers and government and local authorities.

Your Directors would also like to thank all the shareholders for continuing to repose faith in the Company and its future.

For and on behalf of the Board

sd/-

Sarangdhar R. Nirmal

Place: Navi Mumbai Chairman and Managing Director

Date 10/08/2018 DIN: 00035234

Mar 31, 2017

The Directors have pleasure in presenting the Nineteenth Annual Report on the business and operations of your Prabhat Dairy Limited (''the Company'') together with the audited financial statements (Standalone and Consolidated) for the financial year ended March 31, 2017. Financial Highlights (Standalone & Consolidated)

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014. The financial statements for the financial year ended March 31, 2017 are the Company''s first Ind AS compliant annual financial statements with comparative figures for the year ended March 31, 2016 also under Ind AS. The date of transition is April 1, 2015. The disclosure and effects of first time adoption of Ind AS are detailed in Note 47 of the standalone financial statements and Note 46 of the consolidated financial statements.

The standalone and consolidated financial highlights of your Company for the financial year ended March 31, 2017 are summarized as follows:

(Amount - Rs. In Lakhs)

Particulars	Standalone		Consolidated
	March 31, 2017	March 31, 2016	March 31, 2017	March 31, 2016
Revenue from Operations	113,115.89	100,007.79	140,986.50	116,769.92
Other Income	1,711.59	1,788.83	126.46	146.56
Total Income	114,82748	101,796.62	141,112.96	116,916.48
Total Expenses	111,819.15	98,76047	135,571.27	113,254.08
EBITDA	6,080.35	6,359.46	12,805.42	11,671.27
Depreciation and Amortisation	1,604.83	1,523.19	4,320.22	3,956.70
EBIT	4,475.52	4,836.27	8,485.20	7,714.57
Interest and Finance Cost	1,467.19	1,800.12	2,943.51	4,052.17
EBT (before exceptional item)	3,008.33	3,036.15	5,541.69	3,66240
Exceptional item - VAT refund under mega status benefit to Subsidiary	-	-	1,89147	-
PBT	3,008.33	3,036.15	7,433.16	3,66240
Taxes	278.33	34143	2,738.90	1,34742
Profit / (Loss) after Tax	2,730.00	2,694.72	4,694.26	2,314.98
Other Comprehensive Income/(Loss), net of tax	20.04	13.73	33.84	4.97
Total Comprehensive Income / (Loss)	2,750.04	2,708.45	4,728.10	2,319.95

Operations and Financial Review (Consolidated)

The Indian Dairy industry witnessed an unprecedented disruption on account of shortage of rainfall during the previous two years whose resulting effect continued in the financial year under review and increase in prices for dairy products all over the world. Consequently, milk procurement was a big challenge. All these factors combined together have led to decline in operating margins during the year, however your Company smoothly withstood the unprecedented stressed situation with the effect of a slight decline of only 0.91% in its operating margins. The average milk procurement price was Rs.26.65 per litre during the year vis a vis the average price of Rs.20.76 during the previous year 2015-16 i.e. an increase of about 28%. To combat the effect of shortage of milk and increasing milk prices, your Company has got the milk converted at third party plants / locations which inter alia has increased the costs of goods sold.

Your Company has achieved the consolidated total gross revenue of Rs.141,112.96 Lakhs in the current financial year as compared to Rs.116,91648 Lakhs in the previous financial year 2015-16, an increase of 20.70%. The consolidated gross margin increased by 14.32% during the year. Consolidated Earnings before interest (finance costs), tax, depreciation and amortization (EBITDA) is Rs.12,80542 Lakhs as compared to Rs.11,671.27 Lakhs in the previous year registering a growth of 9.72%. Consolidated Profit before tax (before exceptional item) increased to Rs.5,541 Lakhs as compared to Rs.3,66240 Lakhs in the previous year, a remarkable increase of 51.31%. Consolidated Profit after tax increased to Rs.4,694.26 Lakhs in the current financial year as compared to Rs.2,314.98 Lakhs in the previous year, an increase of 102.78% .The major contributing factor for the change is increase in the sales volume, improvements in the internal operational efficiencies and efficient management of funds including restructuring of funding facilities at lower cost and receipt of claim in the nature of grants in Sunfresh Agro Industries Pvt. Ltd., a step down wholly owned subsidiary of the Company under the Package Scheme of Incentives, 2007 from the Government of Maharashtra. The consolidated earnings per share of your Company has increased from Rs.2.70 to H4.84 as on March 31, 2017.

During the year under review, the Company at consolidated level has recorded an income of Rs.1,89147 Lakhs as exceptional item which is the accrued income on account of the claim amount of grant to which Sunfresh Agro Industries Pvt. Ltd., step down wholly owned subsidiary of the Company is entitled to receive relating to previous years i.e. fiscal 2015 and 2016 under its mega status project under Package Scheme of Incentives, 2007 of the Government of Maharashtra. The grant amount accounted for the current financial year 2016-17 is Rs.1,450.26 Lakhs. Out of the total accrued amount of Rs.3,341.73 Lakhs till fiscal 2017, the Company has received the amount of Rs.1,580.63 Lakhs during the financial year 2016-17. Apart from the profitability ratios mentioned, other key financial ratios eg. Leverage ratio, liquidity ratios and important efficiency ratios showed a marked improvement in your Company''s operations. The consolidated net interest / finance cost paid by your Company reduced by 27.36% over the previous year which has significantly improved the cash flow.

During the year, the Company at consolidated level has maintained optimum working capital, better debtors turnover ratio as compared to previous year, constant credit period levels from suppliers and strategically maintained inventory levels to support increased operations and combat the effect of increasing prices on the cost of production.

There was no change in the capital structure during the year. However, the increase in Reserves & Surplus i..e owner''s equity is mainly because of the net profit of Rs.4,694.26 Lakhs in the current year which includes the income from mega status as detailed above.

During the year under review, your Company has launched in-house Ice-cream brands viz. ''VOLUP'' - a popular brand and ''SINSANE'' - a premium brand, with 40 SKUs. Under the "VOLUP" brand the Company is entering in to an exponential segment with high potential for growth in the long term. Foray into this vibrant product segment has enabled the Company achieve its another milestone while keeping up its tradition to deliver high quality products.

The Company is taking all initiatives to achieve its brand presence / visibility which is evident from the fact that the company has spent Rs.1,717.98 Lakhs during the year on advertisement and sales promotion vis a vis Rs.939.77 Lakhs during the previous year.

During the year, at the consolidated level, the sale of milk powders and flavoured milk gained a good momentum. The sale of cheese, paneer and shrikhand also picked up during the year with increase in capacity utilization of their respective plants. At the consolidated level, the sale of milk, milk powders, butter, ghee and condensed milk remained on the top in the contribution to the consolidated total revenue of your Company. Your Company has enhanced capacity utilization across its plant. There has also been a significant increase in the revenue from co-packing services provided by the Company. In the consolidated total sales, value added products contributed 86% and the remaining contribution was of milk.

The consolidated performance of your Company marked a perceivable improvement over the previous financial year. In context to the industry and its position in the economic environment and market variables, the results are seen to be favourable. Your Company''s thrust has been on reshuffling the product - mix conducive to its bottom line, optimal allocation of resources, flexible planning and exercising austerity measures across all functional activities.

Though there is always a perception of clear competition to a higher water mark with new players penetrating into the high-end market space, your company at a consolidated level has taken a decision for exercising austerities in all spheres of its operations, further improving productivity and focusing on repayment of the debts gradually from internal accruals. This would enable your company to become operationally more competitive coupled with its unbeatable strength of strong backward and its forward integration.

Your company has always maintained its policy to retain talent and also to hone the skills of its employees for deliverance of their capabilities and creativity to contribute to their work place and your Company at large.

Though the going would be interlaced with many challenges your Company is confident to overcome these as the fundamentals of your Company are strong and strategic initiatives taken have started to pay off.

Your Company continues to strengthen its market position both in terms of revenue as well as customers and national presence.

Material Changes and Commitments

There are no material changes or commitments affecting the financial position of the Company which have accrued between the end of the financial year and the date of this Report.

Dividend

The standalone profit after tax of the Company for fiscal 2017 is Rs.2,730.00 lakhs after provision for taxes of Rs.278.33 lakhs and all expenses. The disposable profit is Rs.7405.28 lakhs taking into account the balance of retained earnings of Rs.5,145.52 brought forward from the previous year. The Company''s dividend policy is based on the profitability and key financial metrics of the Company, the Company''s capital position and requirements for future. Given the financial performance and in line with the philosophy of the Company "Partners in Progress - a participative and an inclusive growth approach for stakeholders", your Directors are pleased to recommend a dividend of Rs.040 per equity share of face value of Rs.10 each (4%) aggregating to Rs.390.70 lakhs for the year ended March 31, 2017 on which the dividend distribution tax is Rs.79.54 Lakhs.

During the year under review, the company retained the entire surplus in the profit and loss account and no amount from profit was transferred to General Reserves.

There is no outstanding amount in the Unpaid Dividend Account 2016 and no amount is due for transfer to Investor Education and Protection Fund.

Changes in Share Capital:

The paid up Equity Share Capital of the Company at the beginning and at the end of the year as on April 1, 2016 and March 31, 2017 remained the same at Rs.976,761,310 comprising of 97,676,131 equity shares of Rs.10 each.

The Initial Public Offer (IPO) proceeds raised in the financial year 2015-16 have been fully utilized for the purposes as stated in the Prospectus issued for the IPO.

As on March 31, 2017, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

Details of Subsidiary / Associate / Joint Venture Companies

As on March 31, 2017, your Company has the following 2 subsidiaries:

1. Cheese Land Agro (India) Pvt. Ltd.

2. Sunfresh Agro Industries Pvt. Ltd. (material subsidiary)

The Company does not have any associate or joint venture company.

The particulars of subsidiaries as on March 31, 2017 have been included in Form MGT - 9 which is annexed to this Report as Annexure -1.

The performance and financial position of subsidiaries included in the Consolidated Financial Statements is provided in accordance with the provisions of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014 as a separate statement annexed to the Notes on Accounts containing the salient features of the financial statements of the Company''s subsidiaries in Form AOC -1 and forms an integral part of this Report.

The Company will make available separate audited financial statements of the subsidiaries to any member upon request. These documents / details are available on the Company''s website at www.prabhatfresh.com and will also be available for inspection by any Member of the Company at its registered office and corporate office.

The policy for determining material subsidiaries formulated by the Board of Directors is disclosed on the Company''s website and is accessible on http://www.prabhatfresh.com/ wp-content/uploads/2016/01/Material-subsidiary-policy. pdf.

Deposits

Your company has neither invited nor accepted any deposits within the meaning of section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 from the public during the year under review. Also there is no amount of principal or interest outstanding on account of such deposits, as on the date of the Balance Sheet.

Credit Rating

Your Company enjoys credit rating of A issued by ICRA for its long term borrowings as well as for its short term working capital facilities. On the outlook front, ICRA has assigned the outlook of ''Stable'' to the company and its subsidiaries

Particulars of Loans, Guarantees or Investments by the Company

As per the provisions of Section 186(4) of the Companies Act, 2013 full particulars of the loans given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient of the loan or guarantee or security are given in the notes forming part of the financial statements.

Vigil Mechanism / Whistle Blower Policy

Your Company has in place a Whistle Blower Policy covering Vigil Mechanism for Directors and employees to report genuine concerns or grievances about unethical behaviour, actual or suspected fraud or violation of your Company''s Code of Conduct. Adequate safeguards are provided against victimization to those who avail of the mechanism The Whistle Blower Policy has been hosted on the website of the Company at http://www.prabhatfresh.com/wp-content/ uploads/2015/12/Whistle-Blower.pdf. Further details regarding the Vigil Mechanism is given in the Corporate Governance Report.

Significant and material orders passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company and its future operations

There are no significant and / or material orders passed by the Regulators or courts or Tribunals that would impact the going concern and status of future operations of the Company. However, on October 9, 2015, a search was conducted by the Income Tax Department pursuant to the provisions of section 132(1) and 133A of the Income Tax Act, 1961 at the offices of the Company at Shrirampur, Pune and Navi Mumbai and also at the offices of the subsidiaries of the Company and the residence of Executive Directors residing at Shrirampur. The Company had submitted copies of all the documents requisitioned by the Tax Authorities. During the year under review, the Company and its subsidiaries have decided to file an application with the Hon''ble Income Tax Settlement Commission (''ITSC'') with respect to the expected litigation that may arise pursuant to the aforesaid search carried out by the Income Tax Authorities for the assessment years 2010-11 to 2016-17 and the Company and its subsidiaries are in the process of filing such application with ITSC. Based on best estimate, management has carried an evaluation of possible tax obligation that may arise out of the said litigation. As per the management evaluation, the Company and its subsidiaries in the aggregate will have to pay additional tax amounting to Rs.268.81 Lakhs (including interest thereon) (gross of reversal of excess tax provision for earlier years - Rs.196.81Lakhs), reverse MAT credit entitlement amounting to Rs.347.14 Lakhs for assessment years 2010-11 to 2016-17 and provide for additional deferred tax liability charge due to write off of certain fixed assets in tax block for which depreciation claim would not be allowed by the tax authorities amounting to Rs.542.36 Lakhs at the consolidated level. Accordingly, total provision made pursuant to above matter amounts to Rs.1,158.31 Lakhs at the consolidated level. As per the management best estimate of the Company and its subsidiaries they will not have any additional tax liability or penalty other than already accounted as detailed hereinabove into books of accounts. Since the ultimate outcome of the assessment proceeding resulting from settlement application cannot be presently determined, no additional provision for tax including penalty, if any, as a result of such outcome, is made in the financial statements for the year 2016-17.

Directors and Other Key Managerial Personnel

i) Directors:

(a) Changes in the composition of the Board of Directors and other Key Managerial Personnel:

During the year under review, the shareholders of the Company have appointed Mr. Rajesh Srivastava as an Independent Director for a period of three years and also appointed Mr. Raphael Plihon as a Non-Executive Director liable to retire by rotation at the previous Eighteenth Annual General Meeting of the Company held on September 30, 2016.

Mr. Raphael Plihon has resigned a Director of the Company with effect from May 23, 2017. The Board places on record its sincere appreciation to Mr. Raphael Plihon for his valuable contribution and guidance to the Company during his tenure.

During the year, Mr. Omprakash Venkatswamy Bundellu, an Independent Director has also resigned from the Directorship of the Company with effect from February 13, 2017. The Board places on record its sincere appreciation to Mr. Omprakash Venkatswamy Bundellu for his valuable contribution and guidance to the Company during his tenure.

Your Board, based on the recommendation of Nomination and Remuneration Committee, has also co-opted Mr. Haresh Shah as an Additional Independent Director of the Company in accordance with the provisions of section 161 and 149 of the Companies Act, 2013. Mr. Haresh Shah holds office till the date of the date of the ensuing Annual General Meeting pursuant to the provisions of section 161 of the Companies Act, 2013. The Company has received a notice under section 160 of the Companies Act, 2013 from a member of the Company proposing the candidature of Mr. Haresh Shah for confirmation/appointment as an Independent Director of the Company in the forthcoming Annual General Meeting. Your Board recommends to appoint/confirm the appointment as Independent Director in the forthcoming Annual General Meeting.

(ii) Independent Directors:

The Board of the Company as at March 31, 2017 consisted of seven Directors, out of which four are Independent Directors, two are Executive Directors and one is Non-Executive Director.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Regulation 16(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 which have been relied by the Company and were placed at the Board Meeting held on May 23, 2017.

(iii) Retirement by Rotation:

In terms of Section 152(6)(c) of the Companies Act, 2013 and the Company''s Articles of Association, Mr. Sarangdhar R. Nirmal is liable to retire by rotation at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment.

Brief profile of the Directors proposed to be appointed / re-appointed are annexed to the Notice convening the Nineteenth Annual General Meeting forming part of this Annual Report.

Key Managerial Personnel

The following are the key managerial personnel of the Company and continue to hold the respective offices:

1. Mr. Sarangdhar R. Nirmal : Chairman & Managing Director

2. Mr. Vivek S. Nirmal: Joint Managing Director

3. Mr. Raviraj Vahadane ( Mr. Amit Gala Upto April 26, 2016): Chief Financial Officer

4. Ms. Priya Nagmoti : Company Secretary

Committees of the Board

In order to strengthen its functioning and smoothen the functioning of the Company, the Board of Directors has constituted the following Committees:

1. Audit Committee

2. Nomination & Remuneration Committee

3. Stakeholders'' Relationship Committee

4. Corporate Social Responsibility Committee

5. Risk Management Committee

6. Finance Committee

Details of the Committees along with their charter, composition and meetings held during the year, are provided in the Corporate Governance Report which forms part of this Report.

Audit Committee

Audit Committee currently comprises of Mr. Haresh Shah as the Chairman of the Audit Committee with other members being Mr. Ashok Sinha, Mr. Soundararajan Bangarusamy, Mr. Rajesh Srivastava, Mrs. Seemantinee Khot and Mr. Vivek S. Nirmal. Further details relating to the Audit Committee are provided in the Corporate Governance Report, which forms part of this Report. Mr. Omprakash Venkatswamy Bundellu ceased to be a member and the Chairman of the Audit Committee with effect from February 13, 2017 and Mr. Haresh Shah has been inducted as a member and the Chairman of the Audit Committee with effect from May 23, 2017.

Board and Committee Meetings

A calendar of Board and Committee Meetings is circulated in advance to all the Directors. During the year, five meetings of the Board of Directors were held. The details of the Board of Directors and Committees along with their composition, number of meetings held and attendance at the meetings are provided in the Corporate Governance Report.

Nomination and Remuneration Policy

The Board of Directors has, on the recommendation of the Nomination & Remuneration Committee, 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 amongst others lays down the criteria for selection and appointment of Board members. The details of this Policy are annexed as Annexure - 2 and forms an integral part of this Report.

Board Evaluation

The Board has carried out the annual performance evaluation of its own performance, Board Committees and Individual Directors pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of the Listing Regulations. The manner in which the evaluation has been carried out has been provided in the Corporate Governance Report. The Board of Directors expressed their satisfaction with the evaluation process.

The details of programs for familiarization of Independent Directors of your Company is available on your Company''s website www.prabhatfresh.com.

Auditors:

Statutory Auditors:

At the Eighteenth Annual General Meeting held on September 30, 2016, the members appointed M/s. B S R & Associates LLP, Chartered Accountants (Firm Registration No. 116231W/ W-100024) as statutory auditors for a period of five years commencing from the conclusion of the Eighteenth Annual General Meeting till the conclusion of the Twenty Third Annual General Meeting subject to the ratification by the members at every Annual General Meeting. M/s. B S R & Associates LLP have given their unwillingness for ratification of their appointment at the ensuing Nineteenth Annual General Meeting. The Board of Directors therefore recommend to appoint M/s. M S K A & Associates, Chartered Accountants (Firm Registration No. 105047W) as the statutory auditors of the Company for a period of five years to hold office from the conclusion of the Nineteenth Annual General Meeting till the conclusion of the Twenty Fourth Annual General Meeting of the Company. The Audit Committee of the Board of Directors has recommended the appointment of M/s. M S K A & Associates, Chartered Accountants (Firm Registration No. 105047W) as the statutory auditors of the Company by the shareholders at the ensuing Annual General Meeting.

M/s. M S K A & Associates, Chartered Accountants have given a certificate to the effect that their appointment, if made, shall be in compliance with the provisions of Section 139 and 141 of the Companies Act, 2013.

Necessary resolution seeking approval of the members for appointment of new statutory auditors has been incorporated in the Notice convening the Annual General Meeting forming part of this Report.

There are no qualifications, reservation or adverse remark or disclaimer made by the statutory auditors M/s. B S R & Associates LLP in the audit report on the standalone financial statements of the Company for the year ended March 31, 2017 except that in the Auditors'' Report on consolidated financial statements of the Company, the auditors have drawn attention to note 49 to the Consolidated Financial Statements which explains that the material subsidiary has recognized Government Grant related to Income, which it is entitled to receive under the Package Scheme of Incentives 2007 (''the Scheme'') of Government of Maharashtra, pertaining to prior periods during the current year ended 31 March 2017. These benefits are in the nature of Government Grants in accordance with Ind AS 20 ''Accounting for Government Grants and Disclosure of Government Assistance''. In the auditors'' view, had the material subsidiary recognized such grant in the respective period when it should have, the Exceptional item (in relation to revenue from operations), Profit before tax, Tax expense, Net profit after tax and Earnings per share would have been lower for the year ended 31 March 2017 by Rs. 1,891.47 lakhs, Rs. 1,891.47 lakhs, Rs. 374.16 lakhs, Rs. 1,517.31 lakhs and Rs. 1.55 respectively. Further, Revenue from operations, Profit before tax, Tax expense, Net profit after tax and Earnings per share would have been higher for the year ended 31 March 2016 by Rs. 1,891.47 lakhs, Rs. 1,891.47 lakhs, Rs. 458.21 lakhs, Rs. 1,433.26 lakhs and Rs. 1.66 respectively. Deferred tax liability (net) and Other equity as on 31 March 2016 would have been higher by Rs. 458.21 lakhs and Rs. 1,433.26 lakhs respectively.

The Company has received an Eligibility Certificate from the Department of Industries, Government of Maharashtra under the Package Scheme of Incentives, 2007 pursuant to which the Company is eligible to receive benefits in the form of Electricity Duty exemption, Stamp Duty exemption and Industrial Promotion Subsidy (in the form of refund of Value Added Tax and Central Sales Tax), subject to fulfillment of certain conditions under the Scheme and acceptance of the claim by the Department. These benefits are in the nature of Government Grants in accordance with Ind AS 20 ''Accounting for Government Grants and Disclosure of Government Assistance''. Considering the uncertainty of the timings when the actual amount of the admitted claim will be received from the Government which depends on a number of factors beyond the control of the Company, the management has not recognized the income related to the Government Grant during the previous years on accrual basis. During the year under review, the Company has received the refund claims and immediately on receipt of the first claim, the Company has recognized the claim amount in respect of previous year as an Exceptional Item in its books of accounts since after receipt of first claim the certainty in respect of admission and receipt of claim gets established.

Therefore, in the opinion of the Board of Directors, the aforesaid stand of the management in accounting of the receipts of government grant does not have any adverse impact on the Company.

Cost Auditors:

In conformity with the provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board on the recommendation of the Audit Committee has appointed M/s. JNP & Associates, Cost Accountants, as the Cost Auditors, to conduct the Cost Audit of your Company for the financial year ended March 31, 2018, at a remuneration as specified in the notice convening the Annual General Meeting. The Cost Audit Report for the financial year 201617 will be placed before the Board of Directors at the next Meeting of the Board of Directors.

As required under the Companies Act, 2013, the remuneration payable to the Cost Auditors is required to be ratified by the shareholders. Accordingly, the Board recommends the same for ratification by the shareholders at the ensuing Annual General Meeting.

Secretarial Auditor:

In terms of the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s. Shravan A. Gupta & Associates, a firm of Company Secretaries in practice (C.P No. 9990) to undertake the Secretarial Audit of the Company for the financial year ended March 31, 2017. The Secretarial Audit Report is annexed herewith as Annexure -3 and forms an integral part of this Report. There are no qualifications, reservation or adverse remark or disclaimer made in the Secretarial Audit Report.

Internal Control Systems and their Adequacy

Your Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. The internal controls cover operations, financial reporting, compliance with applicable laws and regulations, safeguarding assets from unauthorized use and ensure compliance of corporate policies. Internal controls are reviewed periodically by the internal auditors, and are subject to management reviews with significant audit observations and follow up actions reported to the Audit Committee. The Audit Committee actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them in accordance with the changes in the business dynamics, if required.

Related Party Transactions

All transactions entered with Related Parties for the financial year under review as detailed in Note no. 48 of the Standalone Financial Statements were on arm''s length basis and in the ordinary course of business and that the provisions of section 188 of the Companies Act, 2013 and the Rules made thereunder are not attracted. Further, there are no material related party transactions during the year under review with the promoters, Directors or key managerial personnel. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such related party transactions.

All related party transactions even though carried on in the ordinary course of business and on an arms'' length basis are placed before the Audit Committee for approval. Omnibus approval for few transactions is given by the Audit Committee on an annual basis and the details of actual transactions against such approval is placed before the Audit Committee for every quarter for review and monitoring.

The Policy on Related Party Transactions as approved by the Board of Directors has been hosted on the website of the Company. The weblink of the same has been provided in the Corporate Governance Report. None of the Directors has any material pecuniary relationship or transactions vis - a vis - the company except as members of the Company and except as disclosed in the financial statements.

The particulars of Related Party Transactions in prescribed Form AOC - 2 are annexed as Annexure - 4 and forms an integral part of this Report.

None of the related party transactions entered into by the Company were in conflict with the Company''s interest. There are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnel, etc. which may have potential conflict with the interest of the Company at large.

The disclosure as required by Schedule V, Clause A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is as under: (Rs. in Lakhs)

Particulars

Name of the Subsidiary

Maximum amount of loans / advances / investments outstanding during the year ended March 31, 2016

Amount

outstanding at the end of the year i.e. March 31, 2017

Loans and advances in the nature of loans to subsidiary (incl. interest)

Sunfresh Agro Industries Pvt. Ltd.

NIL

Cheese Land Agro (India) Pvt. Ltd.

14,545.07

Particulars

Name of the Subsidiary

Maximum amount of loans / advances / investments outstanding during the year ended March 31, 2016

Amount

outstanding at the end of the year i.e. March 31, 2017

Loans and advances in the nature of loans to associates (incl. interest)

NIL

Loans and advances in the nature of loans to firms / companies (excluding subsidiary of the Company) in which Directors are interested (incl. interest)

NIL

None of the aforesaid subsidiary, associate company or the Company or firm in which Directors are interested hold any shares of or other investment in the Company.

Corporate Governance

Your Company is committed to maintain highest standards of Corporate Governance. Your Company continues to be compliant with the requirements of Corporate Governance as enshrined in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations''). A Report on Corporate Governance as stipulated under the Listing Regulations forms part of the Annual Report. A Certificate from the Statutory Auditors of the Company, confirming compliance with the conditions of Corporate Governance, as stipulated in the Listing Regulations forms part of the Annual Report.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is presented in a separate section forming an integral part of this Annual Report.

Extract of Annual Return

In terms of the provisions of Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration)Rules, 2014, an extract of the Annual Return in Form MGT 9 for the financial year ended March 31, 2017 is annexed herewith as Annexure - 1 and forms part of this Report.

Managerial Remuneration

Disclosure of the ratio of the remuneration of each Director to the median employee''s remuneration and other details as required pursuant to 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 as Annexure - 5.

Except as disclosed under, none of the Directors or Managing Director of the Company received any remuneration or commission from any subsidiary of your Company during the financial year ended March 31, 2017:

Sr.

No.

Name of the Director of the Company

Designation in the Company

Name of the Subsidiary from which remuneration received

Capacity in which

remuneration

received

Amount of

remuneration received (H in Lakhs)

Mr. Vivek S. Nirmal

Joint Managing Director

Sunfresh Agro Industries Pvt. Ltd.

Managing Director

36.00

The details of the remuneration paid to the Director including Executive Directors of the Company are given in Form MGT - 9 forming part of the Directors'' Report.

Particulars of Employees

Disclosure pertaining to remuneration and other details as required under section 197(12) of the Companies Act, 2013 read with Rule 5(2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure - 5 and forms part of this Report.

Business Responsibility Reporting

Business Responsibility Report as stipulated under Regulation 34(2) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is not applicable to your Company for the financial year ended March 31, 2017.

Risk Management and Internal Financial Controls

Your Company''s system of financial and compliance controls with reference to the financial statements and risk management is embedded in the business process by which your Company pursues its objectives. Additionally, the Audit Committee and the Board of Directors assess the implementation of risk management and risk mitigation measures through their review of potential risks which could negatively impact the operations including additional oversight in the area of financial risks and controls, the proposed budget and plan, your Company''s strategic framework besides inherent risks associated with the products / goods dealt with by the Company as well as execution of any project. Major risks identified by the Company''s business and functions are systematically addressed through mitigating actions on a continuing basis. In the view of the Board of Directors, there are no material risks, which may threaten the existence of your Company.

The Board of Directors of your Company has laid down the policies and procedures for internal financial controls to be followed by the Company for ensuring the orderly and efficient conduct of its business, in order to achieve the strategic, operational and other objectives over a long period and that its exposure to risks are within the acceptable limits decided by the Board. In addition, the policies and procedures have been designed with an intent to ensure safeguarding of Company''s assets, prevention and detection of frauds and errors, the accuracy in completeness of the accounting records and the timely preparation of reliable financial information.

The management is committed to ensure effective internal financial controls environment, which provides assurance on the efficiency of its business operations coupled with adherence to its established policies, safety / security of its assets besides orderly and legitimate conduct of Company''s business in the circumstances, which may reasonably be foreseen. Your Company has defined organization structure, authority levels, delegated powers, internal procedures, rules and guidelines for conducting business transactions. Your Company''s system and process relating to internal controls and procedures for financial reporting have been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Indian Accounting Standards as notified under the Companies Act, 2013 and the Rules framed thereunder and all other applicable regulatory / statutory guidelines, etc. for disclosure with reference to financial statements.

Your Company''s internal control systems are supplemented by an extensive program of internal audit program of internal audit by an independent firm of Chartered Accountants. Internal audits are conducted at regular intervals and a summary of the observations and recommendations of such audits are placed before the Audit Committee. The Internal Auditors, the Audit Committee as well as the Board of Directors conduct an evaluation of the adequacy and effectiveness of the system of internal financial controls system on ongoing basis.

Though not mandatory as per the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has constituted a Risk Management Committee, details whereof are set out in the Corporate Governance Report forming part of this Annual Report. Further, your company has formally adopted a Risk Management Policy and Framework to identify and assess the key risk areas, monitor and report compliance and effectiveness of the policy, framework and procedure.

Your Company has a well - established Enterprise - wide Risk Management (ERM) framework in place for identification, evaluating and management of risks, including the risks which may threaten the existence of the Company. In line with your Company''s commitment to deliver sustainable value, this framework aims to provide an integrated and organized approach for evaluating and managing risks.

A detailed exercise is carried out to identify, evaluate, manage and monitor the risks. The Committee / Board periodically reviews the risks and suggest steps to be taken to control and mitigate the same through a properly defined framework.

Anti - Sexual Harassment Policy

Your Company laid down an Anti Sexual Harassment Policy and it is made available on the website of the Company. The Company has zero tolerance on Sexual Harassment at workplace. During the year under review, there were no cases filed pursuant to the Sexual Harassment of women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and there were no cases pending to be addressed / resolved either at the beginning or at the end of the year.

Quality, Environment and Safety

Your Company continues its focus on quality and strives to exceed customer expectations at all times. It is certified under various standards to meet client demands and enhance value delivery. In addition to these, your Company is conscious of the importance of environmentally clean and safe operations and therefore maintains its commitment to health, safety and environment by continually improving its processes in accordance with ISO 14001 and OHSAS 18001 standards.

The Company''s policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances of environmental regulations and preservations of natural resources.

The Company is certified as TUV SUD, Agmark, IS 1166:1986, Halal, FSSAI, etc. which are a testimony of the robustness of business processes and at large the quality culture imbibed in the organization.

Human Resources and Industrial Relations

Your Company continues to be an employer of choice with robust hiring of high quality talent, high engagement scores, focus on development and effective retention of high potential employees.

Value based HR programs have enabled your Company''s HR team to be strategic partners for the business. To keep pace with the evolving demands of the Value Added Products, HR has shifted focus to building capability in newer areas to be able to predict, diagnose and take actions that will improve business performance. The employee engagement scores continue to be high despite a great deal of volatility in the macro environment. This has resulted in your Company''s ability to retain best talent.

Your Company has had continuous focus on Diversity and Inclusivity. Your Company has hired some of the best talent from FMCG industry. In addition your Company has laid stress to build a women friendly workplace by introducing various initiatives around hiring, development and progression of women employees in the organization.

Your Company has been awarded as the ''HR Professional of the Year'' in the SME Category at the Sixth Annual HR Excellence Awards organized by Genius and Times Jobs in August, 2016. Your Company is also undertaking branding initiative in association with MMA, Navi Mumbai Chapter and NSDC to ensure that employees with the right skill-sets are recruited and retained. Your Company has also taken part in the Great Place to Work Survey which conducted assessments pertaining to trust and cultural indices and chalked out action plans which will be executed in June 2017 onwards. Three case studies of your Company has been published in the prestigious journal - Best HR Practices 2017 brought out by Dun & Bradstreet and Sodexo.

Your Company has focused on identifying internal talent and nurture them through the culture of continuous learning and development, thereby building capabilities for creating future leaders. Your Company has also focused on continual process improvement through various techniques and methodologies. These HR strategies have continued to have strong alignment with your Company''s vision to successfully build and sustain Company''s standing as one of most admired and valuable corporate in dairy sector despite unrelenting competitive pressure.

Overall, the industrial relations remain cordial during the year. However, two labour unions have been formed in your Company out of which one Union having majority of members has signed a Memorandum of Settlement with the Company while the other Union has filed a case against the Company with the Labour Court in Thane, which the Company is contesting with an outlook of positive outcome in its favour.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed pursuant to section 134(3)(m) of the Companies Act, 2013 read with the Rule 8(3) of the Companies (Accounts) Rules, 2014 are given to the extent applicable in Annexure - 6 forming part of this Report.

Green Initiatives in Corporate Governance:

In line with the ''Green Initiative'' the Company has effected electronic delivery of Notice of Annual General Meeting and Annual Report to those members whose e-mail ids were registered with the respective Depository Participants and downloaded from the depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited. The Companies Act, 2013 and the underlying rules as well as Regulation 36 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 permit the dissemination of financial statements and annual report in electronic mode to the members. Your Directors are thankful to the members for actively participating in the Green initiative and seek your continued support for implementation of the Green Initiative.

Directors'' Responsibility Statement

To the best of knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement / confirm in terms of Section 134 of the Companies Act, 2013:

1. That in the preparation of the annual accounts for the year ended March 31, 2017, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. That the Directors had 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 as at March 31, 2017 and of the profit of the Company for the year ended on that date;

3. That the Directors had 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;

4. That annual accounts have been prepared on a going concern basis;

5. That the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

6. That the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Corporate Social Responsibility (CSR)

In terms of the provisions of section 135 of the Companies Act, 2013, read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has constituted a Corporate Social Responsibility ("CSR") Committee. The composition and terms of reference of the CSR Committee is provided in the Corporate Governance Report, which forms part of this Annual Report.

Your Company has also in place a CSR Policy and the same is available on your Company''s website www.prabhatfresh. com/investordesk.

During the financial year 2016-17, the Company has spent Rs.21.01 Lakhs towards CSR activities as against Rs.15.47 Lakhs required to be spent during the financial year 2016-17. The Company during the year has gradually increased the volume of its CSR projects. The Company''s key objective is to make a difference to the lives of the underprivileged and help bring them to a self - sustaining level and is committed to CSR engagement. We are increasing capacity of CSR team to take up more projects and expand the existing scale of CSR activities.

The particulars required to be disclosed pursuant to the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in Annexure - 7 forming part of this Report.

Appreciation and Acknowledgements

The Company is grateful to the Government of India and other Regulators for their continued co-operation, support and guidance. The Company wishes to thank its investors, banking community, rating agencies and stock exchanges for their support.

The Company would like to take this opportunity to express sincere thanks to its all its valued customers, dealers, agents and suppliers for their continued support and patronage. Your Directors express their deep sense of appreciation to all the employees whose outstanding professionalism, commitment and initiative has made the organization''s growth and success possible and continues to drive its progress. Finally, your Directors wish to express their gratitude to the members for their trust and support.

For and on behalf of the Board

Sd/-

Sarangdhar R. Nirmal

Place : Navi Mumbai Chairman

Date : 11/07/2017 DIN : 00035234

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