Heritage Foods RI review (Apply)

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•    HFL is in the dairy products and cattle/fish feeds business.
•    It has been reporting profits since xxx.
•    This at par Rights Issue can be termed a mini bonus for its stakeholders.
•    Investors can grab this opportunity to have the shares at par value. 

Heritage Foods Ltd. (HFL) has been maintaining close relationships with the farming community and staying closer to the milk production centres in order to enable it to deliver fresh and nutritious value-added dairy products and delight consumers. The company has completed three decades in business and has served value-added products to over 15 lakh households across 11 states in India. 

HFL began its journey as a manufacturer and supplier of milk and milk-related products. However, over the years it has expanded its portfolio to value-added products including curd, ice cream/frozen dessert, paneer, buttermilk, flavoured milk, lassi, milk powders, sweets etc. The company has 18 state-of-the-art milk processing facilities, 187 bulk coolers and chilling centres, 1 ultramodern UHT milk processing unit, 65 Heritage distribution centres, and 859 Heritage parlours.

It has milk processing capacity of 26.5 lakh litres per day, milk packing capacity of 16.65 lakh litres per day, milk chilling capacity of 21.5 lakh litres per day, Buttermilk capacity of 1.41 lakh litres per day, Curd packaging capacity of 741.6 metric tons per day besides many other products in its portfolio.

The company also has a renewable energy division engaged in the generation of power through solar and wind. HFL has one wholly owned subsidiary company namely, Heritage Nutrivet Limited (HNL), engaged in the business of manufacturing, processing, and trading of animal feed supplements and nutrition (i.e., cattle feed and fish feed) and offers a wide range of nutritional solutions for milch animals. HNL is one of the leading Live Stock Feed and Feed Supplement players in southern and western parts of India, covering over 3 lakh farmers spread across five states viz., Andhra Pradesh, Telangana, Tamil Nadu, Karnataka, and Maharashtra.

As of the date of filing this offer document, it had 3138 permanent employees on its payroll and also had 3466 contract labourers across different units.

The company is coming out with a rights issue (RI) of 46398000 equity shares of Rs. 5 each at par value to mobilize Rs. 23.20 cr. It is offering 1 share for every 1 share held to eligible stakeholders as of the record date of January 20, 2023. The full amount is to be paid along with the application for the number of shares applied. The issue opens for subscription on January 30, 2023, and will close on February 13, 2023. Post allotment, shares will be listed on BSE and NSE. HFL is spending Rs. 0.97 cr. for this RI process and from the net proceeds, it will utilize Rs. 22.23 cr. for the working capital. 

Chartered Financial Management Pvt. Ltd. is the sole lead manager for this issue and KFin Technologies Ltd. is the registrar of the issue.

Post-RI, HFL's current paid-up equity capital of Rs. 23.20 cr. will stand enhanced to Rs. 46.40 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 46.40 cr. In a way, this at par RI can be termed as a mini bonus for the stakeholders. 

On the financial performance front, for the last two fiscals, HFL has (on a consolidated basis) posted a turnover/net profit of Rs. 2481.15 cr. / Rs. 14.91 cr. (FY21), and Rs. 2692.55 cr. / Rs. 96.52 cr. (FY22). It suffered a setback in its bottom line for FY21 on account of the pandemic.

As per unaudited results filed with the exchange, for 3Qs of FY23, it earned a net profit of Rs. 40.01 cr. on a turnover of Rs. 2431.76 cr. As of December 31, 2022, its current paid-up equity capital of Rs. 23.20 cr. is supported by free reserves of Rs. 674 cr. 

The company has paid a dividend of 100% for the last two fiscals. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 351.80 as of January 19, 2023, and opened on an ex-right basis at Rs. 179.85 as of January 20, 2023. Since then, it has marked a high/low of Rs. 193.70 / Rs. 165.10. The scrip last closed at Rs. 171.30 as of January 25, 2023. Based on this quote, its post-RI market cap comes to Rs. 1589.60 cr. For the last 52 weeks, it has posted a high/low of Rs. 200.27 / Rs. 126.88. Promoters' holding is down a bit to 39.21% (Dec 22) against 39.43% (June & Sept. 22). 

NOTE: My family has a small holding in this company as a long-term investment and will be participating in this RI for the eligible quota.

Conclusion / Investment Strategy

This is at par RI from a consumer dairy products and cattle feed company from the South. It has been doing well and is poised for bright prospects ahead as the dairy industry is set to witness a boom. It’s a not to miss the opportunity for investors of the company as it can be termed as a mini bonus.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Jan 25, 2023

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

More Heritage Foods Limited RI Views / Analysis / Recommendations ...

The Heritage Foods Rights Issue 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Heritage Foods Rights Issue 2022 worth investing. The Heritage Foods Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Heritage Foods Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Heritage Foods Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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