PARAG MILK FOODS LIMITED

RED HERRING PROSPECTUSDated April 21, 2016

Please read section 32 of the Companies Act, 2013Book Built Issue

BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE ISSUE

Kotak Mahindra Capital Company Limited1st Floor, 27 BKC, Plot No. 27, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051Tel: (91 22) 4336 0000Fax: (9122) 6713 2447E-mail: [email protected] Grievance ID: [email protected]: www.investmentbank.kotak.comContact Person: Ganesh RaneSEBI Registration No.: INM000008704

JM Financial Institutional Securities Limited*7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025Tel: (91 22) 6630 3030Fax: (91 22) 6630 3330E-mail: [email protected] Grievance E-mail: grievance.ibd@ jmfl.comWebsite: www.jmfl.comContact Person: Lakshmi LakshmananSEBI Registration No.: INM000010361

IDFC Securities Limited**Naman Chambers, C-32, G Block, Bandra Kurla Complex Bandra (East), Mumbai 400 051Tel: (91 22) 6622 2600Fax: (91 22) 6622 2501Email: [email protected] Grievance Email: [email protected]: www.idfccapital.comContact Person: Akshay BhandariSEBI Registration No.: MB/INM000011336

Motilal Oswal Investment Advisors Private Limited**Motilal Oswal Tower, Rahimtullah Sayani Road, opposite Parel ST Bus Depot, Prabhadevi, Mumbai 400 025Tel: (91 22) 3980 4380Fax: (91 22) 3980 4315E-mail: [email protected] Grievance ID: [email protected]: www.motilaloswalgroup.comContact Person: Subodh MallyaSEBI Registration No.: INM000011005

Karvy Computershare Private LimitedKarvy Selenium Tower B, Plot 31-32, Gachibowli, Financial District, Nanakramguda, Hyderabad 500 032Tel : (91 40) 6716 2222; Fax: (91 40) 2343 1551; Email: [email protected] grievance E-mail:[email protected]; Website: https://karisma.karvy.comContact Person: M. Murali Krishna; SEBI Registration No.: INR000000221

PARAG MILK FOODS LIMITEDOur Company was incorporated as Parag Milk & Milk Products Private Limited on December 29, 1992 with the registrar of companies at Mumbai with our registered office at Pune as a private limited company under the Companies Act, 1956. The name of our Company was changed to Parag Milk Foods Private Limited and a fresh certificate of incorporation consequent upon change of name was granted by the Registrar of Companies, Maharashtra at Pune (RoC) on April 11, 2008. Our Company was converted into a public limited company pursuant to approval of the shareholders at an extraordinary general meeting held on May 16, 2015. Consequently, the name of our Company was changed to Parag Milk Foods Limited and a fresh certificate of incorporation consequent upon conversion to a public limited company was granted to our Company by the RoC on July 7, 2015. For details of changes in the name and Registered Office of our Company, see History and Certain Corporate Matters on page 162.

Registered Office: Flat No.1, Plot No. 19, Nav Rajasthan Society, S.B. Road, Shivaji Nagar, Pune 411 016. Corporate Office: 20th floor, Nirmal Building, Nariman Point, Mumbai 400 021.

Contact Person: Rachana Sanganeria, Company Secretary and Compliance Officer; Tel: (91 22) 4300 5555; Fax: (91 22) 4300 5580 Email: [email protected]; Website : www.paragmilkfoods.com; Corporate Identity Number: U15204MH1992PLC070209

PROMOTERS OF OUR COMPANY: DEVENDRA SHAH, PRITAM SHAH AND PARAG SHAHPUBLIC ISSUE OF UP TO [] EQUITY SHARES OF FACE VALUE OF ` 10 EACH (THE EQUITY SHARES) OF PARAG MILK FOODS LIMITED (OUR COMPANY OR ISSUER) FOR CASH AT A PRICE OF ` [] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF ` [] PER EQUITY SHARE) AGGREGATING UP TO ` [] MILLION CONSISTING OF A FRESH ISSUE OF [] EQUITY SHARES AGGREGATING UP TO ` 3,000 MILLION AND AN OFFER FOR SALE OF UP TO 20,572,573 EQUITY SHARES COMPRISING OF 14,286,449 EQUITY SHARES BY THE INVESTOR SELLING SHAREHOLDERS AND 6,286,124 EQUITY SHARES BY THE OTHER SELLING SHAREHOLDERS (AS DEFINED HEREIN) (THE OFFER FOR SALE AND THE FRESH ISSUE ARE COLLECTIVELY REFERRED TO AS THE ISSUE). THE ISSUE INCLUDES A RESERVATION OF 300,000 EQUITY SHARES AGGREGATING UP TO ` [] MILLION FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES (AS DEFINED HEREIN) (THE EMPLOYEE RESERVATION PORTION). THE ISSUE LESS EMPLOYEE RESERVATION PORTION IS REFERRED TO AS THE NET ISSUE. THE ISSUE AND THE NET ISSUE WILL CONSTITUTE []% AND []%, RESPECTIVELY, OF THE POST-ISSUE PAID-UP EQUITY SHARE CAPITAL OF OUR COMPANY.THE FACE VALUE OF EQUITY SHARES IS ` 10 EACH. THE PRICE BAND AND DISCOUNT, IF ANY, TO RETAIL INDIVIDUAL BIDDERS AND ELIGIBLE EMPLOYEES AND THE MINIMUM BID LOT WILL BE DECIDED BY OUR COMPANY IN CONSULTATION WITH THE INVESTOR SELLING SHAREHOLDERS (AS DEFINED HEREIN) AND THE BOOK RUNNING LEAD MANAGERS AND WILL BE ADVERTISED AT LEAST FIVE WORKING DAYS PRIOR TO THE BID/ISSUE OPENING DATE IN ALL EDITIONS OF ENGLISH NATIONAL DAILY NEWSPAPER FINANCIAL EXPRESS, ALL EDITIONS OF THE HINDI NATIONAL DAILY NEWSPAPER JANSATTA, AND THE PUNE EDITION OF THE MARATHI NEWSPAPER LOKSATTA (MARATHI BEING THE REGIONAL LANGUAGE OF MAHARASHTRA WHERE OUR REGISTERED OFFICE IS LOCATED) EACH OF WIDE CIRCULATION IN ACCORDANCE WITH THE SEBI REGULATIONS.In case of any revision to the Price Band, the Bid/Issue Period will be extended by at least three additional Working Days after such revision of the Price Band, subject to the Bid/Issue Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/Issue Period, if applicable, will be widely disseminated by notification to the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE), by issuing a press release, and also by indicating the change on the websites of the BRLMs, the terminals of the Syndicate Members and the Self Certified Syndicate Banks (SCSBs).In terms of Rule 19(2)(b)(ii) of the Securities Contracts (Regulation) Rules, 1957, as amended (SCRR), the Equity Shares issued in the Issue shall aggregate to at least such percentage of the post-Issue Equity Share capital of our Company (calculated at the Issue Price) that will be at least ` 4,000 million and the post-Issue capital of our Company at the Issue Price will be more than `16,000 mil l ion but l ess t han or equal t o ` 40,000 mil l ion. The Issue is being made t hr ough t he Book Buil ding Process, in compliance with Regulation 26(2) of the SEBI Regulations, wherein at least 75% of the Net Issue shall be Allotted on a proportionate basis to Qualified Institutional Buyers (QIBs) (the QIB Portion), provided that our Company in consultation with the Investor Selling Shareholders and the BRLMs, may allocate up to 60% of the QIB Portion to Anchor Investors on a discretionary basis. 5% of the QIB Portion (excluding the Anchor Investor Portion) shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for allocation on a proportionate basis to all QIB Bidders (other than Anchor Investors), including Mutual Funds, subject to valid Bids being received at or above the Issue Price. If at least 75% of the Net Issue cannot be Allotted to QIBs, then the entire application money shall be refunded forthwith. Further, not more than 15% of the Net Issue shall be available for allocation on a proportionate basis to Non-Institutional Bidders and not more than 10% of the Net Issue shall be available for allocation to Retail Individual Bidders in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (the SEBI Regulations), subject to valid Bids being received at or above the Issue Price. Further, [] Equity Shares will be available for allocation on a proportionate basis to Eligible Employees, subject to valid Bids being received from them at or above Issue Price after the Employee Discount, if any. All potential investors, other than Anchor Investors, are required to mandatorily utilise the Application Supported by Blocked Amount (ASBA) process by providing details of their respective bank account which will be blocked by the Self Certified Syndicate Banks (SCSBs), to participate in this Issue. For details, see Issue Procedure on page 371.

RISKS IN RELATION TO THE FIRST ISSUEThis being the first public issue of our Company, there has been no formal market for the Equity Shares of our Company. The face value of the Equity Shares is `10 each. The Floor Price is [] times the face value and the Cap Price is [] times the face value. The Issue Price (determined and justified by our Company in consultation with the Investor Selling Shareholders and the BRLMs as stated under the section Basis for Issue Price on page 106) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing.

GENERAL RISKSInvestments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their entire investment. Bidders are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of our Company and the Issue, including the risks involved. The Equity Shares offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (SEBI), nor does SEBI guarantee the accuracy or adequacy of the contents of this Red Herring Prospectus. Specific attention of the investors is invited to the section Risk Factors on page 16.

ISSUERS AND THE SELLING SHAREHOLDERS ABSOLUTE RESPONSIBILITYOur Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to our Company and the Issue, which is material in the context of the Issue, that the information contained in this Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. Each Selling Shareholder, severally and not jointly, accepts responsibility only for statements made by such Selling Shareholder in relation to itself in this Red Herring Prospectus and the Equity Shares being sold by it through the Offer for Sale.

LISTINGThe Equity Shares offered through this Red Herring Prospectus are proposed to be listed on the BSE and the NSE. We have received the in-principle approval from each of the BSE and the NSE for the listing of the Equity Shares pursuant to the letters dated October 16, 2015 and October 14, 2015, respectively. For the purposes of the Issue, the Designated Stock Exchange shall be BSE. A copy of this Red Herring Prospectus has been delivered to the RoC and a copy of the Prospectus shall be delivered for registration to the RoC in accordance with Section 26(4) of the Companies Act, 2013. For details of the material contracts and documents available for inspection from the date of this Red Herring Prospectus up to the Bid/Issue Closing Date, see Material Contracts and Documents for Inspection on page 428.

BID/ ISSUE PROGRAMMEBID/ISSUE OPENS ON: May 4, 2016(1) BID/ISSUE CLOSES ON: May 6, 2016

* Formerly, JM Financial Institutional Securities Private Limited** In compliance with the proviso to Regulation 21A(1) of the SEBI (Merchant Bankers) Regulations, 1992, read with proviso to Regulation 5(3) of the SEBI Regulations, IDFC Securities Limited and Motilal Oswal

Investment Advisors Private Limited will be involved only in marketing of the Issue.(1) Our Company in consultation with the Investor Selling Shareholders and the BRLMs, may offer a discount of up to ` [] per Equity Share on the Issue Price to Eligible Employees and a discount of up to ` [] per

Equity Share on the Issue Price to the Retail Individual Bidders. Our Company in consultation with the Investor Selling Shareholders and the BRLMs, may consider participation by Anchor Investors in accordance with the SEBI Regulations. The Anchor Investor Bid/Issue Period shall be one Working Day prior to the Bid/Issue Opening Date.

TABLE OF CONTENTS

SECTION I: GENERAL ........................................................................................................................ 1

DEFINITIONS AND ABBREVIATIONS ............................................................................................... 1

PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ........................................... 13

FORWARD-LOOKING STATEMENTS ................................................................................................ 15

SECTION II ............................................................................................................................................ 16

RISK FACTORS ...................................................................................................................................... 16

SECTION III: INTRODUCTION ......................................................................................................... 43

SUMMARY OF INDUSTRY ................................................................................................................... 43

SUMMARY OF BUSINESS .................................................................................................................... 47

SUMMARY FINANCIAL INFORMATION ........................................................................................... 54

THE ISSUE............................................................................................................................................... 65

GENERAL INFORMATION ................................................................................................................... 67

CAPITAL STRUCTURE ......................................................................................................................... 77

OBJECTS OF THE ISSUE ....................................................................................................................... 97

BASIS FOR ISSUE PRICE ...................................................................................................................... 106

STATEMENT OF TAX BENEFITS ........................................................................................................ 110

SECTION IV: ABOUT OUR COMPANY ........................................................................................... 113

INDUSTRY OVERVIEW ........................................................................................................................ 113

OUR BUSINESS ...................................................................................................................................... 141

REGULATIONS AND POLICIES .......................................................................................................... 157

HISTORY AND CERTAIN CORPORATE MATTERS ......................................................................... 162

OUR SUBSIDIARY ................................................................................................................................. 167

OUR MANAGEMENT ............................................................................................................................ 169

PROMOTERS, PROMOTER GROUP AND GROUP COMPANIES .................................................... 185

RELATED PARTY TRANSACTIONS ................................................................................................... 189

DIVIDEND POLICY................................................................................................................................ 190

SECTION V: FINANCIAL INFORMATION ..................................................................................... 191

FINANCIAL STATEMENTS .................................................................................................................. 191

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS .................................................................................................................

302

FINANCIAL INDEBTEDNESS .............................................................................................................. 327

SECTION VI: LEGAL AND OTHER INFORMATION ................................................................... 328

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS............................................... 328

GOVERNMENT AND OTHER APPROVALS ...................................................................................... 335

OTHER REGULATORY AND STATUTORY DISCLOSURES ........................................................... 345

SECTION VII: ISSUE INFORMATION ............................................................................................. 361

TERMS OF THE ISSUE .......................................................................................................................... 361

ISSUE STRUCTURE ............................................................................................................................... 366

ISSUE PROCEDURE ............................................................................................................................... 371

SECTION VIII: MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ........................ 415

SECTION IX: OTHER INFORMATION ............................................................................................ 428

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ................................................. 428

DECLARATION ...................................................................................................................................... 430

SECTION I: GENERAL

DEFINITIONS AND ABBREVIATIONS

This Red Herring Prospectus uses certain definitions and abbreviations which, unless the context otherwise

indicates or implies, shall have the meanings as provided below. References to any legislation, act or regulation

shall be to such legislation, act or regulation as amended from time to time.

The words and expressions used in this Red Herring Prospectus but not defined herein, shall have, to the extent

applicable, the meaning ascribed to such terms under the Companies Act, the SEBI Regulations, the SCRA, the

Depositories Act or the rules and regulations made there under. Notwithstanding the foregoing, terms in the

sections Statement of Tax Benefits, Financial Statements and Main Provisions of the Articles of

Association on pages 110,191 and 415, respectively, shall have the meaning given to such terms in such

sections. Page numbers refer to page numbers of this Red Herring Prospectus, unless otherwise specified.

General Terms

Term Description

our Company, the

Company, the Issuer or

PMFL

Parag Milk Foods Limited, a company incorporated under the Companies Act,

1956 and having its Registered Office at Flat No.1, Plot No. 19, Nav Rajasthan

Society, S.B. Road, Shivaji Nagar, Pune 411 016

We, our, us or Group Unless the context otherwise indicates or implies, refers to our Company

together with its Subsidiary

Company Related Terms

Term Description

Articles / Articles of

Association

Articles of association of our Company, as amended from time to time

BDFPL Bhagyalaxmi Dairy Farms Private Limited

Board / Board of Directors Board of directors of our Company or a duly constituted committee thereof

Compliance Officer Our company secretary who has been appointed as compliance officer of our

Company

Corporate Office The corporate office of our Company, which is located at 20th

Floor Nirmal

Building, Nariman Point, Mumbai 400 021

Director(s) Director(s) on the Board of Directors of our Company

Equity Shares Equity shares of our Company of face value of 10 each

ESOS 2015 The employee stock option scheme of our Company administered by the ESOP

Trust

ESOP Trust The Parag Milk Foods Employees Stock Option Trust

Investor Selling Shareholders IBEF I, IDFC PE and IBEF

IBEF India Business Excellence Fund (a unit scheme of Business Excellence Trust, a

venture capital fund registered under the Securities and Exchange Board of

India (Venture Capital Funds) Regulations, 1996 and represented by its trustee,

IL&FS Trust Company Limited)

IBEF I India Business Excellence Fund I, a public limited company incorporated

under the laws of the Republic of Mauritius

IDFC PE IDFC Private Equity Fund III, a unit scheme of the IDFC Infrastructure Fund 3

(being a trust created under the Indian Trusts Act, 1881 and a venture capital

fund registered under the Securities and Exchange Board of India (Venture

Capital Funds) Regulations, 1996) of which IDFC Trustee Company Limited,

is a trustee and represented by IDFC Alternatives Limited

IDFC S.P.I.C.E. IDFC S.P.I.C.E. Fund, a venture capital fund registered under the Securities

and Exchange Board of India (Venture Capital Funds) Regulations, 1996, and

represented through IDFC Asset Management Company Limited

Key Management Personnel /

KMPs

Key management personnel disclosed in the section Our Management on

page 183

Memorandum of Association/

Memorandum

Memorandum of association of our Company, as amended from time to time

Other Selling Shareholders Netra Shah, Priti Shah, Ladderup Finance Limited, Parvati Devi Pasari, Anmol

1

Term Description

Insurance Consultants Private Limited, Chetan Pasari and Seema Pasari,

Satyanarayan Kanhaiya Lal Kabra, Seema Narayan Pasari and Narayan

Ramgopal Pasari, Meet Narayan Pasari, Nipa Doshi, Placid Limited, Suneeta

Agrawal, Vimla Oswal and Pratik Oswal

Poojan Foods Poojan Foods Private Limited, a company incorporated under the Companies

Act, 1956 and having its registered office at Block No. 1, Ramkrishna Niwas,

1st Floor, Gokhale Road (North), Dadar (West), Mumbai 400 028. For further

information, see History and Certain Corporate Matters Our relationship

with Poojan Foods Private Limited on page 165

Promoters Promoters of our Company, namely, Devendra Shah, Pritam Shah and Parag

Shah

Promoter Group Persons and entities constituting the promoter group of our Company in terms

of Regulation 2(1)(zb) of the SEBI Regulations and which is disclosed in

Promoters, Promoter Group and Group Companies on page 185

Promoter Group Selling

Shareholders

Netra Shah and Priti Shah

Registered Office The registered office of our Company, which is located at Flat No.1, Plot No.

19, Nav Rajasthan Society, S.B. Road, Shivaji Nagar, Pune 411 016

Registrar of Companies/RoC Registrar of Companies, Maharashtra at Pune

Remaining Selling

Shareholders

The Other Selling Shareholders excluding the Promoter Group Selling

Shareholders

Restated Consolidated

Financial Statements

Restated consolidated financial statement of assets and liabilities as at

December 31, 2015 and March 31, 2015, 2014, 2013, 2012 and 2011 and

statement of profit and loss and statement of cash flows for the nine months

ended December 31, 2015 and for the years ended March 31, 2015, 2014,

2013, 2012 and 2011 of our Company and its Subsidiary read alongwith all the

notes thereto and included in the section Financial Statements on page 192

Restated Financial Statements Collectively, the Restated Consolidated Financial Statements and Restated

Standalone Financial Statements

Restated Standalone Financial

Statements

Restated standalone financial statement of assets and liabilities as at December

31, 2015 and March 31, 2015, 2014, 2013, 2012 and 2011 and statement of

profit and loss and statement of cash flows for the nine months ended

December 31, 2015 and for the years ended March 31, 2015, 2014, 2013, 2012

and 2011 of our Company read along with all the notes thereto and included in

the section Financial Statements on page 249

Selling Shareholders Collectively, the Investor Selling Shareholders and the Other Selling

Shareholders

Shareholders Shareholders of our Company from time to time

Statutory Auditor/Auditor Statutory auditor to our Company, namely Haribhakti & Co., LLP, Chartered

Accountants

Subsidiary Subsidiary of our Company namely, Bhagyalaxmi Dairy Farms Private

Limited

Working Capital Consortium

Loan / WCCL

The working capital facility comprising of fund based and non-fund based

facilities of 2,400.00 million and 55.00 million, respectively, sanctioned to

our Company by the consortium consisting of Union Bank of India, State Bank

of India and IDBI Bank Limited

Issue Related Terms

Term Description

Acknowledgement Slip The slip or document issued by the Designated Intermediary to a Bidder as

proof of registration of the Bid cum Application Form

Allot/Allotment/Allotted Unless the context otherwise requires, the allotment of the Equity Shares

pursuant to the Fresh Issue and transfer of the Equity Shares offered by the

Selling Shareholders pursuant to the Offer for Sale to the successful Bidders

Allottee A successful Bidder to whom the Equity Shares are Allotted

Allotment Advice Note or advice or intimation of Allotment sent to each successful Bidder after

the Basis of Allotment has been approved by the Designated Stock Exchange

2

Term Description

Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor Portion,

with a minimum Bid of 100 million, in accordance with the requirements

specified in the SEBI Regulations and the Red Herring Prospectus

Anchor Investor Allocation

Price

The price at which Equity Shares will be allocated to the Anchor Investor in

terms of this Red Herring Prospectus and the Prospectus, which will be

decided by our Company in consultation with the Investor Selling Shareholders

and the BRLMs on the Anchor Investor Bid/Issue Period Anchor Investor Application

Form

The form used by an Anchor Investor to make a Bid in the Anchor Investor

Portion and which will be considered as an application for Allotment in terms

of the Red Herring Prospectus and Prospectus

Anchor Investor Bid/Issue

Period

The day, one Working Day prior to the Bid/Issue Opening Date, on which Bids

by Anchor Investors shall be submitted, prior to and after which the BRLMs

will not accept any bids from Anchor investors, and Allocation to Anchor

Investors shall be completed

Anchor Investor Issue Price Final price at which the Equity Shares will be Allotted to Anchor Investors in

terms of this Red Herring Prospectus and the Prospectus, which price will be

equal to or higher than the Issue Price, but not higher than the Cap Price. The

Anchor Investor Issue Price will be decided by our Company in consultation

with the Investor Selling Shareholders and the BRLMs Anchor Investor Portion Up to 60% of the QIB Portion which may be allocated by our Company in

consultation with the Investor Selling Shareholders and the BRLMs to Anchor

Investors on a discretionary basis.

One-third of the Anchor Investor Portion shall be reserved for domestic Mutual

Funds, subject to valid Bids being received from domestic Mutual Funds at or

above the Anchor Investor Allocation Price

Application Supported by

Blocked Amount/ASBA

An application, whether physical or electronic, used by ASBA Bidders, to

make a Bid authorising a SCSB to block the Bid Amount in the ASBA

Account.

Application Supported by

Blocked Amount Form

/ASBA Form

An application form, whether physical or electronic, used by ASBA Bidders,

which will be considered as the application for Allotment in terms of this Red

Herring Prospectus and the Prospectus

ASBA Account A bank account maintained with an SCSB and specified in the ASBA Form

submitted by Bidders for blocking the Bid Amount mentioned in the ASBA

Form

ASBA Bidder All Bidders except Anchor Investors

Bankers to the Issue/Escrow

Collection Banks

Banks which are clearing members and registered with SEBI as bankers to an

issue and with whom the Escrow Account(s) for Anchor Investors will be

opened, in this case being Axis Bank Limited

Basis of Allotment Basis on which the Equity Shares will be Allotted to successful Bidders under

the Issue and which is described in the section Issue Procedure on page 404

Bid An indication to make an offer during the Bid/Issue Period by a Bidder (other

than Anchor Investor) pursuant to submission of the Bid cum Application

Form, or during the Anchor Investor Bid/Issue Period by Anchor Investors, to

subscribe to or purchase the Equity Shares of our Company at a price within

the Price Band, including all revisions and modifications thereto as permitted

under the SEBI Regulations in terms of this Red Herring Prospectus and the

Bid cum Application Form

Bid Amount The highest value of the optional Bids indicated in the Bid cum Application

Form and payable by the Anchor Investors/blocked in the ASBA Account for

other Bidders on submission of a Bid in the Issue which shall be net of the

Employee Discount and Retail Discount, as applicable.

However for Eligible Employees applying in the Employee Reservation

Portion and the Retail Individual Bidders applying at the Cut-Off Price, the Bid

amount shall be Cap Price net of Employee Discount or Retail Discount

multiplied by the number of Equity Shares Bid for by such Eligible Employee

or Retail Individual Bidders and mentioned in the Bid cum Application Form

3

Term Description

net of Employee Discount / Retail Discount, as the case may be.

Bid cum Application Form The Anchor Investor Application Form or the ASBA Form, as the context

requires

Bid/ Issue Closing Date Except in relation to any Bids received from the Anchor Investors, the date

after which the Designated Intermediaries will not accept any Bids, which shall

be notified in all editions of the English national daily newspaper Financial

Express, all editions of the Hindi national daily newspaper Jansatta, and the

Pune edition of the Marathi newspaper Loksatta (Marathi being the regional

language of Maharashtra where our Registered Office is located), each with

wide circulation

Bid/ Issue Opening Date Except in relation to Bids received from the Anchor Investors, the date on

which the Designated Intermediaries shall start accepting ASBA Bids for the

Issue, which shall be notified in all editions of the English national daily

newspaper Financial Express, all editions of the Hindi national daily

newspaper Jansatta, and the Pune edition of the Marathi newspaper Loksatta

(Marathi being the regional language of Maharashtra where our Registered

Office is located), each with wide circulation

Bid/ Issue Period Except in relation to Anchor Investors, the period between the Bid/Issue

Opening Date and the Bid/Issue Closing Date, inclusive of both days, during

which prospective Bidders can submit their Bids, including any revisions

thereof

Bid Lot [] Equity Shares

Bidder Any prospective investor who makes a Bid pursuant to the terms of this Red

Herring Prospectus and the Bid cum Application Form

Bidding Centres Centres at which the Designated Intermediaries shall accept the ASBA Forms,

i.e., Designated SCSB Branch for SCSBs, Specified Locations for Syndicate,

Broker Centres for Registered Brokers, Designated RTA Locations for RTAs

and Designated CDP Locations for CDPs.

Book Building Process The book building process, as provided in Schedule XI of the SEBI

Regulations, in terms of which this Issue is being made

Broker Centres Broker centres notified by the Stock Exchanges where Bidders can submit the

ASBA Forms to a Registered Broker. The details of such Broker Centres,

along with the names and contact details of the Registered Broker are available

on the respective websites of the Stock Exchanges

BRLMs/Book Running Lead

Managers

The book running lead managers to the Issue, being Kotak Mahindra Capital

Company Limited, JM Financial Institutional Securities Limited, IDFC

Securities Limited and Motilal Oswal Investment Advisors Private Limited

(In compliance with the proviso to Regulation 21A (1) of the SEBI (Merchant

Bankers) Regulations, 1992, read with proviso to Regulation 5 (3) of the SEBI

Regulations, IDFC Securities Limited and Motilal Oswal Investment Advisors

Private Limited will be involved only in marketing of the Issue)

CAN / Confirmation of

Allocation Note

Notice or intimation of allocation of the Equity Shares sent to Anchor

Investors, who have been allocated the Equity Shares, after the Anchor

Investor Bid/Issue Period

Cap Price The higher end of the Price Band, subject to any revision thereto, above which

the Issue Price and the Anchor Investor Issue Price will not be finalised and

above which no Bids will be accepted

Cash Escrow Agreement Agreement dated April 11, 2016 entered into by our Company, the Selling

Shareholders, the Registrar to the Issue, the BRLMs and the Escrow Collection

Bank(s) for collection of the Bid Amounts from the Anchor Investors, transfer

of funds from the Escrow Account to the Public Issue Account and where

applicable, refunds of the amounts collected from the Bidders, on the terms and

conditions thereof

Collecting Depository

Participant or CDP

A depository participant as defined under the Depositories Act, 1996,

registered with SEBI and who is eligible to procure Bids at the Designated

CDP Locations in terms of circular no. GR/CFD/POLICYCELL/11/2015 dated

November 10, 2015 issued by SEBI.

4

Term Description

Controlling Branches Such branches of SCSBs which coordinate Bids under the Issue with the

BRLMs, the Registrar and the Stock Exchanges, a list of which is available on

the website of SEBI at http://www.sebi.gov.in

Cut-off Price The Issue Price, finalised by our Company in consultation with the Investor

Selling Shareholders and the BRLMs. Only Retail Individual Bidders and the

Eligible Employees bidding in the Employee Reservation Portion are entitled

to Bid at the Cut-off Price, for a Bid Amount not exceeding 200,000 (which

shall be net of Employee Discount / Retail Discount, as applicable). QIBs

(including Anchor Investors) and Non-Institutional Bidders are not entitled to

Bid at the Cut-off Price

Demographic Details Details of the Bidders including the Bidders address, name of the Bidders

father/ husband, investor status, occupation and bank account details

Designated Date Date on which funds are transferred by the Escrow Collection Bank(s) from the

Escrow Account(s) or instructions are given to the SCSBs to unblock the

ASBA Accounts and transfer the amounts blocked by SCSBs as the case may

be, to the Public Issue Account or the Refund Account, as appropriate, after the

Prospectus is filed with the RoC, following which the board of directors may

Allot Equity Shares to successful Bidders/Applicants in the Fresh Issue and the

Selling Shareholders may give delivery instructions for the transfer of the

Equity Shares constituting the Offer for Sale

Designated Intermediaries Syndicate, Sub-Syndicate/Agents, SCSBs, Registered Brokers, Brokers, the

CDPs and RTAs, who are authorised to collect ASBA Forms from the Bidders,

in relation to the Issue

Designated CDP Locations Such locations of the CDPs where ASBA Bidders can submit the ASBA

Forms.

The details of such Designated CDP Locations, along with names and contact

details of the Collecting Depository Participants eligible to accept ASBA

Forms are available on the respective websites of the Stock Exchanges

(http://www.bseindia.com/Static/Markets/PublicIssues/RtaDp.aspx?expandable

=6 and

http://www.nseindia.com/products/content/equities/ipos/asba_procedures.htm )

Designated RTA Locations Such locations of the RTAs where ASBA Bidders can submit the ASBA

Forms to RTAs.

The details of such Designated RTA Locations, along with names and contact

details of the RTAs eligible to accept ASBA Forms are available on the

respective websites of the Stock Exchanges

(http://www.bseindia.com/Static/Markets/PublicIssues/RtaDp.aspx?expandable

=6 and

http://www.nseindia.com/products/content/equities/ipos/asba_procedures.htm)

Designated SCSB Branches Such branches of the SCSBs which shall collect the ASBA Forms submitted

by ASBA Bidders, a list of which is available on the website of SEBI at

http://www.sebi.gov.in/sebiweb/home/list/5/3/3/0/0/Recognised-Intermediaries

or such other website as may be prescribed by SEBI from time to time

Designated Stock Exchange BSE Limited

Diluted Earnings per Share Diluted Earnings per Share has been calculated by dividing restated profit after

tax attributable to Equity shareholders for the year or period by weighted

average dilutive number of Equity Shares.

Draft Red Herring Prospectus

or DRHP

The draft red herring prospectus dated September 30, 2015 issued in

accordance with the SEBI Regulations, which did not contain complete

particulars of the price at which the Equity Shares will be Allotted

Escrow Collection Bank(s) The banks which are clearing members and registered with SEBI as bankers to

an issue and with whom the Escrow Account(s) will be opened Eligible Employees All or any of the following:

(a) a permanent and full time employee of our Company or of our Subsidiary as of the date of filing of this Red Herring Prospectus with the RoC and

5

Term Description

who continues to be an employee of our Company or of our Subsidiary

until the submission of the ASBA Form and is based, working and present

in India as on the date of submission of the ASBA Form;

(b) a Director of our Company, whether a whole time Director or otherwise, (excluding such Directors not eligible to invest in the Issue under

applicable laws, rules, regulations and guidelines) as of the date of filing

this Red Herring Prospectus with the RoC and who continues to be a

Director of our Company until the submission of the ASBA Form and is

based and present in India as on the date of submission of the ASBA

Form; and

(c) An employee of our Company, who is recruited against a regular vacancy but is on probation as on the date of filing this Red Herring Prospectus

with the RoC and date of submission of the ASBA Form will also be

deemed a permanent and a full time employee.

The maximum Bid Amount under the Employee Reservation Portion by an

Eligible Employee shall not exceed 200,000

Eligible NRIs NRIs from jurisdictions outside India where it is not unlawful to make an offer

or invitation under the Issue and in relation to whom the ASBA Form and this

Red Herring Prospectus constitutes an invitation to subscribe to or purchase the

Equity Shares

Employee Discount Our Company in consultation with the Investor Selling Shareholders and the

BRLMs, may offer a discount of up to [] per Equity Share on the Issue Price

to Eligible Employees and which shall be announced at least five Working

Days prior to the Bid/Issue Opening Date Employee Reservation

Portion

Portion of the Issue being 300,000 Equity Shares aggregating up to []

million available for allocation to Eligible Employees, on a proportionate basis

Escrow Account(s) Account(s) opened for this issue with the Escrow Collection Bank(s) and in

whose favour the Anchor Investors may issue transfer money through direct

credit/NECS/NEFT/RTGS in respect of the Bid Amount when submitting a

Bid

Equity Listing Agreement Listing agreements to be entered into by our Company with the Stock

Exchanges

First Bidder The Bidder whose name appears first in the Bid cum Application Form or

Revision Form and in case of joint Bids, whose name shall also appear as the

first holder of the beneficiary account held in joint names

Floor Price The lower end of the Price Band, subject to any revision thereto, at or above

which the Issue Price will be finalised and below which no Bids will be

accepted

Fresh Issue Fresh issue of up to [] Equity Shares aggregating up to 3,000 million by our

Company

IDFC Securities IDFC Securities Limited

IMARC International Market Analysis Research and Consulting

IMARC Report The report titled Indian Dairy Industry: 2015 dated July 30, 2015 by The

International Market Analysis Research and Consulting Group

Issue Public issue of up to [] Equity Shares of face value of 10 each for cash at a

price of [] each, aggregating up to [] million comprising the Fresh Issue and the Offer for Sale after taking into condieration Employee Discount and

Retail Discount, if applicable.

The Issue includes a reservation of 300,000 Equity Shares aggregating up to

[] million for subscription by Eligible Employees and the Issue less

Employee Reservation Portion is referred to as the Net Issue

Issue Price The final price at which the Equity Shares will be Allotted to Bidders other

than Anchor Investors. Equity Shares will be Allotted to Anchor Investors at

the Anchor Investor Issue Price in terms of this Red Herring Prospectus. Issue

6

Term Description

Price will be decided by our Company in consultation with the Investor Selling

Shareholders and the BRLMs, on the Pricing Date. Unless otherwise stated or

the context otherwise implies, the term Issue Price refers to the Issue Price

applicable to investors other than Anchor Investors

A discount of up to [] per Equity Share on the Issue Price may be offered to

Eligible Employees bidding in the Employee Reservation Portion and a

discount of up to [] per Equity Share on the Issue Price may be offered to

Retail Individual Bidders. The Rupee amount of such discount, if any, will be

decided by our Company in consultation with the Investor Selling Shareholders

and the BRLMs

JM Financial JM Financial Institutional Securities Limited (formerly JM Financial

Institutional Securities Private Limited)

Kotak Kotak Mahindra Capital Company Limited

Mutual Fund Portion 5% of the QIB Portion (excluding the Anchor Investor Portion), or [] Equity

Shares which shall be available for allocation to Mutual Funds only

Net Issue The Issue less the Employee Reservation Portion

Net Proceeds Proceeds of the Fresh Issue less our Companys share of Issue expenses. For

further information about the Issue expenses, see Objects of the Issue on

page 97

Non-Institutional Bidders All Bidders that are not QIBs or Retail Individual Bidders or Eligible

Employees bidding in the Employee Reservation Portion and who have Bid for

Equity Shares for an amount more than 200,000 (but not including NRIs other

than Eligible NRIs)

Non-Institutional Portion The portion of the Net Issue being not being less than 15% of the Net Issue, or

[] Equity Shares which shall be available for allocation on a proportionate

basis to Non-Institutional Bidders, subject to valid Bids being received at or

above the Issue Price

Offer Agreement Agreement dated September 30, 2015, as amended by amendment agreement

dated March 22, 2016 amongst our Company, the Selling Shareholders and the

BRLMs, pursuant to which certain arrangements are agreed to in relation to the

Issue

Offer For Sale Offer for sale of up to 20,572,573 Equity Shares aggregating to up to []

million, comprising of such number of Equity Shares by each of the Selling

Shareholders as set out in The Issue on page 65

Price Band Price band of a minimum price of [] per Equity Share (Floor Price) and the

maximum price of [] per Equity Share (Cap Price) including any revisions

thereof

Price Band and the minimum Bid Lot size for the Issue will be decided by our

Company in consultation with the Investor Selling Shareholders and the

BRLMs and will be advertised, at least five Working Days prior to the

Bid/Issue Opening Date, in all editions of the English national daily newspaper

Financial Express, all editions of the Hindi national daily newspaper Jansatta,

and the Pune edition of the Marathi newspaper Loksatta (Marathi being the

regional language of Maharashtra where our Registered Office is located), each

with wide circulation

Pricing Date Date on which our Company in consultation with the Investor Selling

Shareholders and the BRLMs, will finalise the Issue Price

Prospectus The Prospectus to be filed with the RoC in accordance with Section 26 of the

Companies Act, 2013 containing, inter alia, the Issue Price that is determined

at the end of the Book Building Process, the size of the Issue and certain other

information including any addenda or corrigenda there to

Public Issue Account(s) Account(s) opened with the Public Issue Bank(s) to receive monies from the

Escrow Account(s) and to which funds shall be transferred by the SCSBs from

the ASBA Accounts, on or after the Designated Date

Public Issue Bank(s) Bank(s) with whom the Public Issue Account for collection of bidding amount

from Escrow Account and ASBA Accounts will be opened, in this case being

7

Term Description

Axis Bank Limited

QIB Portion The portion of the Net Issue (including the Anchor Investor Portion)

amounting to at least 75% of the Net Issue consisting of [] Equity Shares

which shall be Allotted to QIBs (including Anchor Investors) on a

proportionate basis

Qualified Institutional Buyers

or QIBs

Qualified institutional buyers as defined under Regulation 2(1)(zd) of the SEBI

Regulations

Red Herring Prospectus or

RHP

This red herring prospectus dated April 21, 2016 issued by our Company in

accordance with Section 32 of the Companies Act, 2013 and the provisions of

the SEBI Regulations, which does not have complete particulars of the price at

which the Equity Shares will be offered. This Red Herring Prospectus will be

registered with the RoC at least three days before the Bid/Issue Opening Date

and will become the Prospectus upon filing with the RoC after the Pricing Date

Refund Accounts The account opened with the Refund Banks, from which refunds, if any, of the

whole or part of the Bid Amount to Anchor Investors shall be made

Refund Bank Axis Bank Limited

Refunds through electronic

transfer of funds

Refunds through NECS, Direct Credit, RTGS or NEFT, as applicable

Registered Brokers Stock brokers registered with the Stock Exchanges having nationwide

terminals, other than the members of the Syndicate

Registrar and Share Transfer

Agents or RTAs

Registrar and share transfer agents registered with SEBI and eligible to procure

Bids at the Designated RTA Locations in terms of circular no.

CIR/CFD/POLICYCELL/11/2015 dated November 10, 2015 issued by SEBI

Registrar to the

Issue/Registrar

Registrar to the Issue, namely, Karvy Computershare Private Limited

Registrar Agreement The agreement dated September 29, 2015, as amended by an amendment

agreement dated March 22, 2016 entered into between our Company, the

Selling Shareholders and the Registrar to the Issue, in relation to the

responsibilities and obligations of the Registrar to the Issue pertaining to the

Issue

Retail Discount Our Company in consultation with the Investor Selling Shareholders and the

BRLMS, may decide to offer a discount aggregating to [] per Equity Share

to the Issue Price to the Retail Individual Bidders and which shall be

announced at least five Working Days prior to the Bid/ Issue Opening Date Retail Individual Bidders Individual Bidders other than Eligible Employees bidding in the Employee

Reservation Portion, who have Bid for Equity Shares for an amount not more

than 200,000 in any of the bidding options in the Net Issue (including HUFs

applying through their Karta and Eligible NRIs)

Retail Portion The portion of the Net Issue being not more than 10% of the Net Issue, or []

Equity Shares which shall be available for allocation to Retail Individual

Bidders subject to valid Bids being received at or above the Issue Price

Revision Form Form used by the Retail Individual Bidders, to modify the quantity of the

Equity Shares or the Bid Amount in any of their ASBA Forms or any previous

Revision Forms. Kindly note that QIB Bidders and Non-Institutional Bidders

are not allowed to withdraw or lower their Bid (in terms of number of Equity

Shares or the Bid Amount) at any stage

Self Certified Syndicate

Banks or SCSBs

The banks registered with SEBI, offering services in relation to ASBA, a list of

which is available on the website of SEBI

(http://www.sebi.gov.in/sebiweb/home/list/5/3/3/0/0/Recognised-

Intermediaries) or such other website as may be prescribed by SEBI from time

to time

Share Escrow Agreement Agreement dated January 19, 2016, as amended by amendment agreement

dated April 8, 2016 entered into between the Selling Shareholders, our

Company, the BRLMs and the Escrow Agent in connection with the transfer of

Equity Shares under the Offer for Sale by the Selling Shareholders and credit

of such Equity Shares to the demat account of the Allottees

Specified Locations Bidding centres where the Syndicate shall accept ASBA Forms from Bidders.

Stock Exchanges BSE and NSE

8

Term Description

Syndicate Agreement Agreement dated April 11, 2016 entered into between the BRLMs, the

Syndicate Members, the Registrar to the Issue, our Company, and the Selling

Shareholders in relation to collection of Bid cum Application Forms by

Syndicate

Syndicate Members Intermediaries registered with SEBI who are permitted to carry out activities as

an underwriter, namely, Kotak Securities Limited, JM Financial Services

Limited, Sharekhan Limited and Motilal Oswal Securities Limited

Syndicate / Members of the

Syndicate

The BRLMs and Syndicate Members

TRS/Transaction Registration

Slip

The slip or document issued by the Syndicate, or the Designated Intermediary

(only on demand), as the case may be, to the Bidder as proof of registration of

the Bid

Underwriters The BRLMs and Syndicate Members

Underwriting Agreement Agreement to be entered into among the Underwriters, our Company and the

Selling Shareholders

Working Days Working Day, with reference to (a) announcement of Price Band; and (b)

Bid/Issue Period, shall mean all days, excluding Saturdays, Sundays and public

holidays, on which commercial banks in Mumbai are open for business; and

(c) the time period between the Bid/Issue Closing Date and the listing of the

Equity Shares on the Stock Exchanges, shall mean all trading days of Stock

Exchanges, excluding Sundays and bank holidays, as per the SEBI Circular

SEBI/HO/CFD/DIL/CIR/P/2016/26 dated January 21, 2016

Technical/Industry Related Terms

Term Description

BIS Bureau of Indian Standards

BR Base Rate

BRR Bank Base Rate

ERP Enterprise Resource Planning

EU European Union

FDA Food and Drug Administration

FSSAI Food Safety and Standards Authority of India

GCMMF Gujarat Co-operative Milk Marketing Federation

ISO International Organisation for Standardisation

LLPD Lakh Litre per day

MMT Million Metric Tonne

SAP Systems, Applications and Products

UHT Ultra Heat Treatment

Conventional Terms/ Abbreviations

Term Description

AGM Annual general meeting

AIF Alternative Investment Fund as defined in and registered with SEBI under the

Securities and Exchange Board of India (Alternative Investment Funds)

Regulations, 2012, as amended

AS/Accounting Standards Accounting Standards issued by the Institute of Chartered Accountants of

India, as notified by the Companies (Accounting Standards) Rules, 2006

BSE BSE Limited

CAGR Compounded annual growth rate

Calendar Year Unless the context requires, shall refer to the twelve month period ending

December 31, of the year

Category III Foreign Portfolio

Investors/ Category III FPIs

FPIs who are registered as Category III foreign portfolio investors under the

SEBI FPI Regulations

CDSL Central Depository Services (India) Limited

CIN Corporate Identity Number

Client ID Client Identification Number of the Bidders beneficiary account

9

Term Description

Companies Act Companies Act, 1956 (without reference to the provisions thereof that have

ceased to have effect upon notification of the Notified Sections) and the

Companies Act, 2013, read with the rules, regulations, clarifications and

modifications thereunder

Companies Act, 2013 The Companies Act, 2013, to the extent in force pursuant to the notification of

the Notified Sections, read with the rules, regulations, clarifications and

modifications thereunder

Cr.P.C. The Code of Criminal Procedure, 1973

Depositories NSDL and CDSL

Depositories Act Depositories Act, 1996

DIN Director Identification Number

DP ID Depository Participants Identification

DP/Depository Participant A depository participant as defined under the Depositories Act

EGM Extraordinary General Meeting

EPS Earnings Per Share

FCNR Foreign Currency Non-Resident

FDI Foreign Direct Investment

FEMA

Foreign Exchange Management Act, 1999 read with rules and regulations

thereunder and amendments thereto

FEMA Regulations Foreign Exchange Management (Transfer or Issue of Security by a Person

Resident Outside India) Regulations, 2000, as amended

FIIs Foreign Institutional Investors as defined under the SEBI FPI Regulations

FPIs Foreign Portfolio Investors as defined under the SEBI FPI Regulations

Financial

Year/Fiscal/FY/Fiscal Year

The period of 12 months ending March 31 of that particular year

FIPB Foreign Investment Promotion Board

FVCI Foreign venture capital investors as defined and registered with SEBI under

the Securities and Exchange Board of India (Foreign Venture Capital

Investors) Regulations, 2000

GDP Gross Domestic Product

GIR General Index Register

GoI/Government Government of India

HUF Hindu Undivided Family

ICAI Institute of Chartered Accountants of India

IFC International Financial Corporation

IFRS International Financial Reporting Standards

Income Tax Act/ I.T. Act The Income Tax Act, 1961

Ind-AS The Indian Accounting Standard 101 First-time Adoption of Indian

Accounting Standards

India The Republic of India

Indian GAAP Generally Accepted Accounting Principles in India

IPC The Indian Penal Code, 1860

IPO Initial Public Offering

IRDAI Insurance Regulatory and Development Authority of India

LIBOR London Interbank Offered Rate

MICR Magnetic ink character recognition

Mutual Funds Mutual Funds registered with SEBI under the Securities and Exchange Board

of India (Mutual Funds) Regulations, 1996

National Investment Fund National Investment Fund set up by resolution F. No. 2/3/2005-DD-II dated

November 23, 2005 of the GoI, published in the Gazette of India

NBFC Non Banking Financial Company

NAV Net Asset Value

NECS National Electronic Clearing Service

NEFT National Electronic Fund Transfer

Notified Sections The sections of the Companies Act, 2013 that have been notified as having

come into effect prior to the date of this Red Herring Prospectus

NR / Non-Resident A person resident outside India, as defined under the FEMA and includes an

10

Term Description

NRI, FIIs, FPIs and FVCIs

NRI A person resident outside India, who is a citizen of India or a person of Indian

origin, and shall have the meaning ascribed to such term in the Foreign

Exchange Management (Deposit) Regulations, 2000

NRO Account Non-Resident Ordinary Account

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

OCB / Overseas Corporate

Body

A company, partnership, society or other corporate body owned directly or

indirectly to the extent of at least 60% by NRIs including overseas trusts, in

which not less than 60% of beneficial interest is irrevocably held by NRIs

directly or indirectly and which was in existence on October 3, 2003 and

immediately before such date had taken benefits under the general permission

granted to OCBs under FEMA

p.a. Per annum

P/E Ratio Price/earnings ratio

PAN Permanent account number

PAT Profit after tax

RBI Reserve Bank of India

Rule 144A Rule 144A under the U.S. Securities Act

RoNW Return on Net Worth

/Rs./Rupees Indian Rupees

Regulation S Regulation S under the U.S. Securities Act

RTGS Real time gross settlement

SBI State Bank of India

SCRA Securities Contracts (Regulation) Act, 1956

SCRR Securities Contracts (Regulation) Rules, 1957

SEBI The Securities and Exchange Board of India constituted under the SEBI Act

SEBI Act Securities and Exchange Board of India Act, 1992

SEBI AIF Regulations Securities and Exchange Board of India (Alternative Investment Funds)


SEBI ESOP Regulations Securities and Exchange Board of India (Share Based Employee Benefits)

Regulations, 2014

SEBI FII Regulations Securities and Exchange Board of India (Foreign Institutional Investors)


SEBI FPI Regulations Securities and Exchange Board of India (Foreign Portfolio Investors)


SEBI FVCI Regulations Securities and Exchange Board of India (Foreign Venture Capital Investor)


SEBI Regulations Securities and Exchange Board of India (Issue of Capital and Disclosure

Requirements) Regulations, 2009, as amended

SEBI Listing Regulations Securities and Exchange Board of India (Listing Obligations and Disclosure

Requirements) Regulations, 2015

SEBI Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 2011, as amended

SEBI VCF Regulations Securities and Exchange Board of India (Venture Capital Funds) Regulations,

1996, as amended

SICA Sick Industrial Companies (Special Provisions) Act, 1985, as amended

SPV Special Purpose Vehicle

STT Securities Transaction Tax

State Government The government of a State in India

UBI Union Bank of India

UK United Kingdom

ULIP Unit Linked Insurance Plan

U.S. / United States / USA United States of America

U.S. GAAP Generally Accepted Accounting Principles in the United States of America

U.S. QIBs Qualified Institutional Buyer as defined in Rule 144A under the U.S.

Securities Act

11

Term Description

U.S. Securities Act U.S. Securities Act of 1933

USD / US$ United States Dollars

VAT Value Added Tax

VCFs Venture capital funds as defined in and registered with SEBI under the SEBI

VCF Regulations or the SEBI AIF Regulations, as the case may be

WC Working Capital

12

PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA

All references to India contained in this Red Herring Prospectus are to the Republic of India and all references

to the U.S., USA or the United States are to the United States of America.

Financial Data

Unless stated otherwise, financial data included in this Red Herring Prospectus is derived from the Restated

Financial Statements of our Company, prepared in accordance with Indian GAAP and the Companies Act, 1956

and / or Companies Act, 2013 and restated in accordance with the SEBI Regulations, as stated in the report of

the Auditors. The Restated Financial Statements have been included in the section Financial Statements from

page 191 to page 301.

Our Companys financial year commences on April 1 and ends on March 31 of the next year, so all references to

a particular financial year, unless stated otherwise, are to the 12 month period ended on March 31 of that year.

There are significant differences between Indian GAAP, U.S. GAAP and IFRS. The reconciliation of the

financial information to IFRS or U.S. GAAP financial information has not been provided. Our Company has not

attempted to explain those differences or quantify their impact on the financial data included in this Red Herring

Prospectus, and it is urged that you consult your own advisors regarding such differences and their impact on

our financial data. In addition, see Risk Factors Our Company, will be required to prepare financial

statements under Ind-AS (which is Indias convergence to IFRS). The transition to Ind-AS in India is very

recent and there is no clarity on the impact of such transition on our Company on page 36. Accordingly, the

degree to which the financial information included in this Red Herring Prospectus will provide meaningful

information is entirely dependent on the readers level of familiarity with Indian accounting practices, Indian

GAAP, the Companies Act and the SEBI Regulations. Any reliance by persons not familiar with Indian

accounting practices, Indian GAAP, the Companies Act, the SEBI Regulations on the financial disclosures

presented in this Red Herring Prospectus should accordingly be limited.

In this Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts

listed are due to rounding off.

Unless otherwise indicated, any percentage amounts, as set forth in this Red Herring Prospectus, including in the

sections Risk Factors, Our Business, Managements Discussion and Analysis of Financial Condition and

Results of Operations on pages 16, 141 and 302 respectively, have been calculated on the basis of the Restated

Financial Statements prepared in accordance with Indian GAAP and the Companies Act, 1956 to the extent

applicable and the Companies Act, 2013 to the extent enforced and restated in accordance with the SEBI

Regulations.

Currency and Units of Presentation

All references to:

or Rupees or Rs. are to Indian Rupees, the official currency of the Republic of India; and

US$ or USD are to United States Dollars, the official currency of the United States of America.

Our Company has presented certain numerical information in this Red Herring Prospectus in million units.

One million represents 1,000,000 and one billion represents 1,000,000,000.

Industry and Market Data

Unless stated otherwise, industry and market data used in this Red Herring Prospectus has been obtained or

derived from the report titled Indian Dairy Industry: 2015 dated July 30, 2015 by The International Market

Analysis Research and Consulting (IMARC) Group (the IMARC Report) and publicly available

information as well as other industry publications and sources. The IMARC Report has been prepared at the

request of our Company.

Industry publications generally state that information contained in those publications has been obtained from

sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability

cannot be assured. Accordingly, no investment decision should be made on the basis of such information.

Although we believe that industry data used in this Red Herring Prospectus is reliable, it has not been

13

independently verified by the BRLMs or our Company, the Selling Shareholders or any of their affiliates or

advisors. Such data involves risks, uncertainties and numerous assumptions and is subject to change based on

various factors, including those discussed in the section Risk Factors on page 16. Accordingly, investment

decisions should not be based solely on such information.

The extent to which market and industry data used in this Red Herring Prospectus is meaningful depends on the

readers familiarity with and understanding of methodologies used in compiling such data. There are no

standard data gathering methodologies in the industry in which our business is conducted, and methodologies

and assumptions may vary widely among different industry sources.

In accordance with the SEBI Regulations, the section Basis for Issue Price on page 106 includes information

relating to our peer group companies. Such information has been derived from publicly available sources, and

neither we nor the Selling Shareholders or the BRLMs have independently verified such information.

Exchange Rates

This Red Herring Prospectus contains conversions of certain other currency amounts into Indian Rupees that

have been presented solely to comply with the SEBI Regulations. These conversions should not be construed as

a representation that these currency amounts could have been, or can be converted into Indian Rupees, at any

particular rate or at all.

The following table sets forth, for the periods indicated, information with respect to the exchange rate between

the Rupee and the US$ (in Rupees per US$):

(in )

Currency December

31, 2015

As on March

31, 2015

As on March

31, 2014(1)

As on March

31, 2013(2)

As on March

31, 2012(3)

As on March

31, 2011

1 USD 66.32 62.59 60.10 54.39 51.16 44.65

1 EUR 72.50 67.51 82.58 69.54 51.15 63.24 Note: 1. Period end for Fiscal 2014 taken on March 28, 2014 as data is not available for March 29, 2014, March 30, 2014 and March 31, 2014

as these were non-trading days.

2. Period end for Fiscal 2013 taken on March 28, 2013 as data is not available for March 29, 2013, March 30, 2013 and March 31, 2013 as these were non-trading days.

3. Period end for Fiscal 2012 taken on March 30, 2012 as data is not available for March 31, 2012 as this was non-trading day.

14

FORWARD-LOOKING STATEMENTS

This Red Herring Prospectus contains certain forward-looking statements. These forward-looking statements

generally can be identified by words or phrases such as aim, anticipate, believe, expect, estimate,

intend, objective, plan, project, will, will continue, will pursue or other words or phrases of

similar import. Similarly, statements that describe our strategies, objectives, plans or goals are also forward-

looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions about us

that could cause actual results to differ materially from those contemplated by the relevant forward-looking

statement.

Actual results may differ materially from those suggested by forward-looking statements due to risks or

uncertainties associated with expectations relating to, inter alia, regulatory changes pertaining to the industries

in India in which we operate and our ability to respond to them, our ability to successfully implement our

strategy, our growth and expansion, technological changes, our exposure to market risks, general economic and

political conditions in India which have an impact on its business activities or investments, the monetary and

fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates,

equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in

domestic laws, regulations and taxes and changes in competition in the industries in which we operate.

Certain important factors that could cause actual results to differ materially from our expectations include, but

are not limited to, the following:

Dependence on third parties for procurement of raw milk and transportation and other services;

Changes in customer preferences;

Increase in competition in the dairy industry;

Our geographical concentration;

Emergence of modern trade channels;

Non compliance with changes in the safety, health, environmental and other regulations applicable to us;

Reliance on institutional lenders to meet our financial requirements and non compliance with specific obligations thereunder; and

General economic and business conditions and policies in India.

For further discussion on factors that could cause actual results to differ from expectations, see Risk Factors,

Our Business and Managements Discussion and Analysis of Financial Condition and Results of Operations

on pages 16, 141 and 302, respectively. By their nature, certain market risk disclosures are only estimates and

could be materially different from what actually occurs in the future. As a result, actual gains or losses could

materially differ from those that have been estimated.

There can be no assurance to Bidders that the expectations reflected in these forward-looking statements will

prove to be correct. Given these uncertainties, Bidders are cautioned not to place undue reliance on such

forward-looking statements and not to regard such statements to be a guarantee of our future performance.

Forward-looking statements reflect current views as of the date of this Red Herring Prospectus and are not a

guarantee of future performance. These statements are based on the managements beliefs and assumptions,

which in turn are based on currently available information. Although we believe the assumptions upon which

these forward-looking statements are based are reasonable, any of these assumptions could prove to be

inaccurate, and the forward-looking statements based on these assumptions could be incorrect. Neither our

Company, our Directors, the Selling Shareholders, the BRLMs nor any of their respective affiliates have any

obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or

to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. Our

Company will ensure that the investors in India are informed of material developments until the time of the

grant of listing and trading permission by the Stock Exchanges.

Each Selling Shareholder will ensure that Bidders are informed of material developments in relation to

statements and undertakings made by such Selling Shareholder (in relation to itself and the Equity Shares

offerred by it in the Issue) in this Red Herring Prospectus until the time of grant of listing and trading

permission by the Stock Exchanges.

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SECTION II: RISK FACTORS

RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all the information

in this Red Herring Prospectus, including the risks and uncertainties described below, before making an

investment in our Equity Shares. The risks described below are not the only ones relevant to us or our Equity

Shares, the industry in which we operate in or to India. Additional risks and uncertainties, not presently known

to us or that we currently deem immaterial may also impair our business, results of operations and financial

condition. If any of the following risks, or other risks that are not currently known or are now deemed

immaterial, actually occur, our business, results of operations and financial condition could suffer, the price of

our Equity Shares could decline, and you may lose all or part of your investment. To obtain a complete

understanding of our Company, prospective investors should read this section in conjunction with the section

titled Our Business and Managements Discussions and Analysis of Financial Condition and Results of

Operations on pages 141 and 302, respectively, as well as the other financial and statistical information

contained in this Red Herring Prospectus. In making an investment decision, prospective investors must rely on

their own examination of us and the terms of the Issue including the merits and risks involved.

Prospective investors should pay particular attention to the fact that our Company is incorporated under the

laws of India and is subject to a legal and regulatory environment which may differ in certain respects from that

of other countries. This Red Herring Prospectus also contains forward-looking statements that involve risks,

assumptions, estimates and uncertainties. Our actual results could differ from those anticipated in these

forward-looking statements as a result of certain factors, including the considerations described below and

elsewhere in this Red Herring Prospectus. See Forward-Looking Statements on page 15.

Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the

financial or other implications of any of the risks described in this section. Unless otherwise stated, the financial

information of our Company used in this section has been derived from our Restated Consolidated Financial

Statements.

1. There are outstanding criminal proceedings against our Company and our Directors.

There are criminal proceedings outstanding against our Company. These proceedings have been

initiated by the Government of Maharashtra and the Government of Jammu & Kashmir alleging

contravention of Food Safety and Standards (Prohibition and Restriction of Sale) Regulations, 2011,

Food Safety and Standards (Food Product Standards & Additives) Regulations, 2011, Food Safety and

Standards (Packaging and Labelling) Regulations, 2011 and Food Safety and Standards Act, 2006 by

our Company and are pending before the Chief Judicial Magistrate (CJM), Alibaug, the CJM,

Kathua and the High Court of Jammu & Kashmir (wherein our Company has filed a writ petition

against the Food Safety and Standards authorities), respectively.

In relation to the criminal proceedings initiated by the Government of Maharashtra, if found guilty, our

Company would be liable to penalties ranging from 100,000 to 500,000 for each such violation. In relation to the criminal proceedings initiated by the Government of Jammu & Kashmir (and pending

before the High Court of Jammu and Kashmir), a fine of 5,000 has been levied on our Company and our Company was directed to destroy the products seized by the Food Safety Officer. The value of the

seized products was approximately 145,912. In relation to the criminal proceedings initiated by the Government of Jammu & Kashmir before the CJM, Kathua, if found guilty, our Company would be

liable to penalties ranging from 100,000 to 500,000 for each such violation.

Additionally, there are outstanding criminal proceedings against our Independent Directors pending

before appropriate forums. For further details, see Outstanding Litigation and Material

DevelopmentsLitigation involving our Directors on page 333.

2. Our operations are dependent on the supply of large amounts of cows raw milk, and our inability to

procure adequate amounts of good quality raw milk, at competitive prices, may have an adverse

effect on our business, results of operations and financial condition.

Our manufacturing operations are dependent on the supply of large amounts of cows raw milk, which

is the primary raw material used in the manufacture of all our dairy products. Our manufacturing

facilities are located at Manchar, Maharashtra and Palamaner, Andhra Pradesh, and our supply chain

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network includes procurement presence in 29 districts across Maharashtra, Andhra Pradesh, Karnataka

and Tamil Nadu. All of our products are derived only from cows milk and we procure milk from milk

farmers and through chilling centres and bulk coolers, with whom we have no formal arrangements.

Our average daily milk procurement for the nine months ended December 31, 2015 and 2014 and the

financial years 2015 and 2014 was approximately 1.00 million litres, 1.00 million litres, 1.05 million

litres and 0.77 million litres, respectively.

Since we have no formal arrangements with milk farmers, chilling centers or bulk coolers, they are not

obligated to supply their milk to us and they may choose to sell their milk to our competitors. Also, the

amount of raw milk procured and the price at which we procure such supplies, may fluctuate from time

to time in the absence of a formal supply arrangement. The availability and price of raw milk is subject

to a number of factors beyond our control including seasonal factors, environmental factors, general

health of cattle in India and Government policies and regulations. For instance, the volume and quality

of milk produced by cows is dependent upon the quality of nourishment provided by the cattle feed and

could be adversely affected during period of extreme weather. Also, any disease or epidemic affecting

the health of cows in India, specially within our procurement regions, could significantly affect our

ability to procure adequate amounts of raw milk. Further, any change in the policies of the Government

or the respective State Governments where our operations are based, including those affecting the use

or ownership of agricultural land or the dairy industry in general, could adversely affect our business

and results of operations.

We cannot assure you that we will be able to procure all of our raw milk requirements at prices

acceptable to us, or at all, or that we may be able to pass on any increase in the cost of milk to our

customers. Any inability on our part to procure sufficient quantities of raw milk and on commercially

acceptable terms, could lead to a decline in our production and sales volumes and value, which could

have an adverse effect on our business, results of operations and financial condition.

3. A slowdown or shutdown in our manufacturing operations or the under-utilisation of our

manufacturing facilities could have an adverse effect on our business, results of operations and

financial condition.

Our business is dependent upon our ability to manage our manufacturing facilities, which are subject to

various operating risks, including those beyond our control, such as the breakdown and failure of

equipment or industrial accidents and severe weather conditions and natural disasters. Any significant

malfunction or breakdown of our machinery may entail significant repair and maintenance costs and

cause delays in our operations. If we are unable to repair the malfunctioning machinery in a timely

manner or at all, our operations may need to be suspended until we procure machinery to replace the

same. Milk, which is our primary raw material, is a perishable product, any consequently malfunction

or break-down of our machinery or equipment resulting in the slowdown or stoppage of our operations

may adversely affect the quality of products stored with us. Further, we may also be exposed to public

liability from the end consumer for defects in the quality of the products stored in our premises.

Although we have not experienced any significant disruptions at our manufacturing facilities in the past,

we cannot assure you that there will not be any significant disruptions in our operations in the future.

Our inability to effectively respond to such events and rectify any disruption, in a timely manner and at

an acceptable cost, could lead to the slowdown or shut-down of our operations or the under-utilisation

of our manufacturing facilities, which in turn may have an adverse effect on our business, results of

operations and financial condition.

4. We do not have long term agreements with suppliers for our other raw materials and traded goods

and an increase in the cost of or a shortfall in the availability of such raw materials and traded

goods could have an adverse effect on our business, results of operations and financial condition.

Apart from raw milk, we require sugar, flavour, spices, cultures, packaging material, stabilizers,

preservatives and other additives for our manufacturing operations. The cost of materials consumed by

us constituted 74.84%, 76.42% and 76.72% of our total revenues for the nine months ended December

31, 2015 and the financial years 2015 and 2014, respectively. The price and availability of these raw

materials depend on several factors beyond our control, including overall economic conditions,

production levels, market demand and competition for such materials, production and transportation

cost, duties and taxes and trade restrictions. We usually do not enter into long term supply contracts

with any of the raw material suppliers and typically place orders with them in advance of our

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anticipated requirements. The absence of long term contracts at fixed prices exposes us to volatility in

the prices of raw materials that we require and we may be unable to pass these costs onto our customers.

We also face a risk that one or more of our existing suppliers may discontinue their supplies to us, and

any inability on our part to procure raw materials from alternate suppliers in a timely fashion, or on

terms acceptable us, may adversely affect our operations.

Further, we source packaging for our UHT products from Tetra Pak India Private Limited (Tetra

Pak), which is a leading food processing and packaging solutions company. Our negotiating ability

with Tetra Pak may be limited and if we are unable to procure packaging material from them on

reasonable terms, we cannot assure you that we will be able to make arrangements to procure alternate

packaging material, which could disrupt our operations. Any inability to obtain alternate packaging

material or to pass on additional costs to our customers, could have an adverse effect on our business,

results of operations and financial condition.

5. The improper handling, processing or storage of our raw materials or products, or spoilage of and

damage to such raw materials and products, or any real or perceived contamination in our products,

could subject us to regulatory action, damage our reputation and have an adverse effect on our

business, results of operations and financial condition.

All the products that we manufacture are for human consumption and are subject to risks such as

contamination, adulteration and product tampering during their manufacture, transport or storage.

Although raw milk is tested at collection centers and thereafter extensively tested at our facilities, we

cannot assure you that the quality tests conducted by us will be accurate at all times. Also, raw milk,

certain of our other raw materials and our products are required to be stored, handled and transported at

specific temperatures and under certain food safety conditions. Any shortcoming in the production or

storage of our products due to negligence, human error or otherwise, may damage our products and

result in non-compliance with applicable regulatory standards. Any allegation that our products contain

contaminants could damage our reputation, adversely affect our sales and result in legal proceedings

being initiated against us, irrespective of whether such allegations have any factual basis.

We also sell certain ingredients to institutional customers and if the end products manufactured by

those customers are found to be contaminated on account of our ingredients, our customers may return

our goods, terminate their relationships with us and initiate legal proceedings against us. We cannot

assure you that we will not be subject to such product liability claims in the future. Should any of our

products be perceived or found to be contaminated, we may be subject to regulatory action, product

recalls and our reputation, business, results of operations and financial condition may be adversely

affected.

6. The examination report of our Statutory Auditors on our restated financial statements contains

certain qualifications.

Our Statutory Auditor has provided certain qualifications in the examination report relating to our

restated financial statements and made certain observations pursuant to the Companies (Auditors

Report) Order, 2003 and Companies (Auditors Report) Order, 2015, for the last five financial years.

Pursuant to the Companies (Auditors Report) Order, 2003, our Statutory Auditor observed that for the

financial years 2011 and 2012, our internal control system needed to be strengthened to be

commensurate with the size of our Company. Although our Statutory A

PARAG MILK FOODS LIMITED

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