INDUSTRY PROFILE

“Assessment of the Indian Dairy Industry” dated August 3, 2018 issued by CRISIL
Limited (the “Crisil Report”) on our request. Neither we nor any other person connected with
the Offer have independently verified this information. The data may have been re-classified by
us for the purposes of presentation. Industry sources and publications generally state that the
information contained therein has been obtained from sources generally believed to be reliable,
but that their accuracy, completeness and underlying assumptions are not guaranteed and their
reliability cannot be assured. Industry sources and publications are also prepared based on
information as of specific dates and may no longer be current or reflect current trends. Industry
sources and publications may also base their information on estimates, projections, forecasts and
assumptions that may prove to be incorrect. Accordingly, investors must rely on their
independent examination of, and should not place undue reliance on, or base their investment
decision solely on this information. The recipient should not construe any of the contents in this
report as advice relating to business, financial, legal, taxation or investment matters and are
advised to consult their own business, financial, legal, taxation, and other advisors concerning
the transaction.
The CRISIL Report contains the following disclaimer:

“CRISIL Research, a division of CRISIL Limited (CRISIL) has taken due care and caution in
preparing this report (Report) based on the Information obtained by CRISIL from sources which
it considers reliable (Data). However, CRISIL does not guarantee the accuracy, adequacy or
completeness of the Data / Report and is not responsible for any errors or omissions or for the
completeness of the Data / Report and is not responsible for any errors or omissions or for the
results obtained from the use of Data / Report. This Report is not a recommendation to invest /
disinvest in any entity covered in the Report and no part of this Report should be construed as an
expert advice or investment advice or any form of investment banking within the meaning of any
law or regulation. CRISIL especially states that it has no liability whatsoever to the subscribers /
users / transmitters/ distributors of this Report. Without limiting the generality of the foregoing,
nothing in the Report is to be construed as CRISIL providing or intending to provide any
services in jurisdictions where CRISIL does not have the necessary permission and/or
registration to carry out its business activities in this regard. Dodla Dairy Limited will be
responsible for ensuring compliances and consequences of non-complainces for use of the
Report or part thereof outside India. CRISIL Research operates independently of, and does not
have access to information obtained by CRISIL’s Ratings Division / CRISIL Risk and
Infrastructure Solutions Ltd (CRIS), which may, in their regular operations, obtain information
of a confidential nature. The views expressed in this Report are that of CRISIL Research and not
of CRISIL’s Ratings Division / CRIS. No part of this Report may be published/reproduced in
any form without CRISIL’s prior written approval.”

Investors should note that this is only a summary of the industry in which we operate and
does not contain all information that should be considered before investing in the Equity Shares.
Before deciding to invest in the Equity Shares, prospective investors should read this entire Draft
Red Herring Prospectus, including the information in the sections “Risk Factors” on page 14. An
investment in the Equity Shares involves a high degree of risk. For a discussion of certain risks
in connection with an investment in the Equity Shares, please see the section “Risk Factors” on
page 14. The summary below should be read in conjunction with, and careful consideration of,
the risks to our business and industry set forth in “Risk Factors” on page 14 of this Red Herring
Prospectus
Consumption and investment constitute the growth engine of an economy. In recent
years, India’s growth has been firing on the consumption cylinder, and has been muted on the
investment front. Gross domestic product (GDP) at constant FY12 prices expanded at 7.1%
compound annual growth rate (CAGR) between FY13 and FY18. It grew at a slower pace
between FY12 and FY14 because of sluggish income growth, persistently rising inflation, and
high interest rates. Industrial output, too, weakened. Post FY14, growth recovered with
improving industrial activity, lower crude oil prices, and supportive policies. However, that was
clipped in FY17, owing to demonetisation, dwindling private investment, and slowing global
growth

Overview of the Indian dairy industry

The overall dairy industry (which includes both organised and unorganised segments) in
India broadly consists of processed milk (liquid/fluid milk) and other dairy products such as
curd, ghee, skim milk powder (SMP), cheese, and ice cream. Of these, the fluid milk segment is
the largest (~65%) and is expected to grow consistently. The milk products segment, currently
accounting for ~35% of the industry, has been growing at a much faster pace than the overall
dairy industry.

Overview of milk production in India

The domestic dairy industry has a healthy mix of cooperatives and private players. Small and
marginal farmers benefited from the National Dairy Plans 1 & 2 and Operation Flood, as
attractive prices offered by cooperatives encouraged dairy farmers to shift from indigenous cows
to high-yielding cross-bred cows, thereby increasing their income and milk supply. Setting up of
support infrastructure such as cattle feed plants by cooperatives, training programmes, and
government initiatives further boosted milk production.
In India, production to consumption ratio is nearly 99%, i.e., almost all the milk produced
in India is either consumed directly or in terms of VADP. India exports SMP which accounts for
less than 1% of the total Indian dairy industry in terms of value.

Integrated business model with well-defined procurement, processing and

distribution capabilities
Our integrated business model enables us to provide end to end capabilities from
procurement till distribution and marketing in a cost efficient manner. The key components of
our integrated business model are as follows:

Procurement
Raw milk is one of the key raw materials for our business. Our procurement operations
are spread across the states of Andhra Pradesh, Telangana, Tamil Nadu and Karnataka and
consist of procurement of on an average approximately 1.00 MLPD of raw milk from
approximately 220,789 farmers across 7,598 villages through 3,717 DDCCs, 3,212 procurement
agents and 78 chilling centres as of May 31, 2018. We procure raw milk either directly from the
farmers and through third party suppliers. We believe that a robust raw milk procurement
process is essential for our business to consistently procure quality raw milk for our operations.
We also pay the farmers once every 10 to 15 days, with the money being sent directly to their
bank accounts, which motivates them to engage with us more frequently. Our procurement of
raw milk from DDCCs has increased from 7% in Fiscal 2014 to 49% in Fiscal 2018. For Fiscal
2018, our procurement of raw milk from DDCCs and procurement agents is 86.45%. As on May
31 2018, we operate more than 250 milk procurement routes. These routes have a regular
procurement plan with timely pick up of raw milk from the DDCC and procurement agents and
transportation to the nearest chilling centres. This enables us to preserve the freshness of the raw
milk. The raw milk is thereafter transported to the nearest processing plant through tankers for
onward processing into retail milk packages or manufacture of dairy based VAPs. The strategic
location of our processing plants to our chilling centres and in turn of our chilling centres to our
DDCCs and agents enables us to minimise the transportation and handling costs, without any
loss in quality or nutritional value.

Processing
Our processing operations are spread across 11 processing plants (nine of which are
owned and two are leased) located in the states of Andhra Pradesh, Telangana, Karnataka and
Tamil Nadu in India with an aggregate installed capacity of 1.29 MLPD, excluding a SMP plant
with an installed capacity of 15,000 kgs per day. We regularly incur capital expenditure to
upgrade technology across our processing plants and expand into new geographies by way of
introduction of modern automated plants. We have introduced fully automated processing lines.
Our processing infrastructure is designed in a manner to ensure efficient operations and high
product quality standards

Distribution and marketing –

We sell our products under the “Dodla Dairy” brand in India. As of May 31, 2018 we
distributed our milk and dairy based VAPs through 14 sales offices, 3,329 distribution agents,
379 milk distributors and 466 milk product distributors. As of May 31, 2018, our products are
also available through 217 “Dodla Retail Parlors” which are operated on a franchisee model and
spread across the states of Andhra Pradesh, Telangana, Tamil Nadu and Karnataka. Our total
advertisement and distribution expenses for Fiscals 2016, 2017 and 2018 were `310.03 million, `424.77
million and `491.91 million respectively. We engage in various marketing and promotional campaigns in order to
market our products such
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