International Finance Corporation
  (An affiliate of the World Bank)
  Washington DC
  July 8, 2008

  Sub: Investment Of $ 15 mn into Modern Dairies Ltd., India

  -Pursuant to signing of the Shareholders Agreement between IFC-W (the Fund) and Modern Dairies Ltd (the company), the Fund has accepted allotment and disbursed funds for the allotment of 46,50,000 shares at a price of Rs 60 per share in the company. This subscription amounts to 19 per cent of the fully diluted equity of the company.

  -Pursuant to the signing of the Loan Agreement between the Fund and the Company, sanctioned a sum of $ 8.4 mn for the expansion into milk based nutritional products and a part of the working capital requirements.

  -Modern Dairies is undergoing a $ 46.4 mn (Approx Rs 2 bn) expansion of its processing capacity for value added Dairy products at its facility located  at 136 km milestone, Karnal, Haryana which is slated for conclusion in FY09.

          This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction.

  Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.

Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.

                Project number  26947    Country  India    Sector  Food & Beverages    Department  Agribusiness    Company name  Modern Dairies Limited    Environmental category  B    Status  Active          Date ESRS disclosed  May 28, 2008          Previous Events  Invested: July 8, 2008
Signed: July 1, 2008
Approved: June 27, 2008                View Summary of Proposed Investment (SPI), click here                  Overview  Category & Applicable Standards  Key Issues & Mitigation  Community Engagements  Client's Documentation

                Overview of IFC's scope of review      This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

The review of this project consisted of appraising technical, environmental and social information submitted by Modern Dairies (or the company), and a visit by IFC appraisal team to the project site in Karnal to meet with company’s management and to have a first-hand look at operational activities.

  The team also visited a village milk collection center, a bulk cooler and chilling center and some farmers who supply milk to the company.
    Project description      Modern Dairies Limited (Modern Dairies or the company), a dairy company based in the state of Haryana (Northern India), is undertaking a $46.4 million expansion plan to expand its milk sourcing directly from farmers and increase processing capacity for value added dairy products.

  As part of this expansion, the company has already successfully increased its milk processing capacity at its plant near Karnal, Haryana from 0.5 million to 1.5 million liters of milk per day (lpd).

  The company now plans to:

- expand its milk supply network from farmers in the vicinity of the processing plant,
- increase its production capacity of nutritional products,
- install a 3.5 MW biomass based power plant for captive electricity supply, and
- finance working capital needs.

The capacity expansion for the nutritional products will be done at the company’s existing facilities in Karnal.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

  Nothing in this article is, or should be construed as, investment advice.