Parag Milk Foods

Parag Milk Foods delivered its highest ever first-quarter revenue of ₹852 crores, marking a 12% Y-o-Y growth. This performance was supported by consistent execution of strategic priorities. Gross profit margins improved sequentially to 27.4% in Q1 FY26 from 25.1% in Q4 FY25, driven by an improved product mix and the company's ability to command pricing power. EBITDA grew by 6% despite an 18% Y-o-Y increase in average milk prices to ₹37 per litre.

The company's core categories, including cheese, ghee, and paneer, grew by 9% in volume and 14% in value, now contributing 57% of total revenue. Parag Milk Foods maintains leadership with Gowardhan ghee holding 22% market share in branded cow-ghee and Go cheese holding 35% market share in the cheese category. The new age business, comprising brands like Avvatar and Pride of Cows, was a standout, contributing 9% of total revenue (up from 6% last year) and exhibiting robust 57% Y-o-Y growth.

Avvatar, the indigenous 100% vegetarian whey protein brand, has scaled eight times over the last three Q1s, establishing itself as a top player in the Indian sports nutrition market. The company plans to expand Avvatar into functional snacking with new products like protein wafer bars. Pride of Cows reported a 36% value growth, driven by new product launches such as Greek yogurt and high-protein paneer, along with deeper penetration through quick commerce platforms. A 'what is the source?' brand campaign was launched to emphasize purity and traceability.

Despite challenging macro factors, including rising milk prices, the company sustained its margins. Average milk procurement reached 16.5 lakh litres per day, a 10% increase over the last quarter, demonstrating the strength of its procurement network and farmer connections. The company's own farm cows yield an average of 26 litres per day, significantly higher than the 8-10 litres from farmers' cows, due to better feed and management.

The company's net debt stands at ₹560 crores, broadly flat across the years, while gross debt has marginally increased. Interest costs on the P&L, however, jumped from ₹55 crores in FY23 to ₹93 crores in FY25. This increase is primarily attributed to ROU (Right-of-Use) accounting for leased assets and other miscellaneous financing charges, rather than a significant increase in borrowings. The overall cow valuation (biological assets) on the balance sheet as of March 25 was ₹87.6 crores, accounted for as per Ind AS 41.

Parag Milk Foods maintains an aspiration to reach ₹10,000 crores in revenue within the next five years, supported by expanding distribution, brand building, and value-added product development. The company also targets achieving an ROC (Return on Capital) above 20% within two years. Management emphasized its commitment to improving EBITDA margins, aiming for double-digit to teens within the next 12 to 24 months, driven by improved product mix and operational efficiencies.

The business experiences some seasonality, with higher consumption during festive seasons. This seasonality is also influenced by agricultural factors, such as the monsoon, which impacts farmer income and overall economic growth. A good monsoon this year is expected to drive increased consumption in the upcoming festive seasons, potentially offsetting some seasonal dips.