Parag Milk Foods Limited

Parag Milk Foods reported its highest ever first quarter revenue of INR 852 crores, reflecting a 12% Y-o-Y growth. Gross profit margins improved sequentially from 25.1% in Q4 FY25 to 27.4% in Q1 FY26, despite an 18% Y-o-Y increase in average milk price to INR 37 per litre. The company achieved a 6% EBITDA growth, demonstrating its ability to sustain margins through product mix and pricing power.

Core categories, including cheese, ghee, and paneer, showed robust growth of 9% in volume and 14% in value, now contributing 57% of total revenue. The new age business, comprising brands like Avvatar and Pride of Cows, was a standout, growing 57% Y-o-Y and now accounting for 9% of total revenue, up from 6% last year. Avvatar specifically grew 8x over the last three Q1s, and Pride of Cows grew 36% Y-o-Y, reinforcing consumer demand for quality products.

The company is evolving from a dairy-led enterprise into a diverse FMCG company, with a strong focus on the health and nutrition segment. Avvatar, their 100% vegetarian whey protein brand, has carved a niche in the expanding Indian sports nutrition market, valued at INR 1,600 crores and growing at 30% CAGR. They plan to expand Avvatar into the protein snack functional category with new flavors and products, leveraging their in-house capabilities.

Average milk procurement reached 16.5 lakh litres per day, a 10% increase over the last quarter, highlighting the strength of their procurement network and farmer connect. The company's unique farm-owned model for Pride of Cows achieves an average yield of 26 litres per cow, significantly higher than the 8-10 litres for farmers, contributing to better protein and fat content. They aim to increase their own milk procurement from the current 40%.

Parag Milk Foods is strategically investing in brand building, which led to a marginal decline in EBITDA percentage due to higher advertisement and promotion spending. Pride of Cows launched a 'what is the source?' campaign, utilizing print media and digital influencers, to emphasize purity and traceability. This 360-degree marketing approach aims to reinforce the premium positioning of their brands and drive consumer trust.

The company's debt remained stable at around INR 600 crores, with net debt at INR 560 crores. However, interest costs on the P&L increased from INR 55 crores in FY23 to INR 93 crores in FY25. This increase is primarily attributed to ROU accounting for leased assets, bank charges, lead bank charges, and discounting of receivables, rather than an increase in gross debt.

Parag Milk Foods maintains a leadership position with Gowardhan ghee commanding 22% market share in the branded cow-ghee segment and Go cheese holding 35% market share in the cheese category. The overall business split is 65% B2C and 35% B2B. They are actively leveraging quick commerce platforms for deeper penetration of products like Greek yogurt, high-protein paneer, and Avvatar travel packs, indicating a robust multi-channel distribution strategy.

The company acknowledges some seasonality in its business, with higher consumption during festive seasons and winter, and the impact of monsoon on the agricultural economy. With a good monsoon this year, they anticipate increased consumption in the coming festive seasons. Parag Milk Foods maintains an aspiration to reach INR 10,000 crores in revenue within the next five years and aims to improve EBITDA margins to double digits and eventually teens.