Parag Milk Foods Limited — Q1 FY26 earnings call

Call held 22 Jul 2025

Management summary

Parag Milk Foods delivered its highest ever first quarter revenue of INR 852 crores, growing 12% Y-o-Y, driven by robust volume and value growth in core categories and a significant 57% Y-o-Y growth in its new age business. Gross profit margins improved sequentially to 27.4%, despite rising milk prices. The company continues to invest in brand building and operational efficiency, while managing increased interest costs attributed to ROU accounting and financing charges.

Highlights

  • 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.

  • New age business (Avvatar and Pride of Cows) grew 57% Y-o-Y, contributing 9% of total revenue.

  • Core categories (cheese, ghee, paneer) grew 9% in volume and 14% in value.

  • Average milk procurement reached 16.5 lakh litres per day, a 10% increase over the last quarter.

Concerns

  • Average milk price increased by 18% Y-o-Y to INR 37 per litre, indicating input cost pressure.

  • Marginal decline in EBITDA percentage due to higher advertisement and promotion spending.

  • Interest cost on P&L almost doubled from INR 55 crores in FY23 to INR 93 crores in FY25, despite stable debt.

Key financials

  1. Revenue ₹852 Cr +12%YoY
  2. Gross Profit Margin 27.4% +9.2%QoQ
  3. EBITDA Growth 6% +6%YoY
  4. New Age Business Growth 57% +57%YoY
  5. Core Categories Value Growth 14% +14%YoY
  6. Core Categories Volume Growth 9% +9%YoY

What they filed

Q1 FY27: revenue up 10.9%, net profit down 21.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue871 885 918 852 1,008 +16%1,013 +14%945 +3%945 +11%
EBITDA69 74 62 58 71 +3%68 −8%59 −5%68 +17%
Net profit29 36 26 28 46 +59%30 −17%32 +23%22 −21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Core Categories (Ghee, Cheese, Paneer)
    57% Revenue Contribution14% Value Growth9% Volume Growth
  • New Age Business (Avvatar, Pride of Cows)
    9% Revenue Contribution57% Y-o-Y Growth
  • B2C Business
    65% Share of Overall Business
  • B2B Business
    35% Share of Overall Business

Capital allocation

high confidence
  • Debt Gross ₹600 Cr · Net ₹560 Cr
    So your debt over the last two years is broadly stable at around INR 600 odd crores. But the interest cost on the P&L has jumped from INR 55 crores in FY23 to INR 93 crores in FY25. So even though the debt is not increasing, but the interest cost has almost doubled. So you can explain why is it happening? Yes, I'll explain that. But continuing to the previous question, which is more about see we are a brand which is a national play. And we are able to set up that distribution network, Pan India. So that is where it is not direct comparable. Now coming to your question on the interest cost, see overall our net debt is INR 560 crores, which is broadly flat across both the years. And gross debt has marginally increased if you look at.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · medium term · Medium confidence double digits, then teens
    Our aspiration is also to grow it consistently, move to a double digit and then of course slowly enter into the teens category. So this is what our conscious efforts and as a company we are all targeted towards that. So for the next couple of years definitely you will see us moving up the ladder from a single digit or a high single digit to at least to a double digit level over the next couple of years. I would say maybe in 12 months or 18 months or 24 months. Not giving a specific time frame, but yes that is what our aspiration is to be.

    — Ankit Jain

  • Return on Capital (ROC) Profitability · 2 years · Medium confidence above 20%
    So I think the internal aspiration in two years on a ROC point of view should be above 20%. That is a fair internal aspiration? Yes. So with the improved margin profile, of course, the ROC should significantly improve because we have taken again, you will see in the last investor presentation, overall we have worked upon reducing the working capital cycle which is again one of the important part of the capital employed. So we have put in a conscious effort to reduce the overall working capital.

    — Ankit Jain

Revenue

  • Total Revenue Revenue · next five years · High confidence INR 10,000 crores
    This is what we are targeting for next, I would say, next five years from whatever status what we have today. And that is possible because we have all the ingredients to do that.

    — Rahul Kumar Srivastava

Product Expansion

  • New Age Business Expansion Product Expansion · moving forward · High confidence expand into protein snack functional category, new flavors
    Going forward, we are now forayed into a protein snack functional category where we have launched Whey protein bar and we're soon going to expand into products which are similar to that. We'll have newer flavors and into a snacking category of protein. So that's the plan for Whey protein moving forward.

    — Akshali Shah

Procurement

  • Own Milk Procurement Share Procurement · ongoing · High confidence increase from 40%
    So whatever milk we collect we procure 40% our own and 60% is through agents. And we are trying to increase our own milk procurement because we want to have sustainable milk procurement with the quality. So we are increasing our own milk procurement. So right now it is 40-60, 40 our own and 60%.

    — Rahul Kumar Srivastava

What to watch in Q2 FY26

EBITDA Margin Improvement

medium term (12-24 months)
Current 7.7% (Q1 FY26)
Target Inch towards double digits

Why it matters

Key indicator of operational efficiency and profitability improvement, especially with increased ad spend and growing high-margin segments.

Our aspiration is also to grow it consistently, move to a double digit and then of course slowly enter into the teens category. So this is what our conscious efforts and as a company we are all targeted towards that. So for the next couple of years definitely you will see us moving up the ladder from a single digit or a high single digit to at least to a double digit level over the next next couple of years. I would say maybe in 12 months or 18 months or 24 months. Not giving a specific time frame, but yes that is what our aspiration is to be.

Risks & concerns

  • Input Cost Inflation (Milk Price)

    medium

    Average milk price increased by 18% Y-o-Y to INR 37 per litre, posing a challenge to margin sustainability.

    Average milk price increased by 18% Y-o-Y to INR 37 per litre, yet we were able to sustain margins and deliver 6% EBITDA growth.

    Management acknowledged

  • Competition in Whey Protein Market

    low

    The Indian sports nutrition Whey protein market is cluttered with international brands, but Avvatar has carved a niche.

    The Indian sports nutrition Whey protein market is expanding. Currently it's valued at INR 1,600 crores and it's growing by 30% CAGR. Despite being cluttered with international brands, the market still lacks transparency and localized innovation. This is where Avvatar India, our home grown 100% vegetarian farm to shaker whey protein brand has carved its niche.

    Management downplayed

  • Seasonality of Demand

    low

    Consumption patterns are influenced by festive seasons, winter, and monsoon, leading to quarter-on-quarter variations.

    Yes, there is a little bit pinch of seasonality. As you know that as a part of the consumer community, we know what kind of seasonality is there in our kind of business. Of course, festive seasons have a little bit more consumption.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Whey protein and sports nutrition strategy, including international partnerships Direct
So as of now this brand is catered to hi this is Ankit here, I'm just adding this. This brand is catering to Indian markets only. We know India being a protein deficient market. So we worked upon it as Akshali mentioned in her opening remarks. We have worked consciously to solve the problem for the protein deficiency for the country in India itself the Whey protein is imported. Most of it is an imported one and that is where the problem lied where you didn't know the source. There was a lot of adulteration in the market and from all considering all this problem I think the solution came out was Avvatar and this is what you see as Avvatar now.

Clarifies the strategic focus for their high-growth Avvatar brand on the Indian market due to its potential and their in-house capabilities, rather than international expansion.

Asked by Param Vora

Split between Avvatar and non-Avvatar within the new age business for valuation purposes Evasive
I am sorry. I would like to differ over here. See the way we gave our core categories where we combined ghee, cheese and paneer, same way we have created a new age business which is right now Avvatar and Pride of Cows and tomorrow there could be addition to this business stream. So we are focusing new age business. It is a strong premium business. Both are on high gross margin EBITDA margin and hence we have combined this category which we are focusing as a new age business which is more of a premium business. So we are not giving a split between the revenue for the both.

Management declined to provide granular data for the new age business, making it difficult for analysts to assign specific valuations to individual high-growth brands like Avvatar.

Asked by Kiran D

Unit economics of cow, including lifetime value, yield, and accounting treatment for biological assets Direct
As far as cow is concerned, we don't buy any cows. It's our own generation, since last 15 years. So we don't have to buy any cows. We have about 4,500 cows and then with the natural birth and all, then we are adding our stocks. So just to clarify that there is no buying of the cows in our system. As far as accounting is concerned, I think Ankit can elaborate. ... So the accounting is done as per Ind AS 41. So as per Ind AS 41, all the biological assets are measured at, of course, the initial recognition is done at a fair value, less cost to sell. So there is a separate accounting standard which applies to it. And as on the balance sheet date of March 25, the overall cow valuation was INR 87.6 crores in the balance sheet.

Provides insight into their unique farm-to-fork model, its efficiency (high yield per cow), and clarifies the accounting practices for biological assets, which is specific to their business model.

Asked by Resham Mehta

Gross margin comparison with listed peers given Parag's higher value-added product mix Partial
So, see, while you are comparing versus the listed players, please note that the listed players, there is no direct comparison because most of the listed players are region based players. And they are largely selling milk and curd that to specific geographies, limited geographies as well as largely into ice creams. So if we were to see, there's no direct competition when it comes to ghee or a cheese or the Whey protein kind of products. While your observation is looking at all the financials, but please understand that when we have a Pan India network for these kind of products, there is an investment behind each of the brand, which goes which is the pricing, which is about the margin to operate at, so that we can penetrate into the category.

Addresses a key investor concern about profitability relative to product mix, explaining that Pan-India distribution and brand building investments impact margins compared to regional, less diversified peers.

Asked by Ankush Agarwal

Increase in interest cost despite stable debt levels Direct
Yes, I'll explain that. But continuing to the previous question, which is more about see we are a brand which is a national play. And we are able to set up that distribution network, Pan India. So that is where it is not direct comparable. Now coming to your question on the interest cost, see overall our net debt is INR 560 crores, which is broadly flat across both the years. And gross debt has marginally increased if you look at. So that is why your interest cost sits in the interest line item. And there is a other income on the fixed deposit or the investments goes in the other income part. Having said that, there is an additional interest which is being seen because of the multiple assets on lease. And as per ROU accounting, the interest cost on the lease also resides in the interest cost, which over the past two years we have invested and got into the operating lease aspects.

Clarifies the reasons behind the significant increase in interest expense, attributing it to ROU accounting for leased assets and other financing charges rather than an increase in core borrowings.

Asked by Ankush Agarwal

Return on investment for higher advertisement and promotion spending impacting EBITDA percentage Direct
See, first of all, your observation is right. There is a marginal decline and there is a higher Ad pro, which we have specifically called out as per our investor presentation. How do we look at is more of a return on the Adpro is more on the long term. So we continue to focus on brand building initiatives. That's why we are present across and we are focusing on consumer cheese. We are focusing on Avvatar for all the digital campaigns. There are several campaigns on Pride of Cows. All these get reflected in the of course, the overall revenue growth. And that's where you see the portion on the skimmed milk powder or the ingredient business has declined. But however the other core categories as well as the new age business has done phenomenally well.

Explains the strategic rationale for increased marketing spend as a long-term investment in brand building for both core and new age categories, acknowledging its short-term impact on EBITDA.

Asked by Siddharth Vaid

Why the high-margin new age business is not significantly boosting overall operating margins Partial
Yes, the gross margins are superlative in new-age business and almost double of the average of the company's gross margin. However, when we look at the percentage increase is only from 6% to 3%, which would ideally translate to a certain mathematical number. But as I mentioned in the previous question, what happens is when we pass on a certain cost push, the cost push is passed. When we look at percentage terms, we are not able to pass on that in percentage terms. It is always that the cost push is passed on to the consumers so that the consumers do not take that additional beat of the additional margin on the increase in the price. And hence, we see the mix of Q1 is improved product margin offsetted by a marginal decrease in the pricing.

Clarifies that while new age business has higher margins, its current contribution to overall revenue (9%) is still relatively small, and overall margins are also influenced by the need to pass on cost increases in core categories.

Asked by Debashish Neogi

Seasonality impact on business flow quarter-on-quarter Direct
Yes, there is a little bit pinch of seasonality. As you know that as a part of the consumer community, we know what kind of seasonality is there in our kind of business. Of course, festive seasons have a little bit more consumption. That also depends on kind of monsoon we have in India and that also drives the consumption post-monsoon because of the farmers have better crops and income and all. So it all depends on, you know, the seasonality from the point of view of the agriculture economy, how it's growing or overall economy is growing, as well as the festival season is coming. So in coming season, we know that monsoon is very good in this year. Perhaps this will drive more consumption in coming festive seasons.

Acknowledges the seasonal nature of the business, linking it to festive periods, monsoon impact on agricultural economy, and farmer income, which are crucial drivers of demand.

Asked by Darshil Jhaveri

3 min read 8 chapters

Detailed narrative

Q1 FY26 Performance Overview

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.

Growth in Core and New Age Businesses

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.

Strategic Focus on Protein and Nutrition

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.

Operational Efficiency and Procurement

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%.

Marketing and Brand Building Initiatives

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.

Capital Structure and Interest Costs

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.

Market Share and Distribution

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.

Seasonal Impact and Future Outlook

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.

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