Parag Milk Foods Q4 FY26 earnings call

Parag Milk Foods achieved an annual revenue of INR3,800 crores in FY26, demonstrating double-digit growth with a 5% volume increase. This performance reflects a successful strategic shift towards a more focused, future-ready dairy and nutrition company, with core categories growing 8% and the new age business expanding by 91%. The company emphasized that this growth was accompanied by stronger profitability and a healthier balance sheet, indicating a structurally stronger business.

Despite elevated milk prices, which increased 15% year-on-year to INR42 per litre in Q4 FY26, and other inflationary pressures, the company successfully expanded its gross margins to 28% in Q4 FY26. This is an improvement from 25.9% in Q3 FY26 and 26.7% in the previous year, attributed to sharper execution, better product portfolio mix, disciplined pricing, and tighter cost controls. Management noted a calibrated approach to passing on cost increases to maintain profitability.

The new age business, encompassing brands like Avvatar and Pride of Cows, has emerged as a strong growth engine, consistently crossing INR100 crores in quarterly revenue for the second consecutive quarter. This segment now contributes a meaningful 10% to the overall business and grew by 91% year-on-year. The company aspires for this segment to contribute 20-25% of overall revenues in the next 3-5 years, potentially reaching INR1,000 crores as part of a larger INR10,000 crores company vision, driven by new formats and categories.

While annual volumes were positive, Q4 FY26 saw an overall volume decline of 5%, with core categories experiencing a 3% drop. Management attributed this primarily to reduced institutional and export sales in the base year, which impacted the overall growth. The company clarified that this was not due to broad market weakness^🌐 or issues with their pricing strategy, and they remain focused on achieving double-digit volume growth for core categories going forward^⏳.

Employee expenses saw a significant increase, reaching a quarterly run rate of INR54 crores. This was explained by a combination of factors including annual appraisals, changes in director remuneration (approximately INR9 crores for FY26), ESOP expenditure (approximately INR5 crores), and strategic talent strengthening across various verticals. Inventory levels increased by approximately INR150 crores to INR730 crores, which management clarified was primarily due to rate variance (inflation) rather than channel inventory buildup or strategic stocking.

Parag Milk Foods is actively expanding its distribution across all channels, including General Trade (GT), modern trade, e-commerce, and quick commerce, with plans to add approximately 30,000 outlets per quarter in GT across India. For capital expenditure, the company spent around INR100 crores in FY26 and has guided for INR60-70 crores in FY27. Key capex plans include increasing cheese capacity from 60 to 80 metric tons and investing in lactose-to-whey processing.

The company has established a subsidiary in Dubai and opened a bank account in Q4 FY26 as part of its international expansion strategy. While the long-term plan involves setting up a company-owned depot and expanding distribution in the Middle East, these plans have been temporarily on hold for the last 2-3 months due to geopolitical uncertainties in the region. Management remains committed to the strategy and expects to resume activities once the situation stabilizes, continuing to serve distributors directly in the interim.