Parag Milk Foods – one of the leading manufacturers and marketers of dairy‐based branded foods in India. The company commenced operations in 1992 with collection and distribution of milk and have developed into a dairy‐based branded consumer products company with an integrated business model, manufacturing a diverse range of products including cheese, ghee (clarified butter), fresh milk, whey proteins, paneer, curd, yoghurt, milk powders and dairy based beverages targeting a wide range of consumer groups through several brands.
Revenue contribution from Skimmed Milk Powder eased 4% to 9% while demand for Fresh Milk and Milk Products had jumped 3% each to 21% and 69% respectively.
Revenue from Operations remained flat or stable at Rs. 472.8 crore against Rs. 469.6 crore. Lower growth was attributed to the flat revenues due to contraction of the Skimmed Milk Powder business along with slowdown in rural demand (specific to regions like Maharashtra, Karnataka and others which faced draught situations, while North East sales were hampered by Heavy rains) which consumes 25%-30% of the sales. Also the company hopes to cash in on the increasing monthly expenditure which currently stands at 16.4% by urban customers and 15.2% by rural customers. Ghee being the primarily product driving rural growth, the company has taken a price hike of 8% which has impacted short term sales (Cheese and Ghee are its flagship products).
EBIDTA fell from Rs. 41.4 crore to Rs. 37.7 crore on the back of increased advertising and promotional expenses. Company expects FY17 ad spend to remain within the estimated annual spend.
Exports revenue stood at Rs. 18.3 crore against Rs. 12.9 crore
Profits stood at Rs. 14.3 crore against Rs. 9.69 crore as the company has been able reduce the finance cost with the IPO proceeds helping in repayment of borrowings.
Rising middle class population and income levels, Urbanisation, Changing Dietary Patterns with focus on Milk and Shift to packaged food to drive organised market are some of the dynamics that the company is banking on for opportunities. Like Dominoes which contracted Chef Vikas Khanna for its Chef’s Inspiration Range of Exotic Italian Pizza’s, Parag has decided to associate itself with Chef Ranveer Brar for its Go Cheese and Go Fresh Cream Products – helping build its brand image with the new market population.
Revenue (CAGR of 14% for 3 years) guidance from a long term horizon remains unchanged as the company is confident on new product launches. Increased bulk coolers, increased ad spend, identification of new markets and development of new customized products (5 New Flavoured Cheese Slices “Go Spice-up” launched during the quarter at a Pan India Level) are a couple of strategies the company is looking to exploit.