Parag Milk Foods - FMCG company just in Name or Deed?

Due to poor food safety and blatant irregularity we have in India, I think more than the type of milk it’s more important to get milk which is 1) adulteration free 2) contamination free. Automation that Parag Milk has setup at their Manchar plant and direct delivery of Milk (no distributors), ensures both of the above points.

Disc : Not holding. Regular customer.


Agreed… but I have seen few local players in Mumbai marketing their milk as A2 milk… So I just wanted to know if can this be a trend in near future for health concious players and whether Parag Milk supplies that milk or not…

All desi breed Indian and African cows produce milk with A2 protein. European breeds produce with A1 protein. A2 is the milk produced in older cow breeds. A1 is produced by cows that had undergone genetic mutation hundreds of years ago.

In the last few decades, European breeds have come to dominate the dairy industry due to their high yield (but correspondingly, they consume more and are more expensive to maintain). Barring a few exceptions, US, Australia, New Zealand all of them are majorly European breeds of cows like Holstein. Operation Flood was launched in India to increase yield in Indian cows by cross breeding them with European breeds and downright import of European breeds as well. While this led to an increase in Indian milk production, the population of many pure Indian breeds reduced.

In the last 2 decades, studies in Australia, New Zealand and Russia showed that A2 milk was supposedly superior in health benefits when compared to A1 milk. Since then, many foreign brands started marketing A2 milk as a healthy alternative and are priced accordingly. Australian and NZ companies have put in efforts to maintain the purity of desi Indian cow breeds. Nowadays, a lot of Indian companies have popped up that supply milk, ghee produced by desi Indian cows and are priced exorbitantly.

“Pride of cows” is produced by Swiss Holstein and Friesian cows. So its A1 milk. It is priced higher because it is pure cow’s milk while generally, we get buffalo milk mixed in as well.

Probably, the healthiest option is to buy desi cow’s milk directly from a reliable/trustworthy/kind cowherd. No antibiotics, No harmful medicines, non pasteurised, pasture raised and well looked after Desi Indian cow’s milk.


Valuation was around 1:1 mcap to sales.


Not related to Parag but I thought it was worth noting.

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  1. One of the reasons we have seen a strong private sector sourcing presence in Maharashtra has been so because the Anand pattern has not been successfully implemented in Maharashtra.

  2. One of the key points for a dairy company is a constant supply of milk.
    @rupeshtatiya has done an excellent analysis regarding the dairy industry here - Heritage Foods Ltd - #70 by rupeshtatiya

  3. Parag doesn’t have a a direct procurement system like that of a Hatsun.

Note: This is from their red herring draft, which requires companies to legally state the risks. So it might not be as extreme as stated.

  1. How can Parag ascertain a constant supply of milk for its scalability? It is impossible to start a sustainable dairy procurement from Gujarat (Amul) or Karnataka(Nadhini) where there is already an Anand pattern. Only way seems to be acquiring existing branded companies looking to sell. (Recently Danone) . What stops AMUL or say Hatsun or even local players from squeezing their supply going forward?

  2. Cheese seems to form a large part of its revenue, but won’t it be difficult to compete against the likes of AMUL who have planned to double their capacity this year and have a further expansion in place?
    16:00 onwards - R.S Sodhi Speaks On Amul's Market Share | Exclusive - YouTube

P.S: Not invested

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I don’t think other dairies also have any formal agreement with farmers. Parag do you have direct procurment from farmers but not 100%

I think Parag milkfood USP is creation of brand in various milk product segment. Milk is in any case a commodity and over long term only branding can help sustain competative advantage. Once consumer food brand get established in mind of consumer firmly it is difficult to dislodge it. Though there is definetly some concern around corporate governance particularly after recent sell transaction of Prabhat dairy business structure.

I personally have been using Parag products for quite some time and I have been impressed by their day by day increase of products’ variety in Big Bazaar below my office. Yes, they have a nice, innovative product mix.
But having a good brand presence may not lead to a sustainable, profitable growth always.
Again, the question is regarding the supply… If a more operationally efficient player like Hatsun(Already started covering Maharashtra) or an Anand pattern co-operative(AMUL already sourcing from Maharashtra) starts increasing their reach, farmers would definitely want to be associated with them if they are getting higher amount per litre. So how does Parag scale for the next 7-10 years?

If someone has some on-ground knowledge regarding dairy procurement in Maharashtra and especially Parag’s, please do give your inputs!

Q3 investor presentation

e970d086-9314-4e72-9a1e-2b7c3a2082f7.pdf (3.5 MB)

Result update courtesy @analystmohalla



If we substract the deferred tax, then PAT margin becomes only 2%.

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Is there any discussion or callout in Conc. calls about Pledged holdings of 14.56% ?

In Q3FY19 concall, one of the analyst questioned about the reclassification of Iris business solution private limited from promoter company to public company.

At the time of IPO, IRIS Business solution had 23,14,200 shares in their holding and they have sold their shares after March-18. (Jun-18 shows their holding as NILL, source:cogencis)

Does that mean promotors took out their money out of business through IRIS business solution?
One other company who had major holding at the time of IPO but NILL in Sep-18 holding is IDFC spice…
IDFC PE & IBEF holded shares before IPO but sold in March-16…

Looking at the Prabhat dairy and kwality, we should dig deeper into PMFL too…

Did they reply to his questions? What explanation they gave ?

I think these are not recent developments. IDFC had started exiting after IPO. IRIS business solution reclassification happened in March 1 2018.

Having said that, I agree with the statement that there is a need to dig deeper into PMFL.

With respect to Q3 results, I have 2 points.

POSITIVE: The margins did not drop even though the milk procurement prices have increased.
Link: Parag Milk Foods Launches Ready To Eat Items - YouTube

Parag would have also faced some issue because of this.

NEGATIVE: Finance cost has gone up. Why was that the case?

I could not attend the con call, but did the management highlight about why did the finance cost go up.


Could not hear the voice clearly as there was some disturbance… but called to strategic investor partner… He said, they have reclassified this business from promotor to public holding as there was a promotor earlier which was common between them… Now that is not the situation any more… and when I asked if they have sold their stake on which he replied they still have holding… He didn’t have the data with him so couldn’t provide the numbers… But I don’t think it might be significant.

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Apart from Maharashtra, can fellow VPers help in commenting on the product placement and availability of the company’s products? Are the GO/Gowardhan products visible in the local retails and super markets? DMarts and Big Bazaars?

Hi @divan91, about the availability of the product is already discussed earlier…

Still, I will share my view… as far as the Maharashtra is concerned… I see the Parag Milk product everywehre, specially Go Cheese and Gowardhan Ghee… Gowardhan Ghee has been a strong brand here… Even I used this brand and people don’t consider here other copanies ghee safe…

Go products has very high visibility in the malls specially in big bazar…

and products are available online also like groffers and big basket… and all the Kirana shops here have their products… and I feel shopkeepers prefer parag milk products as they provide discounts to Amul and have higher margins for shopkeepers…

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Hi @pratikchandak,

Thanks for the input. It wasn’t discussed earlier to the extent of Pan-India presence. You yourself gave info regarding Maharashtra, and one of the fellow users gave a count of Kolkata. Apart from that I did not see any information. Hence, asked. (Specifically apart from Maharashtra)