I dont track Heritage in detail (I try to avoid DIRECT political connection companies ) .Having said that its a GOOD professionally managed company but regional focus unlike Parag (Pan India ) and also their VAP is less than Parag .
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Exactly. That is the reason why (I believe), Heritage is always undervalued in the market. As you said, its professional enough when it comes to mgmt. It faced multiple years of opposition governments (who considered him their enemy, as well). And it was regional which started spreading a couple of years back and is successful enough in spreading as of now, and expansion plans are going well, as guided.
Their VAPs are less vis a vis Parag, but they are fast expanding their VAP percentage, and with reasonable success and speed.
So, is the reason I feel, its undervalued.
I am looking for the reasons why one shouldn’t buy it at this price. I welcome negative views on Heritage.
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@debashih ji Given your investment in Parag Milk Foods, I wanted to understand your perspective on the company’s corporate governance practices. There have been some observations around frequent management changes, communication transparency, and the company’s broad approach to product launches. Additionally, past regulatory issues such as income tax scrutiny and huge inventory write-off (from 2021 to 2023) have been noted in the forum.
From your experience and view, do you believe Parag Milk Foods has the governance strength and strategic focus necessary to be a reliable long-term investment? How do you assess the key risks, if any, and do you see the company as well-positioned for sustainable growth for long term to be a multi bagger? Your insights would be highly valuable.
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1)Sharing some digital scuttlebutt this is July 2025 bill and price
2)This is September 2025 bill sudden surge in price approx 25-30% , MRP is same but discount given is less
3)This image from taken from direct website
So lots of protein trend started in India , india is low consumption protein intake country’s,for GLP -1 story you can take proxy also.
In my opinion usually people don’t change their protein powder till the authenticity works so little switching cost might Play.
Disc invested in last 7 days ,not sebi register.
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Big Investor group visited the dairy, looks like something is cooking. Stock has almost doubled in past 6 months. Any insights ?
Whey Protein is one of most popular at Amazon but it is not a substantial part of their revenue.
Disclaimer: holding tracking level position.
They have hiked their Protein Powder price already at par with Optimum Nutrition.
The Protein Bar price was hiked from 60 to 80. Believe 60 could just be introductory. At least the 5-6 Shops I buy them from tell me that they are outselling RiteBite Max Proteins.
I usually don’t like to do these kinds of investigations, but I consume Protiens Bar & Powder a lot & this is what I have observed.
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@DEBASHISH Sir, if Parag Milk has such higher value added mix then -
- Why their gross margins are similar to other milk players and infact lesser than likes of Hatsun?
- Why was the value growth in value added categories so less in FY25 than the volume growth? Why could they not show pricing power and extract more value growth?
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Parag buys milk from traders/collection centers → higher procurement cost.
Hatsun sources 100% directly from farmers → lowest milk procurement cost in India.
Procurement accounts for 60–70% of total COGS, so even a ₹1/litre difference massively impacts gross margin.
Hatsun’s massive scale in the South → better fixed cost absorption.
Larger plants, more SKUs, higher throughput → lower per-unit cost.
Parag’s scale is improving but not at Hatsun levels.
Hatsun has the strongest cold-chain + direct distribution network.
Parag still depends more on distributors instead of direct distribution, which:
increases channel margins
reduces pricing control
leads to higher return/expiry costs
Hatsun’s curd, ice cream, UHT milk have very high repeat demand + scale.
Parag’s cheese and whey are higher value but:
lower scale
underutilisation of cheese plant reduces gross margin
whey is still small and volatile
So the value-added mix helps gross margin but not enough to beat Hatsun.
Parag lost share earlier due to:
COVID disruptions
working capital issues
low distributor confidence
To regain distributors + retailers, they kept pricing stable while increasing discounts.
So volumes grew, but net realization per unit decreased.
Cheese pricing power was weak across the industry.
Amul launched:
low-price variants
bulk cheese at aggressive pricing
So Parag did not raise prices to avoid losing shelf space and food-service clients.
(C) Value Added Segment Was Pushed Through HoReCa (lower realisation)
Parag increased cheese sales in:
QSRs
Hotels
Bakery chains
HoReCa = higher volume, lower margin / lower realization.
Retail cheese demand was slow → food service dominated growth.
This reduces realization per kg, so value grows slower than volume.lowest procurement cost
highest distribution reach
high working capital capacity
dominant regional presence
Parag is improving but not dominant like Hatsun in:
South (curd, ice cream, UHT)
Amul in the West/North
Without regional dominance, you cannot increase prices.
Also:
Milk procurement prices were rising
Retail cheese demand was stagnating
Competition was aggressive
So they could not push price hikes.
—Because their value-added mix advantage is neutralised by:
(1) Higher milk procurement cost
Cancels 60–70% of the theoretical margin advantage.
(2) Under-utilized cheese capacity
Fixed costs spread over fewer units → lower margin.
(3) Higher discounts to revive distribution
Pulls value down.
(4) Lower realization in HoReCa
Bulk cheese = low margin.
(5) Weak North India distribution
Higher channel margin burden.
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Thanks for sharing different pointers. I had similar mental model on milk players but thanks for putting it here.
Yes I have started investing in parag let’s see how does it goes company would selling products to dubai also through it’s subsidiary let’s see if margin expands as company is guiding for that
Your questions are very valid .Infact me and also market is looking for margin expansions .In my view their margins are lower because of :
- Higher procurement cost .Unlike the Southern players (bcos of concentration )where margins are higher bcos of efficient sourcing ,Parags sourcing is not efficient bcos of lack of scale like a national player like Amul .With increase in scale margin should improve .
- I feel their institution and HORECA contribution is very high where they may be charging much lower price which is bringing the overall margin down .
- They are the highest spender on A&P where they spend around 4.8 % of sales (huge given size ) compared to regional players hence if we add this and look at EBIDTA % Parag doesnt look that bad .With increase in contribution of Avaatar (margin is double )the overall EBIDTA ideally should move up.
On your second query ,if you look at core category their value growth now is actually more than volume growth .
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