Parag Milk Foods Ltd (PARAGMILK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Parag Milk Foods Limited Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Brian D'Penha, Head of Investor Relations at Parag Milk Foods Limited. Thank you, and over to you.
Brian D'Penha (Parag Milk Foods Ltd): Good day, everyone, and welcome to the Q2 and H1 FY '27 earnings call of Parag Milk Foods Limited. From the management, we have with us Ms. Akshali Shah, Executive Director, Mr. Rahul Kumar Srivastava, COO, Mr. Rakesh Kothari, CFO, Mr. Ankit Jain, Chief Strategy Officer, and myself, Brian D'Penha, Head, Investor Relations. Before we begin, please note that some statements on this call may be forward-looking and involve risks and uncertainties. Actual results may differ materially. The full disclaimer is in the earnings present-
Brian D'Penha (Parag Milk Foods Ltd): shared with the stock exchanges. After the presentation concludes, we will commence with the Q&A session. Just a couple of points to remember, while asking a question we request you to announce your name and organisation. We request that you limit your participation to one question at a time and rejoin the queue if you have additional questions. I now hand over to Miss Akshali Shah for opening remarks. Over to you, Akshali.
Akshali Shah (Parag Milk Foods Ltd): Thank you, Brian. A very good afternoon to all of you and thank you for joining us today. I'm happy to connect with you once again with another strong quarter for Parag with highest ever revenue of 1,241 crores. In the same quarter last year, we crossed 1,000 crores for the first time ever and over the past 12 months, we have further added 233 crores to that base, taking revenue growth to 23%. What is equally important is the quality of the growth. Volumes grew by 12% this quarter, which accounts to about half of the increase and the remainder came from pricing and product mix. For the first half, the revenue grew by 18% to 2,185 crores, supported by 8% volume growth. The quarter was, therefore, not as a one-off, but as the entire half of the year has moved to a higher level. Let me take you through where the growth came from. Our flagship categories, that is ghee, cheese, paneer, curd, remain the backbone of the business. They now make up to 63% of the revenue at 778 crores and grew 20% in value with 7% growth in volume. Alongside that, our new age business, that is Pride of Cows and Avvatar, has been scaling up rapidly. It grew 71% to 154 crores and it now contributes to 12% of our revenue, up from 9% a year ago. Turning to the broader industry view, the Indian dairy sector continues to present attractive long-term opportunities, supported by growing shift towards organized and branded dairy products. Consumers are increasingly prioritizing quality, safety, nutrition, and product consistency. Within this landscape, value-added dairy continues to emerge as an important growth driver, reflecting evolving consumption preference, increasing demand for differentiated products. For us, this evolving landscape presents an opportunity to build our strength, sharpen our focus on consumer needs, and drive growth through differentiated product portfolios across our core and value-added categories. Awareness of protein and its role in balanced diet has risen considerably and consumers are increasingly seeking protein-rich products, lactose-free options, and products with low added sugar along with greater transparency on the origin of their food. Growing concern about adulteration has sharpened this further, and the consumers are placing more trust in brands that they can rely on for purity and traceability. Parag is well-placed to meet these needs. Parag is well-placed to meet these needs. Our integrated business model, that is from our own farm, our own procurement facilities, gives us control over quality at every step and allows us to offer, allows us to offer with assurance. On the supply side, raw milk output is expected to grow by only 4% this year on account of weather condition and higher fodder cost. With demand growing faster than supply, the company's best place to perform are those with sound procurement capabilities, differentiated product portfolios, and the ability to price in a measured manner. This is where Parag is positioned, which then brings me to which then brings me to the milk, the foundation of our business. On an average, we procure 21 lakh liters of milk per day, which is about 5% more than a year ago.
Akshali Shah (Parag Milk Foods Ltd): Our average price this quarter was about ₹45 per liter that is 18% higher than a year ago when it was ₹38 and about 7% higher than the sequential quarter. It is insightful to look at look at the economics on per liter basis wherein we see that as compared to last year, our our milk cost has increased by about ₹7 per liter while the gross margin per per liter has inched up from ₹14 to ₹17 per liter. This demonstrates our ability not not not only to navigate the cost push but also improve the overall profitability with richer product mix. The result is that our gross profits for the quarter grew by 24% to 323 crores with our gross margins 26% versus 25.8% last year. The other expense grew mainly led by ASP spend and other variable expense. ASP spend was pulled up for brand building initiatives while overall ASP for the year is expected to be in range bound. During last year, there was a one-off item of reversal of forex MTM post the conversion of FCCB into equity. Excluding the same, EBITDA for the quarter has reached 101 crores with all with 37% growth year-on-year. EBITDA margin improved from 7.3 percent to 8.1% this quarter. PAT for the quarter grew to 42 crores with a growth of 42% year-on-year despite the current tax impact in the current year. Similarly, EBITDA for the half year has reached to 170 crores with 23% growth year-on-year. EBITDA margin improved from 7.5% to current year 7.8%. PAT for the half year grew to 64 crores with a growth of 12% year-on-year despite the current tax impact in the current year. Talking about the operating cash profit has increased from ₹130 crores to ₹161 crores during the half year before considering the changes in working capital. After considering the working capital usage, the net cash flow used in operation in in operating activities was tuned to 84 crores. Our net debt has grown from 484 crores in March 2026 to 678 crores. This was mainly driven by you know, inflation built up in inventory on comparative basis of last September to current September the inventory variance is largely because of inflation, but our working but our inventory days remain stable. [laughter] The debt was mainly the debt was mainly funded from working capital in form of ECL GS 5.0 scheme as approved by the Union Cabinet to support businesses, business liquidity and new working capital lender adding getting added to our consortium. We remain comfortable in optimal leveraging the balance sheet to support business growth and navigate the inflationary environment. Our ability to absorb these costs rest on a strong value-added mix. We are investing to expand it further. To end this, our board has approved a combined outlay of 205 crores across paneer and cheese, two categories where demand for branded product is growing steadily. In paneer, we are increasing our capacity four-folds from 20 metric ton per day to 80 metric ton with an investment of about 100 crores across both the plants that is Manchar and Palamaner. This will cover both regular and high-protein paneer and is expected to be commissioned by
Akshali Shah (Parag Milk Foods Ltd): June 2027. Paneer is one of our most one of our most in demand categories and is and the expansion is significant and will give us the ability to to grow the market. In cheese, we are doubling our capacity from 60 metric ton per day to 120 metric ton per day, backed by an investment of 105 crores with with a completion target of second quarter in FY '28. The The way the whey protein production according accordingly will also double, as we doubled our cheese production, the availability of the raw material will also double. This will this will provide Go Cheese the head headroom to sustain its growth, particularly in HoReCa business, which grew in which grew in double digits this quarter. Both expansion are are being undertaken at the existing sites, allowing us to bring additional capacity on-stream in order in orderly manner. These investments are aligned with the demand we are seeing that we are seeing building over the several next years, several years to come. In another important step towards strengthening of our integrated business model, our board has approved the amalgamation of Bhagyalakshmi Dairy Farms, our wholly owned subsidiary, with the company subject to requisite approvals. We expect this to unlock operational synergies, enable us and enable us to be more utilization of capital and resources. Following the amalgamation, Pride of Cows will also benefit from the company's existing distribution network and effective go-to-market. Together these initiatives will strengthen our value-added dairy portfolio and protein offerings, enabling us to convert more of our milk into value-added products. They will support the growth of our flagship brands, that is, Govardhan and Go Cheese, as well as our new age brands, Pride of Cows and Avvatar, while providing the capacity to widen distribution and introduce new products. Turning to the performance of our category of our categories. Demand continues to remain healthy. We are increasingly seeing product availability and and capacity determining the spe- pace at which we can serve the market. Paneer recorded its ha- its strongest quarter in volume, supported by continued shift from unorganized to branded products. Cheese improved over the previous quarter, led by our HoReCa business, which grew in double digits. Ghee also delivered a double digit volume growth during the quarter, with Govardhan continuing to lead the branded cow ghee segment with a market share of 22% and Go Cheese holds around 35% market share. Our new age business comprising of Pride of Cows and Avvatar continues to be an important growth driver. These are premium consumer-led brands, each built on distinguished position, that is, single origin purity of Pride of Cows and performance-led nutrition for Avvatar. The business grew 71% year-on-year, and it contributes to our revenue has the contribution to to our revenue has tripled over the last three years. During the quarter, Pride of Cows unveiled its new identity, inspired by the egret bird, found on our own farm. This marks the brand's evolution into lifestyle offering with fresher appeal for younger, health-conscious consumers. What remains unchanged unchanged, is its foundation of one farm, one herd, and single origin milk and a consistent taste and its quality. Avvatar, India's first and only 100% vegetarian whey protein brand, has scaled up sep- 27x in the first half of first half from from FY '22. More than 75% of its revenue is coming from quick commerce, e-commerce, and its own website.
Akshali Shah (Parag Milk Foods Ltd): nutrition portfolio with its own base as dairy. This growth is being supported by steady by a steady pipeline of product innovation. In Pride of Cows, we introduced lactose-free milk, addressing the growing demand of digestive wellness. In Avvatar, we've expanded into snacking category with pop chips in two flavors, that is Magic Masala and Pudina, offering 10 grams of protein in 30 grams package, which is an excellent micros. It is also introduced it also introduced new performance and Alphaway flavors. We have also introduced one more variant in whey protein with natural sweeteners and one more flavor in our cold coffee, which is hazelnut, which offers around 15 grams of protein with no added sugar. These launches extend our presence across across and more consumption occasions and allowing us to widen our consumer segment. while remaining focused on our core positioning of health and nutrition. We have also enhanced our disclosures this quarter to provide greater visibility into our regional mix and milk economics. Our four regions record high double-digit growth during the quarter with South and West emerging as the fastest growing markets. This reflects the wider reach of our brands and the opportunities we see across geographies. Our brand investments during the quarters were designed around consumer engagement, market visibility, and channel development. For mass reach and recall, Gowardhan Gowardhan was visible on Kaun Banega Crorepati Season 18 through the festive and regional programming during Ganesh Chaturthi. In trade, we focused on strengthening our relationship with our partners. We initiated The Go Cheese Golden Stretch Award inspired by the stretch of our Mozzarella cheese, which we partner with our HoReCa partner, menu guidance to a lot of HoReCa partners and did some chef engagement. Sampling activities across modern trade outlets outlets, we also took visibility we also undertook a visibility campaign across our categories on Quick Commerce. Pride of Cows is taking a new identity towards through our influencers and brand ambassadors with a larger festive campaign to follow. For our younger consumers, Avvatar partnered with India's Got Latent Season 2, which generated 336 million views on YouTube and more on Netflix. The brand also, as brand also did a massive sampling activity along with IndiGo Airlines. And we have done a lot of engagement campaigns through our influencer programs. Our focus remains on translating this visibility and consumer engagement into sustained trials and, more importantly, repeat purchases. As we look ahead, we remained encouraged by the demand environment. The festive season together with widened and deepen our distribution should support our value-added categories in the second-half of the year. The planned capacity addition in paneer, cheese, and whey protein you will see in FY '20 '27 and '28. This will give us a strong support to for our growth from, you know, mid-term to long-term. Our strategy remains very clear, strengthen our flagship categories, scale our new age business, and continue investing in innovative innovative products, capacity and distribution expansion while maintaining financial discipline. Each of these priorities move us closer to our ambition of evolving into a health and nutrition company building on our strong dairy foundation. We will continue to pursue this transition in a measured and a sustainable manner. Thank you so much for your continued trust in Parag Milk Foods. We would be we will now be happy to take questions. Thank you.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and
Moderator: Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Rahul Jain from Credence Wealth. Please go ahead.
Rahul Jain (Credence Wealth): Hello, am I audible?
Moderator: Yes, sir. Could you speak a bit louder, please?
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