Parag Milk Foods Raises Rs 161 Cr, Gains Key Investor Backing Amid Strong Growth Trajectory
Parag Milk Foods Ltd., a leading dairy FMCG company in India, has taken a significant step forward in its growth journey by raising Rs 161 crore through a preferential issuance of 90 lakh convertible warrants. Announced on April 04, 2025, this strategic fundraise aims to optimize the company’s debt, bolster working capital, and fuel capital expenditure initiatives. Priced at Rs 179.10 per warrant (including a premium of Rs 169.10), these warrants will convert into fully paid-up equity shares of Rs 10 each, pending shareholder approval at an Extraordinary General Meeting scheduled for May 3, 2025. The move has already sparked a 9% surge in the company’s share price, reflecting robust market confidence.
A Stellar Line-Up of Investors
The preferential allotment has attracted a distinguished group of investors, signaling strong belief in Parag Milk Foods’ future. Key participants include:
- Utpal Sheth: A renowned investor with over 30 years of experience in capital markets, Sheth is a former Senior Partner and CEO of RARE Enterprises, the asset management firm founded by the late Rakesh Jhunjhunwala. His allocation of 13 lakh warrants underscores his confidence in Parag’s business model and its potential to deliver long-term value.
- Rajesh Kabra: A notable investor joining the round, though specific details of his allocation remain undisclosed.
- Vishesh Dalal: Another key stakeholder participating in the issuance, reinforcing the investor pool’s diversity.
- Trishakti Power Holdings Pvt Ltd: A private entity adding institutional heft to the funding round.
- Ankit Jain: Parag’s Chief Strategy Officer, allotted 2 lakh warrants, aligning his personal stake with the company’s growth vision.
- Promoters: Chairman Devendra Shah and Managing Director Pritam Shah have also subscribed to warrants, reaffirming their commitment to steering the company forward.
This mix of marquee investors, leadership, and promoters highlights a unified belief in Parag’s strategic direction and its ability to capitalize on India’s booming dairy market.
Leadership Speaks: A Milestone in Growth
Chairman Devendra Shah hailed the fundraise as a pivotal moment, stating, “This strategic investment is a major milestone in our growth journey. It reaffirms our assurance to delivering high-quality, value-driven dairy products while expanding our footprint globally. The trust and confidence shown by our investors inspire us to accelerate our vision, enhance our capabilities, and drive long-term value creation for all stakeholders.” Shah also emphasized the leadership’s alignment, noting, “Ankit Jain’s investment reflects his strong belief in Parag Milk Foods’ solid foundation and immense growth potential. His confidence reaffirms our commitment to innovation, sound financial management, and sustainable expansion in the dairy FMCG sector.”
Shareholding Structure: A Deeper Look
As of March 31, 2024 (per the FY24 Annual Report), Parag’s shareholding was dominated by its promoters, the Shah family, who held a significant stake bolstered by a Rs 113 crore warrant issuance in 2022. Post-IPO in 2016, institutional investors like the International Finance Corporation (IFC) and Sixth Sense Ventures joined the fold, alongside public shareholders. Historical backers such as IDFC Private Equity and Motilal Oswal Private Equity exited profitably post-IPO, while domestic mutual funds hold a modest 0.06% stake, suggesting limited institutional research or comfort with current valuations.
The latest Rs 161 crore infusion will dilute existing shareholding slightly upon conversion of the 90 lakh warrants into equity shares. Assuming full conversion, this would add approximately 7.6% to the company’s equity base (based on 118.6 million shares outstanding as of FY24). Promoters are expected to maintain control, while Sheth’s entry could elevate his stake to around 1-2%, depending on further allotments. Exact post-conversion shareholding details will emerge after the May 3, 2025, shareholder meeting.
Financial Snapshot: Building on FY24 Momentum
Parag’s financial performance in FY 2023-24 provides context for this fundraise. The company reported:
- Revenue: Rs 31,387 million (8.5% Y-o-Y growth).
- EBITDA: Rs 2,223 million (7.1% margin, up 36% Y-o-Y).
- PAT: Rs 906 million (70% Y-o-Y growth).
- Net Debt: Rs 5,681.11 million, with a debt-to-equity ratio of 0.62.
The Rs 161 crore will likely reduce this debt burden while funding expansion in high-growth segments like Avvatar whey protein and Pride of Cows premium dairy, which contributed 4.7% to revenue in FY24, up from 1.2% in FY20.
Strategic Roadmap: Where the Funds Will Go
Parag plans to deploy the capital across three key areas:
- Debt Optimization: Reducing the Rs 5,850.37 million borrowing load to improve financial flexibility.
- Working Capital: Supporting a retail network expansion from 4.6 lakh touchpoints to 13-15 lakh by 2027.
- Capex: Scaling production capacity, including the Rs 300 crore Pune whey protein facility (announced in 2024) and Pride of Cows’ target of 2.5 lakh liters/day by 2027.
The company’s focus on premiumization—evident in new launches like high-protein paneer and Greek yogurt under Pride of Cows—aligns with rising consumer demand for health-focused nutrition.
Market Sentiment and Valuation
The market responded enthusiastically, with Parag’s share price jumping 9.56% to Rs 185 on April 03, 2025, per BSE data. At a P/E ratio of ~26x (based on FY24 EPS of Rs 7.71 and a share price of ~Rs 200), the stock remains reasonably valued for a growth-oriented FMCG player. Analysts project an EPS of Rs 10 by FY26, suggesting a potential target price of Rs 300—a 50% upside.
Competitive Edge and Risks
With a 22% share in branded cow ghee and 35% in cheese, Parag leads its core categories. Its new-age brands, Avvatar and Pride of Cows, position it to capture the protein and premium dairy segments. However, risks include milk price volatility, competition from Amul and Mother Dairy, and regulatory challenges (e.g., Rs 548.82 million in contingent liabilities).
Conclusion: A Dairy Powerhouse in the Making
Parag Milk Foods’ Rs 161 crore fundraise, backed by heavyweights like Utpal Sheth and reinforced by promoter and leadership commitment, marks a turning point. As it leverages India’s Rs 9,926 billion dairy market (projected to hit Rs 31,720 billion by 2032), Parag is poised to strengthen its leadership in value-added dairy. For investors, this is a story of growth, resilience, and strategic vision—worthy of a “Buy” consideration.
