Summary
Parag Milk Foods Limited - Q3 FY26 Earnings Call Summary Thursday, February 5, 2026, 4:00 PM IST
Event Participants
Executives Akshali Shah – Executive Director, Ankit Jain – Chief Strategy Officer, Brian D’Penha – Head of Investor Relations, Rahul Kumar Srivastava – Chief Operating Officer
Analysts Debashish Neogi (Abaan Dubai), Dhwanil Desai (Turtle Capital), Kaushal Sharma (Equinox Capital), Madhur Rathi (Counter Cyclical Investments), Mohit Dodeja (Emkay Global), Parikshit Gujrati (Niveshaay), Prit Nagersheth (Wealth Finvisor), Rahul Jain (Credence Wealth), Rehan Saiyyed (Trinetra Asset Managers), Vinod Krishna (Avendus Wealth)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹1,013 crores | +14% YoY; achieved ₹1,000 cr+ for two consecutive quarters driven by 8% volume growth. |
| Gross Margin | 25.9% | -130 bps YoY; impacted by 20% YoY milk inflation, offset by improved product mix. |
| EBITDA | ₹77 crores | 7.6% margin vs 9% YoY; impacted by higher employee costs and lower “other income” sequentially. |
| PAT (Adj.) | ₹35 crores | -2% YoY; reflects underlying strength despite sharp raw material cost push. |
| Milk Price | ₹40 / litre | +20% YoY, +6.5% QoQ; management expects prices to remain elevated through summer. |
| Net Debt | ₹435 crores | Reduced from ₹615 crores in March 2025; internal accruals funding current capex. |
| Core Category Vol. | +12% YoY | Strong growth in Ghee, Cheese, and Paneer; categories represent 64% of total revenue. |
| New Age Revenue | ₹100 crores+ | +123% YoY; combined Pride of Cows and Avvatar revenue crossed milestone for the first time. |
| Net Working Capital | 60-65 days | Improved from 75 days in prior years; target to maintain at current levels. |
Geographic & Segment Commentary
- Core Categories (Ghee, Cheese, Paneer): This segment remains the backbone of the company, contributing 64% of total revenue with 12% volume growth. Profitability is being managed through calibrated price hikes, including a February increase in Gowardhan Ghee to offset inflation.
- New Age Business (Avvatar & Pride of Cows): Revenue grew 123% YoY, now contributing 9% of total revenue compared to 6% last year. Avvatar has seen 6x growth over the last three years, with the new Protein Wafer Bar already contributing 8% to brand revenue.
- Regional Expansion: Management identified East and Northeast India (Calcutta, Odisha, and the Seven Sisters) as major focus areas for distribution disruption. The company added 30,000 new outlets YTD to strengthen its pan-India footprint.
Company-Specific & Strategic Commentary
- Premiumization & Nutrition Focus: The company is pivoting toward a health-led portfolio; the “New Age” segment is targeted to reach 20% of revenue in 2-3 years.
- Brand Collaboration: Partnered with Blue Tokai to supply Pride of Cows milk, viewed as a marketing initiative to deepen relevance with health-conscious urban consumers.
- Product Innovation: Launched Gowardhan Ghee in ₹20 sachets (20ml) to drive household penetration, trials, and deeper reach in both urban and rural value segments.
- Cost Management: Navigating 20% milk inflation by balancing B2B (SMP/Whey) and B2C mixes; absolute EBITDA grew 6.5% YTD to ₹232 crores despite margin percentage pressure.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| New Age Rev Share | 20% by FY28-29 | Scaling Avvatar and Pride of Cows through distribution and portfolio expansion. |
| EBITDA Margin | Double-digit (Long-term) | Aspiration to move beyond current 8.1% YTD as premium portfolio mix improves. |
| Milk Prices | Elevated through Q1 FY27 | Seasonal summer scarcity to keep prices high; relief expected with the monsoon. |
| Revenue Growth | 15% - 20% CAGR | Driven by core category volume and aggressive new age business scaling. |
Risks & Constraints
| Risk | Context |
|---|---|
| Milk Inflation | Average prices rose 20% YoY to ₹40/litre; continued elevation through summer may squeeze margins if price hikes aren’t fully absorbed. |
| Margin Dilution | High share of B2B/SMP (30% of business) acts as a denominator-heavy, low-margin drag on overall percentage gross margins. |
| Inventory Risk | Cheese ripening requires significant working capital; however, management has reduced the cycle to 60-65 days to mitigate liquidity pressure. |
| Regulatory | Implementation of new Labour Codes necessitated a one-time exceptional charge of ₹5.7 crores in Q3. |
Q&A Highlights
Margin Disparity
- Question: Why are margins lower than competitors who sell only liquid milk, despite Parag’s value-added portfolio? (Madhur Rathi)
- Answer: Valuation of raw milk is done at “landed cost at factory gate.” The high turnover of SMP (a low-margin byproduct of Ghee) increases the denominator, diluting margin percentages even as ROCE has improved from 8.6% to 14.3% (Ankit Jain).
Avvatar Pricing Strategy
- Question: Why were Avvatar prices increased twice in 3 months? (Parikshit Gujrati)
- Answer: Global whey protein prices and FX rates are inflationary. While Parag produces whey in-house, it aligns pricing with leading international brands to maintain premium positioning and offset raw milk cost increases (Ankit Jain/Akshali Shah).
Distribution Leakage
- Question: Is there a “last mile leak” in distribution, specifically in Calcutta and Mumbai? (Debashish Neogi)
- Answer: We have added 30,000 outlets in the East/Northeast YTD. We use Bizom, an IT sales tool, to track distribution precisely and aim to reach 1 million outlets total (Rahul Kumar Srivastava).
Debt Reduction
- Question: What is the plan for the ₹483 crore gross debt? (Kaushal Sharma)
- Answer: Gross debt has already been reduced from ₹615 crores in March. We are repaying NCDs (outstanding ₹81 cr) on schedule. Operating cash flows (₹99 cr in H1) now fund all capex, precluding the need for new debt (Ankit Jain).
Key Takeaway
Parag Milk Foods delivered a resilient Q3 FY26, surpassing the ₹1,000 crore revenue milestone for the second consecutive quarter despite a severe 20% YoY inflationary surge in milk prices. The company transitioned further toward a nutrition-led model, with its New Age brands (Avvatar and Pride of Cows) growing 123% YoY to cross ₹100 crores in quarterly revenue. Profitability faced temporary pressure from milk costs and one-time labor code provisions, yet management successfully maintained flat sequential gross margins through calibrated pricing and an improved product mix. Strategically, the firm is prioritizing ROCE expansion—up 570 bps since FY23—and debt reduction, while leveraging innovations like ghee sachets to broaden its consumer base. Looking forward, the company expects seasonal milk price headwinds through the summer but remains committed to a 20% revenue contribution from the high-margin New Age segment within the next three years.
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