PARAGMILK - Parag Milk Foods Limited Share Price

Management's outlook highlights a strong financial performance, reflecting resilience and strategic execution during Q3 FY26. The company achieved record quarterly revenue exceeding INR 1,000 crores for the second consecutive quarter, marking a 14% year-on-year growth supported by an 8% volume increase. Revenue for the first nine months of FY26 reached INR 2,872 crores, also reflecting a 14% year-on-year increase.

Key forward-looking points mentioned by management include:

1. Core Business Performance: The core categories of ghee, cheese, and paneer drove performance, posting a 12% volume growth and contributing to 64% of total revenue. These remain pivotal for scale and profitability.

2. New Age Business Growth: The new age business, which includes Pride of Cows and Avvatar, witnessed a remarkable 123% year-on-year growth, surpassing the INR 100 crores mark in quarterly revenues. This segment now contributes 9% to overall revenue, up from 6% year-on-year.

3. Product Innovations: The recently launched Protein Wafer Bar contributed to 8% of Avvatar's revenue, reflecting strong consumer interest and their intention to expand distribution nationwide.

4. Commodity Pricing Strategy: Milk prices have risen by 20% year-on-year, prompting the company to implement a disciplined pricing and promotional strategy while maintaining a gross margin of 25.9% for Q3 FY26.

5. Future Pricing Expectations: Management anticipates elevated milk prices in the near term due to seasonal factors and plans to maintain pricing power through strategic price adjustments.

6. Debt Management: The company is focused on reducing debt levels, with gross debt decreasing from INR 615 crores in March 2025 to around INR 543 crores as of September 2025, and cash flows from operating activities showing improvement.

Overall, management expressed confidence in sustaining growth momentum while navigating through inflationary pressures, with a continued focus on operational efficiency and enhancing product portfolio quality to drive profitability.

Question 1: Rehan Saiyyed: "Can you break down how much of this surge is driven by new product launches like Tiramisu Protein Bar versus deeper penetration of the existing portfolio?"

Answer: The brand, combining Avvatar and Pride of Cows, achieved over INR100 crores in revenue this quarter. Specifically, our Avvatar Protein Wafer Bars contribute 8% to total brand revenue. This growth is thanks to both our new product launches and stronger penetration of existing offerings, showcasing significant momentum in our portfolio.

Question 2: Rahul Jain: "Have milk prices stabilized post-quarter end? How much of the milk price has been passed on till December?"

Answer: Milk prices increased 20% year-on-year and 6.5% sequentially. While the milk prices are expected to stay elevated for the near term, we have successfully passed on price increases, maintaining gross margins at around 25.9%, reflecting our ability to offset input costs via improved product mix.

Question 3: Debashish Neogi: "Why are our value-added product margins lower than industry standards, despite strong brand presence?"

Answer: While we have seen margins at 26% up from 20% in FY23, our B2B segment simplifies margins due to lower realizations compared to B2C. The high proportion of commodity byproducts like SMP impacts gross margins, hence we focus on improving our overall EBITDA and strategic channel mix to address this.

Question 4: Parikshit Gujrati: "Why did employee costs jump 25% year-on-year? What factors have contributed to this increase?"

Answer: Employee costs rose significantly due to annual appraisals typically finalized in Q3, which led to higher arrears this quarter. Additionally, we expanded our workforce to support our distribution strategy and staffing for new facilities. This cyclical expense pushes costs higher in this quarter.

Question 5: Kaushal Sharma: "What is our target for new age business revenue in the next 2-3 years, and how will this affect working capital?"

Answer: We aim for our new age business to contribute 20% of overall revenue in 2-3 years, growing at 15-20% annually. While this growth may increase working capital needs, our existing strategies ensure we manage inventory efficiently, thus maintaining our capital structure without straining our margins.