Parag Milk Foods IPO

Parag Milk Foods IPO

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Parag Foods logoParag Milk Foods IPO

Parag is one of the leading manufacturers and marketers of dairy-based branded foods in India. The company commenced its business in 1992 with collection and distribution of milk and has now developed into a dairy-based branded consumer products company with an integrated business model, manufacturing a diverse range of products including cheese, ghee (clarified butter), fresh milk, whey proteins, paneer, curd, yoghurt, milk owders and dairy based beverages targeting a wide range of consumer groups through several brands. A significant portion of its product range includes long shelf-life food and beverage products that enable it to sell its products to retail and institutional customers across India. The company derives all of its products only from cows’ milk. The company’s aggregate milk processing capacity is 2 million litres per day while its cheese plant has the largest production capacity in India, with a raw cheese production capacity of 40 MT per day.
Parag sells its products – primarily milk, curd products, ghee, paneer, butter, cheese products, UHT milk – under Gowardhan and Go brands while also selling premium cow milk under Pride of Cows brand and flavoured milk under Topp Up name. The company’s main business lines and products are as follows:
  • Gross fresh milk accounted for 20.3% of its total revenues for the nine months ended 31 December 2015.
  • Ghee, butter and cream accounted for 28.5%
  • Cheese/paneer accounted for 18.7%
  • UHT (Ultra Heat Treatment) products accounted for 4.8%
  • Whey products accounted for 2.9%
  • Skimmed milk powder and dairy whitener accounted for 10.1%
  • Other products such as curd, fruit yoghurt, gulab jamun mix, and flavoured milk accounted for 4.9%
Parag’s manufacturing facilities are strategically located at Manchar in the Pune district of Maharashtra and Palamaner in the Chittoor district of Andhra Pradesh with milk processing capacities of 1.2 million litres per day and 0.8 million litres per day, respectively.
Its institutional customers include restaurant and cafe chains such as Yum! Restaurants (India) Private Limited (for Pizza Hut, Taco Bell and KFC), Jubilant Foodworks Limited (for Domino‘s Pizza) and Sankalp Recreation Private Limited (for Sam‘s Pizza).

Parag Milk Promoters – Devendra Shah, Pritam Shah and Parag Shah

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Subscription Dates4-6 May 2016
Price BandINR220 – 227 per share
Issue SizeINR767 crore
Face ValueINR10 per share
Minimum Bid65 shares
Retail Allocation10%
Listing OnBSE, NSE
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Proceeds to the company INR300 crore
Expansion and Modernisation PlanINR147.7 crore
Investment in Subsidiary for financing the capital expenditure requirementsINR2.3 crore
Partial repayment of the Working Capital Consortium LoanINR100 crore
General corporate purposesRemaining amount
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Major shareholders in Parag Milk Foods
Name of shareholderEquity SharesPercentage (%)
Devendra Shah14,570,83220.69
IDFC PE14,134,16220.07
Netra Shah10,272,78214.59
Pritam Shah9,159,88813.01
IBEF I 4,359,7496.19
Priti Shah3,322,8204.72
Poojan Shah3,295,0004.68
IDFC SPICE2,411,8703.43
IBEF2,316,8663.29
Iris Business Solutions Private Limited2,314,2003.28
Total66,158,16993.95
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Parag Milk’s consolidated financial performance (in INR crore)

 FY2011FY2012FY2013FY2014FY2015
Total revenue658.5900.5927.11,089.51,440.5
Total expenses608.1817.5841.61,005.91,332.3
Profit/(loss) after tax-0.418.920.715.925.9
Net margin (%)-0.12.12.21.51.8
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Parag Milk IPO Subscription Details

CategoryShares offeredSubscription (No. of times)
Day 1Day 2Day 3Day 4Day 5Day 6
QIB 10,388,3030.120.12 0.550.55 0.69 1.18
NII 5,098,4470.020.22 2.652.66 2.66 3.10
Retail 3,398,9640.140.50 1.711.79 1.84 2.14
Employees300,0000.020.720.960.97 0.98 1.02
Total 19,185,7140.100.221.321.33 1.42 1.86
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Listing Performance of Parag Milk Foods IPO

IPO Closing Date: 6 May 2016 (IPO extended to 11 May after poor demand)

Finalisation of Basis of Allotment: 11 May 2016

Initiation of refunds: 12 May 2016

Transfer of shares to demat accounts: 17 May 2016

Listing Date: 19 May 2016

Listing Price on NSE: INR217.5 per share (7.1% premium over IPO price)

Closing Price on NSE: INR248 per share (22.2% return over IPO price)

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10 COMMENTS

  1. Despite all the outrage, I have a feeling this IPO will make you richer on 19 May when it lists. Don’t read too much into analysis and don’t discount a good and profitable business.

  2. Parag deserves these troubles. Strange that no one mentioned the conflict of interest for Motilal Oswal and IDFC…

    • @BrezzaRunner, good point but both were involved only in marketing of the IPO. At least on the face of it, there was no conflict of interest.

  3. None of the analysts said to avoid the issue and still such poor response. If it lists at discount which has high probability, it will be double whammy for investors as there will be full allocation

    • You may be right John and this review also says this stock may give some returns on listing. but why to risk when there are better options available?

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