In conversation with: Devendra Shah, CMD, Parag Milk Foods

Recently, Parag Milk Foods Pvt ltd, one of India’s largest companies in the dairy business, went for public and it was listed on both BSE and NSE. The company’s IPO was oversubscribed 1.83 times till the last day of the offer. Parag Milk Foods is popular for its brands such as ‘Go’ and ‘Gowardhan’. In an email interaction with the CMD of Parag Milk Foods Pvt. Ltd, Devendra Shah, we wanted to learn about his impressions, the future road-maps of the company and more. Excerpts:

BB: Share with us the journey of Parag Milk Food so far – from the beginning till the IPO

Shah: We are one of the leading manufacturers and marketers of dairy-based foods in India. We commenced our business in 1992 with the collection and distribution of milk and have now developed into a dairy-based branded consumer products company with an integrated business model which manufactures a range of products including cheese, ghee, fresh milk, whey proteins, paneer, curd, yoghurt, milk powders and other dairy-based beverages targeting a wide range of consumer groups. A significant range of our food products has a long shelf life that enables us to market our products to institutional and retail customers across India. Today, Parag Milk Foods is the second largest cheese player in India with 32% market share. It also has the largest cheese plant in India where the total available market is Rs. 1,200 crore. It is a pioneer and the biggest player in the ‘cow ghee’ segment where the total available market size is Rs. 61,800 crore. It is the largest private player in UHT milk market where the addressable market is Rs. 2,600 crore. In the fresh milk category, it is the largest private brand in Mumbai, 2nd Largest in Pune, 3rd largest in Nagpur and amongst top 5 in Bangalore & Chennai. It is a pioneer in frozen & flavored yoghurt segment and is a prominent player in curd market in West & South India.

BB: Are you happy with the response (for the IPO) so far?

Shah: We are overwhelmed with the response received from 52000 shareholders, which includes employees, retailers, distributors, farmers, our consumers, and other investors. Our IPO and listing today has given us adequate capital to take Parag Milk Foods to the next level. During this entire process of going public, there were hurdles with change of timelines, last minute extension due to technical issues with FIIs, etc. Despite these hurdles, Parag IPO sailed through 1.82 times subscription. This success is the testimony of the support and trust by our shareholders.

BB: What are your plans after getting the fund from the shareholders?

Shah: We have planned to set up a research and development centre at Manchar (near Pune) to develop new products and processes, and a technology centre at our ancillary for ‘training and development’ activities in addition to focus on animal husbandry. We have recently launched flavoured milk with rich protein content under its ‘Topp Up’ brand and buttermilk under ‘Go’ brand with a few variants each. We have also introduced milk variants on the basis of specific end-use along with introducing ‘T-Star’, a variety of milk best suited for making tea and coffee; and introduced ‘Go Kidz’ milk with high protein content for growing children. Parag now intends to increase dairy based beverages portfolio under ‘Go’ brand which also includes the introduction of milk-based high protein drinks.

We constantly focus on ‘research and development’ to distinguish ourselves from our competitors to enable us to introduce new products based on consumer preferences and demand. We also intend to increase the share of our value-added product portfolio by focusing more on health and nutrition to cater to evolving consumer trends. At Parag, we believe that we can increase our margins by focussing on increasing sales of our value-added products; such initiatives will be helpful in further expanding our business.

BB: How do you see the Indian ‘milk food’ market?

Shah: Indian milk food market is growing rapidly and has tremendous opportunities for growth. The Indian dairy industry is divided into the organized and unorganized segments. The unorganized segment consists of traditional milkmen, vendors and self-consumption at home and the organized segment consists of cooperatives and private dairies.

According to IMARC report, in 2014, 30% of the total organised milk market in India was processed by the organized segment with private players processing 55% and cooperatives 45% of the total marketable milk in the organized segment.

During 2010 to 2014, the organized segment grew at CAGR 20.7% whilst the unorganized segment grew at a CAGR of 14.2%. The organized segment is expected to grow at a CAGR of 19.5% between 2015 and 2020 – accounting for approximately 25.5% of the Indian dairy industry by 2020. The unorganized segment is likely to grow at a CAGR of 13.2% during the same period and is expected to account for 74.5% of the total Indian dairy industry by 2020.

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