Metrics raised 3
- FY27 revenue growth guided to >10% YoY (from prior ~10% benchmark)
- Cheese capacity expansion target raised to 120 MT/day by March 2028 (from current 60 MT/day)
- Distribution reach target of 1.5+ million outlets over next 2 years (new target, no prior)
Event Participants
Executives
5 Akshali Shah, Ankit Jain, Brian D'Penha, Rahul Kumar Srivastava, Rakesh Kothari
Analysts
10 Amish Kanani, Anubhav Goel, Ashish Kumar Singh, Debashish Neogi, Kavina Desai, Kiran Dhanwada, Rahul Jain, Swapnil Gupta, Vinod Krishna, Viraj Mehta
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹945 crores | Highest-ever Q1; +11% YoY value growth, +3% YoY volume growth |
| Gross Profit | ₹200 crores | +11% YoY, in line with revenue growth; gross margin stable at ~21%, demonstrating full pass-through of input cost inflation |
| EBITDA | ₹70 crores | +6% YoY; margin at 7.4% vs 7.7% YoY, impacted by milk price inflation and fixed overhead absorption |
| PBT | Broadly flat YoY | PAT declined ~20% YoY primarily due to current tax impact |
| Raw Milk Prices | ₹42/litre | +13% YoY, flat sequentially; cost push passed on via calibrated price hikes, mix improvement and promotional optimization |
| Flagship Categories Contribution | 61% of Q1 revenue | Ghee, Cheese, Paneer, Dahi; volume declined 2% YoY but value grew 10% YoY; B2C robust, B2B modest decline |
| New Age Business Contribution | 13% of revenue (vs 9% YoY) | Pride of Cows & Avataar grew 59% YoY; premium dairy, sports/functional nutrition platform |
| Cheese Market Share | 35% | #2 in Indian cheese category |
| Cheese Production Capacity | 60 MT/day → 120 MT/day | Doubling over next 1.5 years; expansion enables parallel whey protein generation capacity |
| Avataar Distribution Mix | 75% E-com/Quick-com/Website, 25% Traditional Retail | Reflects channel-specific strategy for protein products |
Geographic & Segment Commentary
Flagship Categories (Ghee, Cheese, Paneer, Dahi): Contributed 61% of Q1 revenue with 10% YoY value growth despite 2% volume decline. The decline is attributed to a transient slowdown in B2B channels where management is deliberately ceding volume to maintain pricing discipline; B2C within flagship categories grew high single-digit (near double-digit) volume. Strategic focus remains on strengthening leadership in these core categories amidst input cost inflation.
New Age Business (Pride of Cows, Avataar): Grew 59% YoY, now contributing ~13% of total revenue vs 9% YoY. Avataar has expanded beyond whey protein powders into protein bars, ready-to-drink products, and functional nutrition; the newly launched RTD Avataar coffee (15g protein/serving) has received encouraging initial response. Management confirms growth is strongly backed by volume, not just price-driven value growth.
Others (Beverages, UHT Milk, Misc.): Revenue declined 46% YoY due to reclassification of Dahi to flagship categories and reduction in one-off other operating revenues (PSI/PLI incentives post GST changes). UHT beverages within the category performed reasonably well.
Company-Specific & Strategic Commentary
Cheese & Whey Capacity Expansion: Doubling cheese capacity from 60 to 120 MT/day over next 1.5 years (by ~March 2028). This expansion will simultaneously scale whey protein generation, positioning the company to capitalize on both cheese and whey as part of its health & nutrition ambition.
Avataar Brand Building ("India's Got Latent"): Season 2 partnership with Samay Raina generated 80+ million unique reach across YouTube and Netflix. While commercials not disclosed, management highlighted ~200% increase in website traffic and Google searches over the last two months, indicating strong brand awareness impact.
Distribution Strategy Evolution: Moving from blanket distribution to targeted, channel-specific placement for new age products (airports, hostels, canteens, pharmacies, quick commerce). Management guided toward availability in 1.5+ million outlets over the next couple of years.
New CFO Appointment: Rakesh Kothari (ex-Citibank, 25+ years experience in banking and corporate finance) elevated as CFO effective August 6, 2026, focusing on disciplined capital allocation, stronger cash flows, and sound governance.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (FY27) | >10% YoY | Management confident of breaking the 10% growth benchmark; Q1 typically weakest quarter, festive Q2/Q3 expected to drive higher growth |
| Cheese Capacity | 120 MT/day by ~March 2028 | Doubling from current 60 MT/day; milk procurement to be scaled in parallel to meet requirement |
| Distribution Reach | 1.5+ million outlets | Targeted over next couple of years; revamping distribution for depth as well as length |
| New Age Business Mix | Continuing upward trajectory | Growing from 9% → 13% of revenue; management expects continued progression, though no explicit percentage target given |
| B2C Volume Growth (Flagship) | High single-digit to double-digit aspiration | Currently high single-digit; working toward double-digit while maintaining pricing discipline |
Risks & Constraints
| Risk | Context |
|---|---|
| Milk Price Inflation | Milk prices at ₹42/litre (+13% YoY) remain elevated though stable. Management expects possible slight seasonal increase due to monsoon impact on production and festive demand. Mitigation: calibrated price increases, mix improvement, promotional optimization |
| B2B Volume Decline | Core category volume declined 2% due to deliberate B2B volume forfeiture to protect profitability; some chains negotiate on price "make or break" basis. Risk of sustained volume pressure if B2B pricing remains unviable |
| New Age Business Input Costs | Global whey protein demand has increased exponentially (driven by GLP-1 medication trends in US/Europe), creating a structural demand-supply gap. Input price increases in whey protein segment are considered structural, not temporary |
| Competitive Pressure in Protein Segment | Market leaders in protein bars available in wider distribution; Avataar's channel-specific strategy may limit immediate shelf presence. Management addressing via targeted high-throughput outlets and distribution expansion roadmap |
| GST/Incentive Changes | Post September 2025 GST changes, state incentives (PSI) have substantially reduced, impacting other operating income. This is a structural change affecting other income lines |
Q&A Highlights
Growth Outlook and Product Mix Evolution
- Question: Is FY27 the year Parag breaks out of the ~10% growth band to 15%+? (Kiran Dhanwada, TableTree Capital)
- Answer: Management confirmed growth will exceed 10% in FY27; Q1 is typically the weakest quarter and festive quarters ahead will drive stronger growth. Product mix has transformed vs FY23 (new age business grew from <3-4% to 13% of revenue), shifting to higher-value products like whey protein with ₹3,000-4,000 MRP. (Rahul Kumar Srivastava, Akshali Shah)
Avataar Volume vs Value Growth
- Question: Given retail prices moved up significantly on whey protein, is Avataar's 59% growth purely price-driven with stagnant volumes? (Kiran Dhanwada, TableTree Capital)
- Answer: Growth is strongly backed by volume, evidenced by company's overall 3% volume growth despite flagship category volume decline of 2%. New product formats (beginner proteins at lower price points, RTD, bars) expanded the portfolio. Management claims "calibrated" price increases, not 100% hikes, across Avataar over recent quarters. (Ankit Jain, Akshali Shah)
Distribution Strategy for New Age Products
- Question: Why are higher-margin products like goater cheese and Avataar protein bars/coffee unavailable in stores that stock Gowardhan Ghee? (Unidentified Analyst)
- Answer: New age products are deliberately placed in high-throughput, channel-specific outlets (vending machines at airports/hostels/canteens, pharmacies, quick commerce) rather than blanket distribution. RTD coffee launched only this quarter; distribution will expand over coming quarters. Management targeting 1.5+ million outlets as distribution revamp progresses. (Rahul Kumar Srivastava, Akshali Shah)
Operating Margin Stagnation
- Question: With mix improving toward premium new age products and brand investments, why has operating margin remained stagnant for several quarters? (Debashish Neogi, Abaan Dubai)
- Answer: Milk price increases carried a lag effect due to weighted average inventory costs. Gross margin declined ~70bps sequentially to 27.3% due to full absorption of higher milk prices in Q1. Management confirmed YoY gross profit growth (+11%) matches revenue growth, demonstrating full cost pass-through. Margin expansion from mix improvement has been offset by milk cost inflation; calibrated price increases continue to be implemented. (Ankit Jain)
Core Category Volume Decline
- Question: Despite distribution expansion and new market entry, why did core categories see volume decline? (Viraj Mehta, Enigma Investment Partners)
- Answer: Decline is entirely from B2B channel, where certain customers negotiate aggressively on pricing and management chooses to forego volumes to protect profitability. B2C volumes within core categories have grown high single-digit to near double-digit. This is a "transient slowdown" in specific channels, not a broad-based demand issue. (Rahul Kumar Srivastava, Ankit Jain)
Whey Protein Input Cost Dynamics
- Question: Will global whey protein price increases (retail prices up ~35% recently) hit PBT given backward integration? Is the price increase structural or temporary? (Unidentified Analyst)
- Answer: Global whey protein demand has increased exponentially, driven by fat reduction medicines (GLP-1 drugs) leading to higher protein recommendations in US/Europe. This is considered a structural demand-supply gap, not temporary. Management does not disclose product-level cost of production. (Rahul Kumar Srivastava)
Other Income Fluctuations
- Question: What drives the spiking/fluctuating other income every alternate quarter, and what is the normalized run rate? (Arya Shah, Well Guardian Services)
- Answer: Fluctuations stem from fair valuation changes on biological assets (annual exercise based on cow count) booked in March quarters, and one-off items like last year's sale of the Sonipat plant. Q1 FY27 other income is very low, primarily from bank deposit interest. (Ankit Jain)
Avataar Distribution Mix
- Question: What is the E-com/quick-com contribution and market share of Avataar vs competition? (Debashish Neogi, Abaan Dubai)
- Answer: Revenues from quick-commerce, E-com, and Avataar's own website are 75%, with 25% from traditional retail/specialized protein outlets. Market share data not disclosed. (Akshali Shah)
FDA Paneer Regulations
- Question: How has Maharashtra FDA's crackdown on adulterated/analog paneer affected the business? (Amish Kanani, Knowise Investment Managers)
- Answer: FDA has banned analog paneer made with vegetable fat (not milk fat). This is positive for Parag, which manufactures 100% milk fat paneer, as it eliminates confusion and moves the industry toward milk-based products, benefiting the entire organized dairy stream. (Rahul Kumar Srivastava, Rakesh Kothari)
Key Takeaway
Parag Milk Foods delivered its highest-ever Q1 revenue of ₹945 crores (+11% YoY), with EBITDA at ₹70 crores (+6% YoY) as the company absorbed 13% YoY milk price inflation through calibrated price increases, stable gross margins of ₹200 crores (+11% YoY), and disciplined B2B volume management. The flagship categories (Ghee, Cheese, Paneer, Dahi) at 61% of revenue saw 10% value growth but 2% volume decline (from deliberate B2B forfeiture), while the new age business (Pride of Cows, Avataar) grew 59% YoY to 13% of revenue. Management's strategic focus centers on doubling cheese capacity from 60 to 120 MT/day by March 2028, which will simultaneously expand whey protein generation, and building Avataar as a health & nutrition powerhouse through targeted brand partnerships and channel-specific distribution. Management guides to >10% revenue growth for FY27 with Q2/Q3 festive demand as the primary driver, while navigating structural whey protein input cost inflation. Watch points include sustained core category B2B volume softness, milk price seasonality, and execution of the capacity and distribution roadmaps.