Parag Milk Foods to raise Rs 400-500 crore for expansion

HYDERABAD: Parag Milk Foods, one of India’s largest private dairy companies backed by few private equity firms including IDFC, has firmed up an expansion plan involving Rs 500 crore of investment to double the processing capacity to 3.6 million litres and to spread to new markets.

The milk products firm, which owns ‘Gowardhan’ and ‘Go’ brands, is looking at raising the required funds either through private equity sources or by tapping the capital markets with initial public offering ( IPO), said its chairman Devendra Shah.

The dairy products firm has so far raised Rs 300 crore of funds from three private equity funds that include IDFC Alternatives, Motilal Oswal Private Equity and International Finance Corporation (IFC).

On the sidelines of a program in Hyderabad to announce the company’s foray into Telangana market on Tuesday, Shah told ET that it could take few more months to decide on the route of raising funds for expansion of capacity as well as product portfolio. The portfolio expansion includes new range of milk based beverages and nutritional value-added products.

The company, which has been reporting a growth of around 30% a year, expects to maintain the growth rate at least for the next three years. “We have crossed Rs 1,400 crore of revenue last fiscal and are expecting to report Rs 2,100 crore of sales this fiscal,” said Shah.

At present, Parag Milk has two plants – one at Manchar near Pune and the other at Palamaner in Chittoor district of Andhra Pradesh, with an aggregate capacity of 1.8 million liters.

The company, which has initially appointed 350 dealers to reach 5,000 retailers in Hyderabad and has plans to spread operations to tier-2 cities of the state later in the second phase, is eying to capture at least 3% of the Rs 3,500 crore of market in Hyderabad in the first year, said Shah.