Parag Milk Foods sees a good debut

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Shares of Parag Milk Foods were trading at Rs 240.50 at 10:15 on BSE, a premium of 11.86% over the initial public offer price of Rs 215.

The stock debuted at Rs 215.70, a premium of 0.33% to the initial public offer (IPO) price. So far the stock hit a high of Rs 245.50 and low of Rs 215.70. On BSE, 16.27 lakh shares were traded on the counter.

The IPO of Parag Milk Foods closed on 11 May 2016. The IPO received bids for a total of 3.56 crore shares. It was subscribed 1.83 times as per data from the National Stock Exchange (NSE) website. The IPO of Parag Milk Foods was earlier slated to end on 6 May 2016. The company had revised the price band of the issue to Rs 215 – Rs 227 per share from Rs 220 – Rs 227 per share earlier. The IPO opened for bidding on 4 May 2016.

The qualified institutional buyers (QIBs) category was subscribed 1.15 times. The non-institutional investors category was subscribed 3.08 times. The retail individual investors (RIIs) category was subscribed 2.12 times.

The IPO of Parag Milk Foods, one of the leading manufacturers and marketers of dairy-based branded foods in India, comprised of fresh issue of equity shares aggregating up to Rs 300 crore and offer for sale of up to 2.05 crore shares from existing shareholders.

The three investors who sold shares via the IPO are India Business Excellence Fund (IBEF) which is a unit scheme of venture capital fund Business Excellence Trust, India Business Excellence Fund I (IBEF I) and IDFC Private Equity Fund III (IDFC PE) which is a unit scheme of venture capital fund IDFC Infrastructure Fund 3. IBEF sold 21.09 lakh shares, IBEF I sold 39.17 lakh shares and IDFC PE sold 82.59 lakh shares via the IPO.

From the promoter group, Netra Shah sold 20.04 lakh shares and Priti Shah sold 11 lakh shares. Other selling shareholders sold a combined 31.81 lakh shares.

The company had raised Rs 342.85 crore by selling 1.51 crore shares to a total of 17 anchor investors ahead of the opening of the IPO. The shares were allotted to the anchor investors at Rs 227 per share, the top end of the Rs 220 to Rs 227 per share price band for the IPO.

The company will utilize the proceeds of the fresh issue of shares to fund the expansion and modernisation at its existing manufacturing facilities at Manchar in Pune and Palamaner in Andhra Pradesh and improving the marketing/distribution infrastructure. The company has earmarked Rs 147.70 crore the expansion and modernisation plan. It has earmarked Rs 2.29 crore for investment in its subsidiary for financing the capital expenditure requirements in relation to the expansion and modernisation of the Bhagyalaxmi Dairy Farm. A sum of Rs 100 crore will be used for partial repayment of the working capital consortium loan.

Promoted by Devendra Shah, Pritam Shah and Parag Shah, Parag Milk Foods manufactures a diverse range of products including cheese, ghee (clarified butter), fresh milk, whey proteins, paneer, curd, yoghurt, milk powders and dairy based beverages targeting a wide range of consumer groups through several brands. The company currently has aggregate milk processing capacity of 2 million litres per day. The cheese plant has a raw cheese production capacity of 40 MT per day. The company’s two flagship brands are Gowardhan and Go.

The company operates a diary farm through its subsidiary Bhagyalaxmi Dairy Farms. It is a fully automated cow farm housing over 2,000 holstein breed cows with superior quality yields. It produces farm-to-home premium fresh milk, which is marketed under the Pride of Cows brand in Mumbai and Pune.

Based on the consolidated financial performance, Parag Milk Foods registered net profit of Rs 31.92 crore on revenue from operations of Rs 1230.60 crore for 9 months ended 31 December 2015. The company reported net profit of Rs 25.96 crore on revenue from operations of Rs 1438.70 crore for the year ended 31 March 2015. The company has stated in its Red Herring Prospectus that it has not declared any dividend in the last five financial years. The company has no formal dividend distribution policy.