Parag Milk Foods to expand manufacturing capabilities in India

Indian dairy company Parag Milk Foods plans to invest Rs4.5bn ($82.48m) over the next five to seven years in order to expand its manufacturing footprint and boost its milk procurement capacity.

The company is planning to fund the expansion through an initial public offering (IPO), which is expected to be launched within two years.

As part of the expansion plan, Parag Milk Foods will invest Rs800m ($14.66m) to expand the processing capacity of its facility in Chittoor, Andhra Pradesh state, by March 2013.

While half of the investment will be released this fiscal year, the remaining will be rolled out in the next fiscal.

The project will increase the plant’s procurement capacity from 600,000 litres per day to 1 million litres per day.

Parag Milk noted that it has decided to expand the facility in Andhra Pradesh due to factors such as surplus milk in the state and low procurement price.

The expansion plan will also see the company establish two milk processing plants in the eastern and northern regions of the country, which will boost its total procurement capacity from the current 2 million litres to 5 million litres per day.

Parag Milk chairman Devendra Shah was quoted by the Economic Times as saying that the company will expand its value-added milk products and brands in order to achieve its sales target of Rs100bn ($1.83bn) by 2020, up from Rs12bn ($219.97m) this fiscal.

The company is also planning to increase its EBITDA from the current 8% to 14%, Shah added.

Parag Milk Foods markets dairy products such as cheese, yoghurt and UHT (ultra-high temperature processing) under the Go and Gowardhan brands, and has two facilities – one each in Maharashtra and Andhra Pradesh.