Parag Milk Foods nets US$29m in Indian dairy sector’s biggest PE deal

18-Sep-2012 - Last updated on 16-Mar-2017 at 01:42 GMT

In what is yet another clear sign of the growing interest of investors in India’s homegrown food processing industry, Parag Milk Foods has signed a new private equity deal to secure a huge funding boost.

The dairy company, which markets its products under the Gowardhan, Go and Pride of Cows brands, received US$28.7m from the private equity arm of IDFC, making it India's biggest dairy-sector PE deal.

The new funding will be used to build product capacity and strengthen its procurement network.

Parag has been growing fast in recent years, its performance mirroring the concurrent rise of India's large middle-class and it's corresponding purchasing power.

Over the last financial year, Parag achieved a turnover of around US$163mn, a 40% jump from the previous year. The company holds around 2% of the$11bn organised milk and allied products market in India.

Its product range includes skimmed milk powder, ghee and processed cheese, along with proprietary foods like dairy whitener and gulab jamun mix. It also processes nearly 1.1 million litres of milk per day at two plants and exports to 27 countries in Asia and Africa.

As of now, Parag operates across more than 300,000 retail outlets and has more than 2,000 distributors.

“Parag is committed to bring new and exciting products to the market and emerge among the top value-added food companies in India. We believe that the investment from IDFC will help us stay committed to these goals,” said Devendra Shah, chairman of Parag Milk Foods.

The deal will also provide a partial exit to Motilal Oswal Private Equity, which invested US$10.2m in the company in 2008 for a reported 10-12% stake. The new deal will give IDFC a 15-20% stake in Parag Milk Foods.

The deal is being routed through the IDFC Private Equity Fund III. It is the firm’s second investment in rural infrastructure and first in the dairy sector—although it is not the first investment to shed light on opportunities in India’s food processing and retailing industry.

Most recently, Actis Private Equity infused US$65mn into dairy products retailer Nilgiris Dairy Farm, while the Carlyle Group invested US$22mn in regional dairy player Tirumala Milk in 2010.