Virendra Pandit

Ahmedabad, Feb. 1

Pune-based Parag Milk Foods Pvt Ltd, makers of ‘Gowardhan' brand of dairy products, and its sister concern Bhagyalaxmi Dairy Farms Pvt Ltd are together investing nearly Rs 160 crore this year to expand capacities for processing a total of 20 lakh litres of milk daily.

The plans include a backward integration project involving a cold chain. A milk collection centre, with a capacity of three lakh litres, is being set up with an investment of Rs 12 crore in Shrirampur near Shirdi in Maharashtra, Mr Devendra Shah, Chairman and Managing Director, told Business Line after launching ‘Go Cheese', a new product, here today. Unlike other dairies, Parag processes only cow milk to make various products. Parag Milk's new plant at Palamner in Chittoor district in Andhra Pradesh, set up with an investment of Rs 65 crore, is to commence production this year in two phases with a total capacity to process 10 lakh litres of milk daily.

The company will procure the milk from dairy farmers in Andhra Pradesh, Karnataka and Tamil Nadu.

Also, the capacity of Bhagyalaxmi is also being ramped up to quadruple the number of cows from the existing 2,500, at an investment of Rs 55 crore.

“With our daily milk requirement projected to more than double from the current 8 lakh litres a day, we are quadrupling the number of cows. We have also imported semen from Canada for this purpose,” he added.

The herd of 10,000 cows will be raised by Bhagyalaxmi at Manchar, near Pune. The company is currently obtaining 55,000 litres of milk daily from its own 2,500 cows at India's largest cattle farm spread over 35 acres, and procuring the rest (7.5 lakh litres) from dairy farmers around Pune, at the price of Rs 13.50 a litre.

With the expansion projects being completed, the milk requirement will increase to around 15 lakh litres a day. Parag Milk is also considering to hit the capital market next year.

It is expecting to increase its turnover from Rs 320 crore in 2008-09 to Rs 425 crore this fiscal and Rs 550 crore in 2010-11.

Funding plans

The company is currently funding its plans with a mix of private equity, internal accruals and bank loans. Recently, Motilal Oswal picked up 11% equity in Parag Milk.

In its quest for a major market pie and to make cheese its growth driver, Parag Milk has ramped up its butter-and-cheese-making capacity to 40 tonnes a day.

The Indian cheese market is dominated by Amul (800 tonnes a month), followed by Britannia (300 tonnes) in the organised sector.

Parag is also targeting an initial marketing of 300 tonnes a month of cheese in the country, including 150 tonnes in Gujarat alone. Gujarat and Maharashtra account for 70% of cheese consumption in India. The cheese market is growing at 30 per cent a year in India because of the rising popularity of fast-foods and snacks such as pizza among youngsters.

The company had recently signed a MoU with a South Korean company, Geo Foods Corporation, to supply 300 tonnes of mozzarella cheese a month. Parag Milk, which also exports to West Asia, is now eyeing new markets such as Hong Kong and China as well for cheese supply.

(This article was published in the Business Line print edition dated February 2, 2010)
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