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Parag Milk Foods has gained about 13 per cent so far on listing today from the Rs 215 it debuted at. Given the volatile market conditions, the company has been able to make listing gains, probably because of the fact that it belongs to the defensive FMCG space. But the stock may not move up with the same enthusiasm in the days to come.
Earlier, the company was forced to revise its price band from Rs 220-227 to Rs 215-227 and extended the IPO closing date by a few more days as it met with a lukewarm response from investors. Even then, the IPO closed with only a modest oversubscription of about 1.83 times. High valuation, which left very little room for immediate gains for the stock, has been a major deterrent. The IPO was priced at over 40 times the company’s annualised earnings for 2015-16.
However, long-term prospects for the company remain sanguine. Parag Milk Foods produces milk and milk products under the ‘Gowardhan’ ‘GO’, ‘Topp Up’ and ‘Pride of Cows’ brands and has a growing presence in the retail space and a good foothold in segments such as sweet whey and cheese (32 per cent market share).
Parag derives two-thirds of its revenue from value-added segments such as cheese, paneer, yogurt and flavoured milk. Revenue in the last three years grew at an average annual rate of 17 per cent to ₹1,440 crore in fiscal 2015; net profit grew 11 per cent to about ₹26 crore.
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