Parag Milk Foods Limited — Credit Ratings, 11-02-2025: Credit Rating

Parag Milk Foods Limited has obtained a credit rating of 'IND BBB' with a Stable outlook from India Ratings. This reflects the company’s solid market position in the dairy value-added products (VAP) sector, particularly in cheese and ghee, where it holds significant market shares of approximately 35% and 22% respectively.

The recent strategic focus on expanding its high-value product offerings and the successful enhancement of its working capital borrowings have led to a healthier liquidity position. The company's revenue has shown a robust growth trajectory, with consolidated revenue reaching INR 31,387 million in FY24, up from INR 28,926 million in FY23. The growth has been driven by increased sales in core categories like ghee and cheese, alongside higher realisations due to rising demand.

Operational profitability has improved, with EBITDA margins rising from 4.1% in FY23 to 6.3% in FY24, bolstered by enhanced cost management strategies. However, the company still faces challenges with moderate credit metrics owing to elevated debt levels. The interest coverage ratio has improved to 2.59x but remains below optimal levels for a robust credit profile.

Going forward, while revenue growth is expected to persist, investors should remain vigilant about potential risks including market volatility and competition. The rating action may influence borrowing costs, and consequently, the company’s strategic flexibility in pursuing growth opportunities while managing capital efficiently. Therefore, a cautious approach is suggested.