Parag Milk Foods Limited — Credit Ratings, 09-04-2025: Credit Rating- Revision

On April 8, 2025, ICRA Limited placed Parag Milk Foods Limited’s (PMFL) ratings on a "Rating Watch with Developing Implications" due to a recent announcement for the issuance of convertible warrants aimed at raising ₹161 crore (₹1.61 billion) to enhance its capital structure. The existing ratings for various instruments, including the ₹150 crore non-convertible debenture (NCD) programme, were retained at [ICRA]BBB- (Negative).

The company's consolidated financials for FY2024 reflect a revenue increase of 8.6% year-over-year, totaling ₹3,138.7 crore, supported by consistent demand across its product lines, particularly value-added dairy products. Net profit surged to ₹90.6 crore, up from ₹53.4 crore in FY2023, marking a notable improvement in profitability with an EPS of ₹1.99. Operationally, EBITDA margins expanded to 6.4% from 4.2%, driven by stable milk prices and a higher contribution from the value-added segment.

However, PMFL’s elevated debt levels, standing at ₹648.5 crore, present ongoing challenges. The company's working capital intensity remains high due to significant inventory needs and advances to suppliers, leading to a stretched liquidity position with high utilization of banking facilities.

Strategically, PMFL focuses on reducing its debt burden through potential equity financing and strengthening its operational efficiencies. The current market sentiment remains cautious, warranting prudent debt management.

Investors may consider holding their positions, observing the company’s ability to manage its debt and leverage the upcoming capital inflow effectively.