1. Patanjali could be a threat to Parag Milk Foods; should you invest?

Patanjali could be a threat to Parag Milk Foods; should you invest?

Parag Milk Foods initial public offerings hit capital markets on May 4 to raise Rs 760 crore.

By: | New Delhi | Updated: May 4, 2016 4:17 PM

 

patanjali parag milk foods ipo Parag Milk Foods initial public offerings hit capital markets on May 4 to raise Rs 760 crore.

Parag Milk Foods initial public offerings hit capital markets on May 4 to raise Rs 760 crore. The company already raised nearly Rs 343 crore from anchor investors. This is the third initial public offer in less than one week which hit capital markets after Thyrocare Technologies and Ujjivan Financial Services.

Price band of Parag Milk Foods has been fixed at Rs 220-227 per share.

While brokerage houses such as Angel Broking, KR Choksey and Prabhudas Lilladher gave ‘Subscribe’ rating to the issue on account of sustained growth in the past couple of years. Choice Broking gave ‘Avoid’ rating to Parag Milk Foods public offer.

Choice Broking in a research note said, “Volatile profitability trend and single digit profitability are the main concern for Parag and increased competitive pressure from Patanjali Ayurved Ltd, which recently said that it is planning to venture into dairy segment this year are another reason to worry. Therefore, we recommend ‘Avoid’ rating for the issue.

According to Angel Broking, Indian and multinational FMCG companies are expected to face stiffer competition from the Patanjali brand. Patanjali has significant presence in the ghee segment, thus posing competition to PMFL.

Read more: Parag Milk Foods Rs 760 cr IPO hits markets: What these 5 brokerages are saying

Parag Milk Foods is one of the leading manufacturers and marketers of dairy-based branded foods in India. Its products are sold under four brands, namely: “Gowardhan”, “Go”, “Pride of Cows” and Topp Up”.

Net proceeds from the issue will be utilised to fund the expansion and modernisation of its facility in Maharashtra and for the partial repayment of the working capital loans.

 

Get latest news and updates on Auto Expo 2018, check breaking news on Budget 2018, like us on Facebook and follow us on Twitter.

  1. K A Prasanna Ananthamurthy
    May 5, 2016 at 1:11 am
    The company is unprofessionally managed. Avoid the IPO.RISKS:1. There are criminal proceedings outstanding against the Company. These proceedings have been initiated by the Government of Maharashtra and the Government of Jammu & Kashmir alleging contravention of Food Safety and Standards (Prohibition and Restriction of ) Regulations, 2011, Food Safety and Standards (Food Product Standards & Additives) Regulations, 2011, Food Safety and Standards (Packaging and Labelling) Regulations, 2011 and Food Safety and Standards Act, 2006 by the Company.2. Operations are dependent on the supply of large amounts of cow’s raw milk, and the inability to procure adequate amounts of good quality raw milk, at compeive prices.3.Statutory Auditor observed that for the financial years 2011 and 2012, that the internal control system in the Company / Subsidiary were inadequate. 4. The Income Tax Department in 2011 had conducted a search on the company / promoters for inaccurate reporting of revenues / profits.5. Dairy products are subject to extensive government regulation.6. A portion of the Net Proceeds to partly repay the Working Capital Consortium Loan and accordingly, the utilisation of that portion of the Net Proceeds will not result in creation of any tangible ets.7. The company in the past had defaulted in repayment of its dues to Exim Bank and it had dela in depositing taxes deducted at source.VALUATION AND RECOMMENDATIONS:The company post IPO will have equity around Rs 85 cr. The company is likely to report an EPS around Rs 7 for FY 16 and Rs 8 for FY 17. The asking PE is around 26, which is on the higher side.
    Reply

    Go to Top