Milky Mist Dairy Food’s initial public offering (IPO) has put forth a familiar question for investors – should the company be valued like a traditional dairy business, or should it command the premium usually given to fast-growing Fast-Moving Consumer Goods (FMCG) companies?
The Rs 1,553-crore IPO opened on August 11 and will close today, August 13. With the issue priced at Rs 133-140 per share, the company will close its subscription window today. But there is another number that stands out – its valuation.
At the upper price band, Milky Mist is valued at around 85 times its FY26 earnings. So, is the premium justified?
Milky Mist IPO subscription status so far
The issue received a subscription of 2.42 times by the end of the second day.
As of now, so far on its final day of bidding, the issue was subscribed 54.57 times.
Milky Mist IPO GMP
The grey market is also indicating a premium. Milky Mist shares were commanding a grey market premium of around Rs 22. This translates into nearly 16% over the upper price band of Rs 140.
However, it is important to understand that grey market sentiment can change quickly.
Why Milky Mist is different from traditional dairy players
This is where the company’s business model becomes important.
Milky Mist is heavily focused on value-added dairy products, or VADP. These include products such as paneer, cheese and yogurt.
Traditional dairy companies often have considerable exposure to liquid milk, which generally carries lower margins. Milky Mist has taken a different route by focusing more on processed and branded dairy products.
SBI Securities highlighted this distinction in its IPO note, saying, “Milky Mist Dairy Foods focuses primarily on VADP which is a higher margin product compared to its peers which are heavily invested in traditional low margin liquid milk business.”
Strong growth, but a demanding valuation
Milky Mist’s revenue, Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA), and Profit After Tax (PAT) grew at compound annual growth rates of 31.3%, 40.5% and 155.6%, respectively, between FY24-26.
Its EBITDA margin also improved to 13.7% in financial year 2026 from 13% a year earlier.
Aditya Birla Money noted, “Revenue grew at a strong 31.3% CAGR over FY24-26, while EBITDA margin expanded from 11.9% to 13.7%.”
The company also plans to use Rs 497 crore from the IPO proceeds to repay debt. That could reduce interest costs and support earnings going ahead.
However, the valuation remains the sticking point.
At Rs 140 per share, Milky Mist trades at nearly 85 times FY26 earnings.
Milky Mist IPO: What are brokerages saying?
Despite the valuation concern, brokerages remain positive on the IPO.
Anand Rathi Research said, “Given its strong revenue growth, leadership in key value-added dairy categories and premium positioning, the company may command a valuation premium.”
However, it also cautioned that “the IPO valuation appears fully priced at the upper band” before assigning a “Subscribe – Long Term” rating.
Geojit Securities also highlighted the premium valuation but pointed to Milky Mist’s leadership in value-added dairy products, growth and FMCG-oriented model.
“At the upper price band of Rs 140, MMDFL is valued at 85x FY26E P/E, which is at a premium compared with the industry peers. The company enjoys leadership in value-added dairy products, strong growth profile, expanding profitability and scalable FMCG-oriented business model. We recommend a ‘Subscribe’ rating for investors with a medium- to long-term investment horizon,” said Geojit securities.
Aditya Birla Money similarly recommended subscription, saying the premium is supported by “the quality of growth, category leadership and IPO-led deleveraging.”
The brokerage noted, “We recommend ‘Subscribe’ to Milky Mist’s IPO, given its differentiated value added dairy products (VADP) model, category leadership and brand-led pricing power. At the upper band of Rs 140, the issue implies a post-issue market cap of ~Rs 107.8bn and ~85x FY26 P/E, which is demanding, but we believe the premium is supported by the quality of growth, category leadership and IPO-led deleveraging.”
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice, an offer, or a solicitation to buy or subscribe to any initial public offering (IPO). Valuation metrics, grey market premiums, and brokerage views cited represent market commentary and should not be treated as direct investment recommendations. Readers are strongly encouraged to carefully read the official offer documents and consult a SEBI-registered financial advisor before making any investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.