The three investors who are selling shares via the IPO are India Business Excellence Fund (IBEF) which is a unit scheme of venture capital fund Business Excellence Trust, India Business Excellence Fund I (IBEF I) and IDFC Private Equity Fund III (IDFC PE) which is a unit scheme of venture capital fund IDFC Infrastructure Fund , IBEF is selling 21.09 lakh shares, IBEF I is selling 39.17 lakh shares and IDFC PE is selling 82.59 lakh shares via the IPO.
From the promoter group, Netra Shah is selling 20.04 lakh shares and Priti Shah is selling 11 lakh shares. Other selling shareholders are selling a combined 31.81 lakh shares.Anchor Investors : Parag Milk Foods has raised Rs 342.85 crore by selling 1.51 crore shares to a total of 17 anchor investors ahead of the opening of the company’s initial public offer (IPO). The shares were allotted to the anchor investors at Rs 227 per share, the top end of the Rs 220 to Rs 227 per share price band for the IPO.
Among the anchor investors, Nomura India Investment Fund Mother Fund will be allotted 22.02 lakh shares, Tata Balanced Fund will be allotted 19.21 lakh shares and Abu Dhabi Investment Authority – Behave will be allotted 14.23 lakh shares. Other investors include, Government Pension Fund Global, Morgan Stanley Mauritius Company and Copthall Mauritius Investment, among others.
List of Anchors Investors
Issue Open: May 4, 2016 – May 6, 2016
Issue Type: Book Built Issue IPO
Face Value: Rs 10 Per Equity Share
Minimum Investment : Rs 14300/- on lower price band
Issue Price: Rs. 220 – Rs. 227 Per Equity Share
Market Lot: 65 Shares
Promoters – Devendra Shah, Pritam Shah and Parag Shah
Book Running Lead Manager – Kotak Mahindra Capital Company Limited, JM Financial Institutional Securities Pvt Ltd, IDFC Securities Ltd, Motilal Oswal Investment Advisors Private Limited
Parag Milk Foods offers discount of up to Rs.12/- on Issue Price (per Equity Share) to all eligible Retail Individual Bidders and Eligible Employees.
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Summary : Parag is one of the leading manufacturers and marketers of dairy-based branded foods in India. The company commenced its business in 1992 with collection and distribution of milk and has now developed into a dairy-based branded consumer products company with an integrated business model, manufacturing a diverse range of products including cheese, ghee (clarified butter), fresh milk, whey proteins, paneer, curd, yoghurt, milk owders and dairy based beverages targeting a wide range of consumer groups through several brands. The company derives all of its products only from cows’ milk. The company’s aggregate milk processing capacity is 2 million litres per day while its cheese plant has the largest production capacity in India, with a raw cheese production capacity of 40 MT per day.
Parag sells its products – primarily milk, curd products, ghee, paneer, butter, cheese products, UHT milk – under Gowardhan and Go brands while also selling premium cow milk under Pride of Cows brand and flavoured milk under Topp Up name.
Gross fresh milk accounted for 20.3% of its total revenues for the nine months ended 31 December 2015.
Ghee, butter and cream accounted for 28.5%
Cheese/paneer accounted for 18.7%
UHT (Ultra Heat Treatment) products accounted for 4.8%
Whey products accounted for 2.9%
Skimmed milk powder and dairy whitener accounted for 10.1%
Other products such as curd, fruit yoghurt, gulab jamun mix, and flavoured milk accounted for 4.9%
Parag’s manufacturing facilities are strategically located at Manchar in the Pune district of Maharashtra and Palamaner in the Chittoor district of Andhra Pradesh with milk processing capacities of 1.2 million litres per day and 0.8 million litres per day, respectively.
Its institutional customers include restaurant and cafe chains such as Yum! Restaurants (India) Private Limited (for Pizza Hut, Taco Bell and KFC), Jubilant Foodworks Limited (for Domino‘s Pizza) and Sankalp Recreation Private Limited (for Sam‘s Pizza).
Objects of the Issue:
1. To meet the capital expenditure requirements for expansion and modernisation of existing manufacturing facilities at Manchar and Palamaner;
2. Investment in Subsidiary for financing the capital expenditure requirements in relation to the expansion and modernisation of the Bhagyalaxmi Dairy Farm;
3. Partial repayment of the Working Capital Consortium Loan; and
4. General corporate purposes.
On performance front, on a consolidated basis the company has posted turnover and profit of Rs. 900.54 cr. / Rs. 18.90 cr. (FY12), Rs. 927.15 cr. /Rs. 20.77 cr. (FY13), Rs. 1089.50 cr./ Rs. 15.97 cr. (FY14) and Rs. 1440.52 cr. /Rs. 25.97 cr. (FY15). For first nine months ended 31.12.15 it has earned net profit of Rs. 31.92 cr. on a turnover of Rs. 1231.19 cr. If we annualized these earnings and attribute to the fully diluted equity post IPO then asking price is at a P/E of 44 plus at the higher price band. This augurs well against listed peers that are quoting at a P/E of 56 plus.
32% share in High growth cheese market.
Revenues and EBITDA have increased at a compounded annual growth rate (CAGR) of 22 per cent and 21 per cent.
GOVT. inventives for organised players in the dairy sector like VAT and Tax benefits.
There are outstanding criminal proceedings pending against the company, its promoters and one of its directors.
Aggressive pricing by exisitng dairy co-operatives like Amul and Mother Dairy.
Lack of free cash flows
Limited pricing power in highly competitive fresh products
Margins are very low 2% to 2.4 % from last 3 years.
Bhagyalaxmi Dairy farm ( 100% SUB ) is making losses and its unable to sell the full production at premium pricing.
It’s operations are dependent on supply of large amounts of cow’s row milk, and its inability to procure adequate amount of good quality row milk, at competitive prices,may have an adverse effect on its business.
They do not have long term agreement with suppliers for other row materials or products.
Potential increase in VAT rate and Tax rate on expiery of Incentives.
Possible interruption in availability of quality milk at reasonable prices and rising competition are some of the key risks for the company.
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