IFC to invest up to $17M in IDFC-backed Parag Milk Foods

International Finance Corporation (IFC) is investing up to $17 million (Rs 92.7 crore) in Pune-based Parag Milk Foods Pvt Ltd (Parag) for expanding the latter’s milk processing projects at Manchar in Maharashtra and Palamaner in Andhra Pradesh.

The total project cost is estimated at $32.7 million, of which $13.9 million (42 per cent of total cost) has already been funded through an equity investment by IDFC last September.

Established in 1992 by Devendra Shah, Parag is one of India’s largest private dairy companies which has a milk processing capacity of up to 20 lakh litres per day (LPD) at Manchar and 8 lakh LPD at Palamaner. The firm produces liquid milk and value added products like UHT milk, cheese, butter, ghee (clarified butter), paneer (cottage cheese), yoghurt, curd, lassi, flavoured milk, dairy whitener and milk powder, which are sold under the brands ‘GO’, ‘Gowardhan’ and ‘Top Up’.

Parag is planning to strengthen its operations through plant automation and expanding its procurement and distribution networks. Currently, the promoters of the company—Devendra Shah and his two brothers, Pritam Shah (managing director) and Parag Shah (director)—hold 58 per cent stake in the company, while IDFC and Motilal Oswal own 21 per cent and 12 per cent, respectively.

The dairy firm would be getting the funding third time since starting. Last September, IDFC Private Equity Fund III invested $29 million in Parag Milk Foods through compulsorily convertible debentures and Motilal Oswal Private Equity made a partial exit on its four-year-old investment in Parag. The PE firm had invested Rs 55 crore in Parag back in 2008 through its India Business Excellence Fund and sold off 40 per cent of its holding.

For IFC, the private sector investment arm of the World Bank Group, this would be the first investment in the consumer space this year. In the same space, IFC invested $6.44 million in Haryana-based Modern Dairies in 2008.

Last year, Rabo Equity Advisors Pvt Ltd invested an undisclosed amount in Ahmednagar-based Prabhat Dairy Pvt Ltd.

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