Parag Milk Foods Ltd (NSE: PARAGMILK) Q3 2026 Earnings Call dated Feb. 05, 2026
Corporate Participants:
Bryan De Pena — Head of Investor Relations
Akshali Devendra Shah — Executive Director
Ankit Jain — Chief Strategy Officer
Analysts:
Unidentified Participant
Presentation:
operator
Sa. Sam. Sa. Sa. Sa. It. Sa. Foreign. Ladies and gentlemen, good day and welcome to the Parag Milk Foods Limited Q3FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Brian Depena, head of Investor Relations. Thank you. Hand over to you sir.
Bryan De Pena — Head of Investor Relations
Good day everyone and a warm welcome to the Q3FY26 earnings call of Barack Mill Sports Limited. We are glad to have you all join this meeting. Virtually for the meeting today we have with us our Executive Director Ms. Akshali Shah, our Chief Operating Officer, Mr. Rahul Kumar Srivastava, our Chief Strategy Officer Ms. Rankit Jain and myself Head of Invest Relations Brian Vikana. After the presentation concludes, we will commence with the Q and A session. While asking a question, I would request you to announce your name and organization. For the purpose of completeness, I do want to read out our Safe harbor statement.
Certain statements in this meeting with regard to our future growth prospects are forward looking statements which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward looking statements. I now hand over to Ms. Akshali Shah for operating for the opening remarks. Over to you Akshay.
Akshali Devendra Shah — Executive Director
Thank you Brian. Good evening everyone and thank you for joining us today. As we begin this new calendar year, I wish you all a healthy and a prosperous year ahead. Q3 FY26 has been yet another landmark quarter for Parag Merfu. One that reflects the clarity of our strategy, the strength of our brand and the discipline with which our team continues to execute. Building on our momentum, we delivered a revenue in excess of 1000 crores for the second consecutive year quarter. This our highest ever quarterly revenue represents a 14% year on year increase supported by 8% volume growth.
This performance reinforces our belief that consumer demand for trusted high quality dairy and nutrition product remains Strong. For the first nine months of FY26 our revenue reached of Rupees 2,872 crore reflecting a 14% year on year increase with underlining volume of 8%. These achievements provide a solid foundation and underscoring the resilience of our business model that is built on a strong brand differentiated offering and an extensive panel India Reach our core categories I.e. ghee, cheese, paneer, Continue to be the backbone of our performance during the Q3 these categories recorded a 12% volume growth and together they contribute to 64% of the total revenue.
They remain pivotal to our scale and profitability. Our new age business is increasingly shaping the future portfolio of the company. During quarter three, Pride of Cars and Avatar continued their strong momentum, delivered a robust 123% year on year growth and for the first time ever crossing the 100 crore mark in quarterly revenues on a year to date basis till December FY26. The new edge business now contributes to 9% of our overall revenue up from 6% in the same year last year, reflecting its growing strategic significance within the portfolio, avstar in particular maintains a strong growth trajectory achieving six fold growth in the last three years.
During the same nine months period, the recently launched protein vapor bar has received an encouraging consumer response contributing to 8% to the brand revenue and has now been scaled up for nationwide distribution. Together these developments reinforce our journey towards becoming a healthy nutrition led organization anchored by a premium portfolio and and align with the long term shift in consumer behavior towards purposeful consumption. The Government of India notified the provision of the four new labor codes in November 2025 in accordance to the requirements of INDS 19 Employee Benefits. The changes arise from the implementation of the labor codes have resulted in an estimate of one time increase in the BL provisional provision of employee benefit of rupees 5.4 crores on a standalone basis and rupees 5.7 crores on standalone basis.
The same has been recognized as an exceptional item. During the quarter. The commodity witnessed inflation of 20% year on year and 6.5% sequentially during the quarter with the average milk price inching up to 40 rupees a litre for quarter and quarter impact while the milk prices inched up 6.5% sequentially. The company has been able to maintain a similar gross margin sequentially at 25.9% for Q3FY26 versus 25.8% for Q2FY2 25. Okay sure. The company has been able to navigate the cost push with pricing and promotion strategy together improving the portfolio mix the year on year impact while the mill price is inched up 20% year on year. The company has managed to pass on the cost push in a calibrated manner which led to gross profit growth by 9% which is in line with the volume growth. In this inflationary environment the gross margin has come down to 25.9% in Q3FY26 versus 27.2 in Q3FY25 this moment entitled by a combination of favorable product mix impact offset by the inflammatory impact EBITDA for Q3 FY26 is 7.6% versus 9% last year and last quarter it was 8.9%.
While the year on year EBITDA is impacted mainly due to on the account of gross margin but the sequentially EBITDA is lower on account of one time other income of 16 crore. During Q2FY26 profit after tax and before the exceptional item stood at rupees 35 crores representing a year on year decline of 2%. On a nine month basis EBITDA stands at 8.7% versus 8.1% versus 8.7% last year down mainly on account of higher employee cost and other expense. However on absolute basis the EBITDA has grown by 6.5% which is 232 crores while the fact before the exceptional item grew by 17% to rupees 109 crores.
Reflecting the underlying strength of the business, Brand building continued to remain a key priority for us during the quarter. The company further strengthened its brand building initiatives through series of impactful marketing and visibility campaigns across its portfolio. Govardhan and Go enhance their presence with nationwide reach through Konbanega, Karodpati and Super Dancer targeting mass family audience through television and digital platform. To further strengthen the household penetration and make sure pure cow ghee accessible to wider consumer base, we introduced Govaran ghee in a 20ml sachet pack at an affordable price point of 20 rupees. This initiative allows first time and value seeking consumers to experience the purity and quality of more than brand without a higher entry barrier.
It also supports in increasing trials, daily usage, occasional usage and deeper reach across urban and rural markets. Pride of Caste continued to reinforce its position as India’s most premium single origin dairy brand through dynamic multi platform campaigns showcasing its commitment towards purity, traceability and quality. For Avatar, our home grown nutrition brand strengthened its brand presence by collaborating with a Bollywood celebrity, Janhvi Kapoor as a face of its overall marketing initiative. This association aligns with Avatar’s positioning for fitness performance and modern nutrition helping us deepen the relevance with younger and health conscious consumers. Looking forward, the mill prices are expected to remain elevated in the near term.
The company remains focused on navigating this environment through discipline, pricing, continuous improvement, improvement in the product and the portfolio mix, the operational efficiency and we continue to pursue measures and distribution, expansion and new product development to drive the sustainable and profitable growth. To conclude this quarter this reflects the resilience of our business model and our ability to deliver growth while managing industry wide cost pressures. We remain committed to become a health and nutrition company with a long term focus on profitability and stakeholder value. I would like to thank you everybody for the continued trust and support and we are happy to take questions now over to guys.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Rehan Syed from Trinetra Asset Managers. Please go ahead.
Unidentified Participant
Yeah, good evening and thanks for taking my question. Now my first question is around your avatar business. So Avatar inside of house cross get quarterly revenue mark for the first time with a massive 23% yy growth. So can you break down how much of this search is driven by new product launches like Tiramasu Tiramisu 14 bar versus deeper penetration of the existing portfolio.
Akshali Devendra Shah
While Avatar has grown. Hello. Hi Priyank. Thank you for your question. The brand which is the new age business combining of Avatar and Pride of TARS has grown more than 100 crores. It’s a landmark achievement again for this quarter. To your specific question. Afsar protein wafer bar as a category as a portfolio is now comprising 8% of the total brand.
Unidentified Participant
Okay. Okay. And my next question is around the net working capital side. That net working capital days having improved. To 62 in FY25. So how has the increase in the quarterly revenue 1013 crore impacted your inventory levels for the current season? And do you expect further efficiency gains in the cash conversion cycle?
Akshali Devendra Shah
See while we have not published the balance sheet so I will not. I will not comment specific on the numbers but overall as you know there is an inflation sequentially. So of course the inventory has moved up in value terms to a sequential impact. But because of a high inventory as at September end because we were ahead of festive. So inventory has significantly come down during quarter three which is evident from the LODR financials which has been published whereby the change in inventory is reflecting 34 crores on a consolidated basis. However it is lower on account of the inflationary impact and hence it looks like 34 crores reduction.
Unidentified Participant
Okay. Okay. And one last question from.
operator
Sorry to interrupt. Rehan, we request you to please rejoin the queue if you have any further questions? Thank you. Ladies and gentlemen, you are requested to please limit yourselves to one question only. If you have any further questions you may rejoin the queue. Our next question comes from the line of Rahul Jain from Credence Wealth. Please go ahead.
operator
Thanks for the opportunity. Congratulations the entire team at Paragnirputs for a good set of numbers in an inflationary milk environment. Sir, first question is with regards to milk inflation and you already alluded in your initial remarks as well as in presentation about the kind of inflation which has been seen in quarter three also. So typically post the end of quarter are the milk prices now more stable or have they moved up? Is it better?
Akshali Devendra Shah
Yeah, it’s better now.
Unidentified Participant
So ma’, am, my question was regarding the milk prices, have they been stable post quarter end and also with regards to the prices of products how much of the milk price has been passed on till December? And post that have we taken further price hikes to kind of, you know, take care of the meat price increase?
Akshali Devendra Shah
Yeah, with respect to milk prices of course it has inched up on a quarterly basis. On a y o y basis you would have seen it has increased 20%. Similarly if you were to look at on a sequential basis it has increased to the tune of close to six and a half percent. Now when we compare sequential quarter the gross margins are relatively flat around 25.9% representing that we have been able to pass on the price increase which is of course offsetted by our improved portfolio mix on a yoy terms significantly because it’s a 20% yoy increase in mill prices and of course the other commodity input prices the same has been passed on respectively.
This is evident in the gross profit growth. So our absolute gross margin gross profit has grown by 9% which is in line with our overall underlying volume growth of 8%. So we have been able to pass on the cost push. Now coming to your question on the price increase further etc. Yes, we foresee that in the near term the milk prices are going to be remain at an elevated level and we will take due precautionary action when it comes to passing on the pricing cost push. Just for an update from February we have increased our prices in branded cowgi which is Govardhan Ghee to a certain extent to take care of the inflationary impact.
Just to add on Ankit, normally when the outset of summer there is a statisty of May the production goes down and the milk patches go up. So next three months there will be some elevated prices. As far as milk prices are Concerned. But as I told that we are going to maintain our pricing power and we will take the necessarily price increase in our product to compensate the pricing.
Unidentified Participant
So my next question is regarding.
operator
Sorry to interrupt. We request you to please.
Unidentified Participant
I only asked one question.
operator
So we request that you limit yourself to one question only. Please rejoin the queue for any follow up.
Unidentified Participant
Sure.
operator
Thank you. Our next question comes from the line of Debashish Niyogi from Aban Dubai. Please go ahead.
Unidentified Participant
Yeah, am I audible?
operator
You are audible. So you may proceed.
Akshali Devendra Shah
Yeah, we can hear you well. Yeah, we can hear you well.
Unidentified Participant
Yeah, so my question actually is, you know, more strategically strategic question is, is, you know, we have the highest contribution to value added products but our margin is the lowest in the industry. Now structurally that should not be. We are there on top of it. What is happening? We are not able to pass on the price. We are very three strong brands. Now if I take a longer horizon of one year, we are not able to pass on the price hike. So why is it so? Which is why our margin is static or it is actually it is somehow in the nine month period.
So why is it so? Is it because the 30% of the business is creating problem or is it because we supplies to institution at such unfavorable price? And overall the margin table is coming down because as FMCG brand, you know the margins of a commodity. We are talking about being a health and nutrition brand but the margin doesn’t speak of it. And I’m not looking at quarter or nine months. I’m looking at 1/2, 2 years. And on top of it I feel also, you know there’s a last mile leap happening because I personally worked in the market in Calcutta and Bombay.
You know, Calcutta distribution is weak, very weak to say the least. And in Bombay also I find the distribution not up to the mark. So I just want to know that we may have great brand but we may be having last mile week in terms of distribution. So can you shed some light on the distribution figures in terms of direct outlets covered now Visa the last one year. Also the width and the depth of the distribution. Hello.
Akshali Devendra Shah
Great. Hi. So we got your questions. I’m just going to take your questions in two parts. One is first you asked about the margins and you know there we have a portfolio which is high value added. So how is the margins going to play out in the near future? And the second part that you’re asking about is distribution. Okay, just if you can see the slide on your screen, you can be our gross margin FY23 was 20% and it’s now moved to. In FYI 25, it’s moved to 26%. Yeah. So of course the portfolio mix and the channel mix plays a very important role when it comes to cross margins.
And if you can see our continuous effort is actually scaling out to be how you can see that on the screen that it’s inched up by almost 6%. That is there. So coming to the distribution and Also what is ROG on Calcutta distribution versus Bombay.
Unidentified Participant
See, we are. Sorry to interrupt. Akshay. 23 may be one of you. I’m talking from 24 and 25 because 23 we took a lot of write offs. Maybe the write off was much more than what is needed. I’m just talking to the last one and a half years. If your value added component is increasing, if Avatar is doing well, New Age is doing well, Core is doing well. So then structurally the margin profile should improve in the last one or two years is what I’m saying.
Akshali Devendra Shah
So if you can see, even with the cost pressure that we have, year on year it’s increased by 20%. Yeah. The commodity and sequentially it’s increased by 6.5%. Even in a cost pressure environment like this, we have maintained our cross margin. Yeah, that’s because of course of, you know, because we have better product and portfolio mix which was also offset by inflation because we take our price increase in a staggered or a calibrated manner that you can see. So of course that lag you can see. But we were able to maintain our gross margins. Yeah, just to clarify.
Ankit Jain
Yeah, just to clarify, the right of year was FY22 and not FY23. So FY23 was 20% which is without the write off, which has improved to 26%. It is hovering around 26% while we compare. Specifically we have discussed that this gross margin considers the raw milk at a landed rate at the factory gate. This is how we look at it. However, our overall target is to improve ebitda. As the portfolio mix improves, gross margin will certainly improve. And as I and also the channel mix see, one of the important factor is we have a B2B portfolio of around 30% which impacts gross margin in a percentage term because they work on a thin margin as compared to a consumer segment which is B2C.
Overall EBITDA journey, we can see on the slide 5.7% to 8.5% even in current year. On a YT in December we are at around 8.3% which is on a similar line we are likely to continue on this trajectory. Of course, our aspiration is to move up to double digit first. But this inflation, which is very heavy inflation impacts the gross margin in percentage terms that I think we have clarified in the last quarter. Also because it was inflationary quarter last year as well and this year also we have given, given a clear explanation that percentage gross margin looks dipped or moderated in an inflationary environment.
Akshali Devendra Shah
And also to talk about the pricing power that we have, if you see for Goa and ghee, we’re almost 20 to 25% higher than the second leader. So it also reflects that our pricing power and the brand power in the market which is there. So all we really need to work on is a better channel mix and of course strengthen our portfolio, which means. The channel, the pricing power channel. Sorry to interrupt. May we request you to please rejoin the queue if you have any further questions.
Unidentified Participant
No, I’m not asking further question. I’m just, you know, follow up on the. She’s answering and just follow up and doing a follow up on the answer because I’m not convinced on the answer. I didn’t ask a separate question.
operator
Please go ahead.
Unidentified Participant
So what I’m saying Akshay, is that the channel mix actually is not reflecting the pricing power, which means in B2C we are able to maintain the margin but in B2B it is pulling it down. You know, so that is not a brand should work on. Right. So I don’t know. I’m saying ultimately it’s not reflecting. And the other thing is I think we have great brands, great products. I personally tested the product but I think we are having a last mile leap in terms of distribution. Any numbers on that front in the last one year how it has moved both with and with distribution.
Akshali Devendra Shah
So Devashi, as far as distribution is concerned, this is one of our major sales KPI to disrupt the distribution to have a very massive distribution vision as you rightly pointed out. So one of the June what we are concentrating on the east and northeast. So basically you know all this Seven Sisters as well as Calcutta and Risa. So last means YTD. We have about 30,000 more outlets we have created. And this is what you know, we are working on that with the clear follow up with the Bison, which is our sales tool. It so we do a very, very precise, you know, updation on the distribution network increase.
And this is, this will continue till we reach to a respectable, you know, in all the states close to about 10 billion outlets. Yeah, I’ll answer on the gross margin front See, while B2B business, as you’re saying, doesn’t fetch, doesn’t reflect. See B2B business, one portion of it is largely SMP. Skim milk powder. Now skim milk powder is a commodity. So when we look at the portfolio of G +S and P we have to actually look at G +S and P combined together to look at the gross margin. Because SMP is finally a byproduct which gets generated which is at times margin dilutive, at times a very nominal margin accretive.
So what happens is the denominator with respect to turnover increases because of SMP sales and thereby it impacts the gross margin in terms of the percentage because the realization is more on ghee and not on smp. That’s one part of it. In terms of horeca, the market is quite competitive. We are competitively priced as compared to any other one of our other competition. So that doesn’t seem a margin pressing point. But it is the turnover of this kind of by product which impacts the overall gross margin profile. Plus we need to see cheese and whey also in tandem. When you see, when you look at the cross margins.
Unidentified Participant
Understood. Thanks.
Akshali Devendra Shah
Be happy to help you. Yeah. If you have further questions.
Unidentified Participant
Thank you. All the best for future.
operator
Thank. Thank you. Thank you. Our next question is from the line of Farad Gujarati from Niveshai. Please go ahead.
Unidentified Participant
Hello. Thank you for this opportunity. So my first question was from the. Scuttle with Channel 6. What I have heard this. You have increased the badges of starve routine two times in the last three months. And my second question was that what percentage of revenue we are spending on marketing?
Akshali Devendra Shah
Hello. Yeah, so in marketing we spend around 3 and a half to 4%. Last year also was around 4%. Considering the inflationary impact this year percentage might look little subdued but we spend around three and a half odd percent. Now your question on Avatar V protein, I’m not clear if you you elaborate. Yeah.
Unidentified Participant
So can you from the Channel 6 what I got was you have increased the prices of protein two times in the previous three months. So what was the reason for that? Basically it, it decreases our competitiveness and, and because we have an in house whey protein production facility so our prices should be lower. Right. So that was my question.
Akshali Devendra Shah
So let me. Yeah I understood your question. Now see after way protein as you rightly pointed out is created in house etc and you will know that on a comparative basis the whey protein in India is all important imported. So when it is imported of course it has an inflationary impact. On account of not only FX but on account of the protein prices overall across the globe. Now of course these two factors create lot of impact when it comes to the competition. We don’t want to be again behind the competition. We are almost at par with competition when you will find this.
But what is happening is when you are noticing in the past three months, specifically in September 22, sorry on 22 September 2025, we had to compulsory reduce the prices in spite of the increase in the cost as a part of the GST measure which we have passed on as a benefit. But as we progress further and as the input material cost increase, because finally the milk, while it is used for cheese, it is used for whey as well. So as the milk prices have increased, as the input prices have increased, we have passed on that cost push even in Avatar as well.
And we are quite competitive when it comes to the category that can be searched on Amazon or on our website or any other health and nutrition website like Yuga Life that you will find us equally competitive when compared to other brands.
Ankit Jain
Plus the brand position when it comes to pricing. Brand positioning also plays a very key role when it comes to pricing and we want it to be with the leading market what it the pricing aspect. So as for the competition, we put our pricing strategy.
Unidentified Participant
Okay, so just a follow up question. Why are employee costs jumped y oi by 25%? Why such a big jump?
Akshali Devendra Shah
Yeah, so your observation is right. See typically if you look at even in last year quarter three, the employee cost has increased significantly. So on a consolidated basis, sequentially the employee cost has increased by around 16% because typically our appraisal cycle, the closure on the appraisal happens during quarter three. So our quarter three is always heavier in terms of the employee cost because of the earlier payout. Plus this quarter we also had a small portion of it, but we have added additional hiring for as part of our distribution strategy. So we have hired more feet on the ground to a certain extent.
So that that’s a combination impact. But we have commissioned a new plant as well to render Lakeland, which is at Manchur only. So there was a separate staffing for that. So it’s a combination of both. But largely all our Q3s, at least for the past three years, you can see it is heavier as compared to quarter two.
operator
Thank you. Our next question is from the line of Madhur Rati from Countercyclical Investments. Please go ahead.
Unidentified Participant
So sir, taking off from the previous speaker, my concern is also similar that it is beyond comprehension that despite having such a high value added, so called value added portfolio, our margins are actually lower than people who are basically selling milk and those companies are actually operating at negative working capital. Whereas we have a huge working capital and despite that we have low margins. So it is not comprehensible that what exactly is the issue? Is the issue that our dependence on B2B is too much or the cheese is the main culprit over here? That we have to maintain a huge inventory and then give huge credit, period.
And I can see on the balance sheet that we even pay advances to our suppliers. So I mean how is this business going to earn a return on capital when we are going to pay advance to our suppliers, pay huge credit to our purchasers, distributors and on top of that have a huge inventory and then do a mid single digit operating margin?
Akshali Devendra Shah
Okay, see, while you are comparing like to like on the listed entities, see there could be fundamental differences. One, when we measure our raw material first we measure the raw material at the landed cost at the factory gate and not the pure commodity price which is paid to the farmers. That is one, the second portion which I explained to the previous question also that our turnover is little higher because the entire by product sale gets accounted as a turnover. While when we sell liquid milk we are selling only milk. But when we are selling ghee, we have to sell ghee as well as the SMP which is being generated as a part of the byproduct.
So what happens is your denominator increases because of the same denominator means having to sale the sale number increases and thereby it impacts on the gross margin as a percentage what we look at. Having said that we have to while the gross margin in other portfolio is quite high, we have to look at ROC accretion as you rightly pointed out. And you can very well see on the chart that overall the ROC has inched up from 8.6% to 14.3%. And that is also our target and our vision mission to how to improve on the roc.
Now coming to your question on the working capital requirement, I think we have significantly improved on our working capital cycle. Our working capital cycle has come down from 75 odd days to now close to 60 days. Again large port of it. We have already corrected in terms of how should the inventory be there just in time etc. But whatever is required as a part of the business fundamental like ripening of the cheese, etc. We need to keep it. While all are other factors in terms of receivable payables. So overall Our net working capital cycle we look at from this 60 day perspective.
That’s all. So the ethos of our company is to add value in the long term and add the business wherever needed. So we are going and growing our portfolio. We are focusing lot on NPD’s. You would have seen that protein wafer bar which was launched just in quarter one, which was scaled up over a period of time and now ready for now, already scaled up now for national wide distribution is already got its share to 8% of the total brand revenue in just three quarters. So we believe that the way we are looking at improving our profitability in terms of overall EBITDA margin, the same should reflect in roce.
And since you are observing everything specifically our overall the debt has reduced, overall finance cost has reduced which is adding to the bottom line overall. So that’s where while EBITDA growth will be certain muted but PBT growth is healthy growth.
operator
Thank you. Our next question is from the line of Preet Nagarshet from Wealth Fundwiser. Please go ahead.
Unidentified Participant
So I wanted to talk about the increase in wealth prices and my concern is that given the next year is supposed to be an El Nino year and with severe summer expected, do we anticipate the inflation in prices to continue north of UN also for the next financial year? Can you please shed some light on that?
Akshali Devendra Shah
No, the prices, as I mentioned that it is also with the seasonality and the seasonality is basically summer where the milk production goes down and demand is there in terms of ice cream and other products. So there will be some inflation in the last quarter of this right up to March, April and then next year again on that, on the onset of monsoon, the prices, you know, start, start softening. So basically it will not be continuously, you know, increase from this quarter to next quarter to next quarter. But till the summer is there, I think there will be a one, one or two, two more price increases.
Unidentified Participant
Okay. Yeah. So I also wanted to understand that regarding the FDAs that are getting signed, do we anticipate any risk of protein coming into the country without duties or lower duties that could impact us?
Akshali Devendra Shah
No, no, no, no. In fact, you know there is a, there is a shortage of protein across the world and basically even fda, the dairies are not included. They are not included. So the FDA is isolated, daily isolated from fda. So there is no risk. I would say that.
operator
Thank you. Our next question is from the line of Mohit Dodeja from MK Global. Please go ahead.
Unidentified Participant
Yeah, hi. Thanks for the opportunity. So could you please highlight the breakup in the ingredients business what is driven by is this driven by lower SMP sales And how should we see the growth here? And for Pride of Cow’s milk, what is the growth trend and the milk and the mix of non milk shares. So because I’m asking because we have been seeing Pride of Cow getting used in Blue Tokai outlets. So just wanted to know the share of B2B for pride of.
Akshali Devendra Shah
See with respect to ingredient business. Of course yes, the large part of the degrowth is coming from SMP absorbation is right. However there is other institutional whey protein also which we sell there. Also we have chosen in terms of not to allocate much on the ingredient business, rather to allocate more towards our avatar protein business. So that has been a conscious strategy to have a lower ingredient business whether in form of the whey proteins or whether in form of the skim milk powder. But your observation is right. Largely it is on account of SMP now coming to the share of Pride of cows.
See Pride of Cows as a brand and avatar both are our new growth engines and we’ve combined it together for all our reporting purposes. And that’s why we call it as new age business which is going to grow significantly versus where it is today as well as is going to be margin accretive for the company as a whole. Because these both are our premium offerings and superior product offerings. So from that perspective we are not, we’re not sharing any differentiation or the split between the two. And further question is your is in terms of the milk supply which is to the Blue Tokai.
See we always evaluate market. If there is an opportunity to create a surplus milk we can always allocate to the B2B business. But we took it more as a marketing initiative whereby they are able to place the milk in those outlets which is a growing chain and they are going to promote their products along with our brand.
Ankit Jain
Collaboration is the new way of marketing and you see a lot of brands collaborating. So we’ve done a collaboration with Blueprint and that’s why this one off institution that we do plus to give you a breakup on the brain milk, liquid milk and value added for pride. Of course that’s not too small to actually comment, but if anything in the near future we will definitely keep you posted.
Unidentified Participant
Okay, thank you so much.
Akshali Devendra Shah
Thank you.
operator
Our next question comes from the line of Dwanil Desai from Total Capital. Please go ahead.
Unidentified Participant
Hi, good afternoon everyone. Am I audible?
operator
You are audible, sir. You may proceed.
Akshali Devendra Shah
Yes, yes, yes.
Unidentified Participant
Yeah. So my first question is you Know, we talked about pricing increases that we have taken for our portfolio on the value added side. So two parts to the question. One, we have done very good volume growth in the core categories. So you know, how do we see the impact of, you know, this pricing increase that we are taking in terms of volume growth going forward. And second, you know, since now we will be offsetting the inflation on the milk side largely and because our new age business is growing much faster, should we expect, you know, some kind of a sequential improvement in margin or should we stabilize around current level? How should we look at, you know, gross margin, EBITDA margin going forward till the flush comes into play?
Akshali Devendra Shah
Now, as you rightly pointed out, yes, the volume growth at a category level in double digit for four categories with such a large base is significantly good. And you can see that the performance is there, whether in quarter three or in nine months put together at 12%, it’s a significant achievement. We also believe, however, because of the inflation, you can see that there is almost a kind of 8 to 9% inflation and that’s where the value growth is very, very high. But we believe more on fundamentals in terms of volume growth. That’s where we have been transparently updating you that the volume growth is 12%.
This inflation will continue, will not continue. There could be plus minus as the commodities are cycle changes. So it is better that we focus more on the volume portion. Now coming to your question with respect to is the portfolio mix is increasing, the core categories is growing, the new age share is growing and how it adds to the overall margin and how do you foresee it? See, it’s a combination of overall managing a business. So at times we take call on four categories. At times we choose to pass on, at times for certain products, we choose not to pass on, etc.
Every time, for every consumer product, with every single rupee increase, it will be good for a cleaner supply chain for consumers, etc. Overall, all stakeholders, to keep it simple. So from that perspective, we manage it. And this is the art of managing the business. How do we manage the overall and balance the overall portfolio put together? So in an inflationary environment, we have categorically explained the percentage margin always comes down. Because what happens is for certain core categories like product, we tend to keep the, we pass on the cost push, thereby keeping our, you know, for example rupee per liter margin keeping same.
But because the inflation is there, the margin percentage comes down. Having said that, we have categorically also mentioned that the favorable product mix has improved or has helped in supporting a sequential gross margin. So it is overall balancing. I would say that the company will overall look into the portfolio and balance it out. We have to more look at how we are growing the absolute ebitda. How we are. How we are able to add to eps. I think that’s our vision.
Unidentified Participant
More questions? I’ll come back.
Akshali Devendra Shah
Thank you. Thank you.
operator
Our next question is from the line of Kaushal Sharma from Equinox Capital Venture Private limited. Please go ahead.
Unidentified Participant
Hello. Hi sir, I’m available.
Akshali Devendra Shah
Yes.
Unidentified Participant
Very good evening sir. So my question is on your new age business which is currently around 9% of our overall revenue. So what is our outlook for this share going forward next two to three years and for new as we are aggressively growing in our new age new age product and the milk ratio is quite high in this segment because we require around 10 to 12 liters of of milk to produce 1 kg of cheese. And the intermediate product is by product is whey which requires some milk quite a high content and our because currently very inflationary requirement.
Akshali Devendra Shah
So. So are we jumping the inventory or a working capital incremental working capital because currently we are growing around 14 to 15%. Will this increase our borrowings which is around 543 karams as of now that will impact our margins going ahead. And what is our plan to repayment of our debt because it’s quite elevated. So you are talking about the new age business, you know percentage. So based on our you know the long term planning we have with a growth rate of 15 to 20% per year our newest business will contribute around 20% in next two to three years. That is what we are targeting and will happen because of the good base now we are having and we already cross about 100 crores per quarter based on. Yeah. So see while your observation is with respect to whether we will need more working capital as the new age business is growing.
See the new age business is growing on account of both aptar and pride of cows. And we also have institutional business. So in when it comes to getting into we. So we don’t need to worry on the way sourcing as such. I think the levels at which we are there and the levels of inventory which we are maintaining we are not going to significantly increase from where it is we are looking at in terms of more in terms of volume. See while inflation may create a number in terms of the overall value of the inventory.
However we look at more inventory in terms of the quantitative terms. And in quantitative terms the inventory is just to update you is Almost the same as what was there in last year, December 2024 in spite of the strong growth in the business at a overall level. So it will not see the debt levels etc. Is not going to impact the EBITDA margin as such because if there is the elevated interest cost it will be down. But as you see the interest cost has been coming down as a percentage of sales. So it has come down significantly because there is a reduction in the debt.
So while we are talking of. You’re talking of increase in debt, see in last year as on 31st March 2025 our gross debt was around on a consolidated basis was around 615 crores which as on 30th September is 483 crores while our net debt is around 435 crores as on 30th September. So we have of course reduced the debt levels. We will be conscious about choosing when to introduce debt etc. However, that’s a call we will take because see overall we are generating cash flows. If you look at our cash flow from operating activities as increased significantly.
Two years back we were using the cash flow. Now we are generating cash flow year on year. In half year itself we have generated 99 crores which is good to fund our overall capital expenditure program. And in fact if you look at last year also we have funded the entire capital expenditure through in house accruals only. So with that perspective in mind we are not going to of course increase the debt levels. Debt levels versus last year definitely is going to look moderated, only significantly moderated versus what it was there last year.
Unidentified Participant
What is our targeted debt to capital in that case considering current inflationary environment and what is the repayment plan? As you said that we will reduce the debt.
Akshali Devendra Shah
A large part of the debt is a short term working capital debt. The long term debt is a very small portion which is large. One portion is on account of NCDS which we are repaying on a half yearly basis. This was an entity which was taken in 2021 of around 150 crores and today the outstanding is around 81 crores. So it’s a repayment which is scheduled on a half yearly basis. Having said that, for funding the additional working capital we had taken certain other debt in terms of the machinery related capital expenditure. But also overall it is part of managing the overall debt profile whether we are borrowing in form of using it for a term loan for a machinery versus using our CC limits.
So as of now we have Maintained a mix of both. And that’s where we’re looking at the overall debt position. Not in terms of what is the long term debt and what is short term debt.
operator
Thank you. Our next question comes from the line of Vinod Krishna from Aventus Wealth. Please go ahead. Am I audible? Sir, you are audible so you may.
Akshali Devendra Shah
Yes please sir.
Unidentified Participant
In the Govardhan Ghee, how. How much? Like actually you were saying that our prices are 20 rupees or 20% higher than the competitor. And also the growth outlook on the new age business, what percentage can we expect? Because we are going 100%. I don’t. I don’t think we can maintain hundred percent. But this 400 will become thousand in two to three years. So we can take like that. So these two.
Akshali Devendra Shah
See if we were to grow. So first of all let me answer on the ghee prices. So ghee prices is almost close to 20% higher than the competition. It is not 20 rupees, it is 20%. Okay. What we were mentioning 20 rupees was the 20 ML sachet. Hope the there is no confusion on account of this. Secondly, with respect to the new age business, I think Raulji just answered that Today it comprises 9 to 10%. Our endeavor is how does it grow the portfolio to double and make it 20% as a part of the overall turnover.
Having said that even if the mix improves in terms of the new product portfolio, the new age business portfolio growing from 100 crores to 1000 crores is a 10x jump. While we have seen abnormal jump, you look at 8x6x it has grown significantly but in two years getting to 1000 is little far fetched. However, the endeavor will be to continue the growth trajectory on the similar lines where we have been growing 8x6x. We will see how we are able to continue with this momentum and the journey.
Unidentified Participant
Thank you. Thank you sir.
Unidentified Participant
And working capital is around 60 days, right? We can take that or 60 to 65 days. It will be around that networking capital.
Ankit Jain
Yes, yes, yes, yes. That working Capital is around 66 days and we can assume the same will continue.
Unidentified Participant
Thank you sir. Thank you very much. Thank you very much. Thank you.
operator
Thank you ladies and gentlemen. We will take that as a last question for today. I would now like to hand the conference over to Mr. Brian Depena for closing comments. Over to you sir.
Bryan De Pena
On behalf of Parag Milk Foods Ltd. I would like to thank all of you who have joined us online. Have a nice evening. Thank you for joining us. Thank you. Thank you.
operator
Thank you. On behalf of Parag Foods limited. That concludes this conference. Thank you all for joining us. You may now disconnect your lines.