Parag Milk Foods Ltd

NSE:PARAGMILK

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the Parag Milk Foods Limited Q1 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Brian DePanna, Head of Investor Relations, Parag Milk Foods Limited. Thank you, and over to you, sir.

[Unknown Executive]

Thank you. Good day and good evening to everyone who have joined this call from various geographies and all those who joined us from Mumbai. We have with us today from the management, Ms. Akshali Shah, our Executive Director; Mr. Rahul Kumar Srivastava, our COO; Mr. Ankit Jain, who is Head of -- who is our Chief Strategy Officer and Head of Business Finance; and myself, Brian DePanna, Head of Investor Relations. I would now like to hand over the mic to our Executive Director, Ms. Akshali Shah, to take this forward.

[Akshali Shah, executive]

Good evening, everyone. It's a pleasure to welcome you all to the Q1 FY '26 Earnings Call for Parag Milk Foods Limited. I hope you and your families are doing well. We are delighted to share that Q1 FY '26 has set a strong and promising tone for the year ahead. We delivered our highest ever first quarter revenue of INR 852 crores, reflecting a 12% Y-o-Y growth, backed by consistent execution of our focused strategic priorities. This growth was driven by robust volume expansion across our core categories, that is cheese, gee and Paneer, which grew by 9% in volume and 14% in value. These categories now contribute to 57% of our total revenue, affirming their strength in our portfolio.

We continue to retain leadership position with Gowardhan Ghee commanding 22% market share in branded cowgi segment. and Go Cheese holds 35% market share in the cheese category. We have witnessed a strong operational execution despite of challenging macro factors. Average milk price increased by 18% Y-o-Y to INR 37 per liter, yet we were able to sustain margins and deliver 6% growth -- EBITDA growth. With a margin of 7.7%, our average milk procurement has now reached to 16.5 lakh liters per day, marking a 10% increase over the last quarter. This demonstrates the strength of our procurement network and our deep connect with the farmer community.

Our gross profit margins improved sequentially from 25.1% in Q4 FY '25 to 27.4% in Q1 FY '26. This was aided by improvement in product mix and the ability of our premium branding to command the pricing power. The standout of this quarter is contribution of our new age business. So the quarter, the new age business now contributes to around 9% of our total revenue over last year, which was 6%. Both the brands, Avvatar and Pride of Cows have exhibited robust growth of 57% Y-o-Y, reinforcing the consumer demand for good quality products.

Parag Milk Food steadily evolved from a dairy-led enterprise into a diverse FMCG company, and now we are heading towards Health and Nutrition segment. This move was driven by our foresight into India shifting dietary patterns with protein becoming a key component in everyday nutrition. The Indian sports nutrition whey protein market is expanding. Currently, it's valued at INR 1,600 crores and is growing by 30% CAGR. Despite being a cluttered with international brands, the market still lacks transparency and localized innovation. This is where Avvatar India, our homegrown 100% vegetarian farm to Shake away protein brand has carved its niche. The milk is directly sourced by us and processed at our state-of-the-art integrated facility. Avvatar brings unmatched quality and traceability. In just a few years, Avvatar has scaled 8x over the last 3 Q1, establishing itself as one of the top players in the Indian sports nutrition space.

With a robust 360-degree marketing engine and a modern multichannel distribution strategy, we are present across from our own website, quick commerce, e-commerce, organized trades. Avvatar is gaining a rapid consumer trust and innovations like protein wafer bar is expanding our footprint into functional snacking, providing the brand adaptability. As Parag milk Food continues to strengthen the presence in nutrition, Avvatar stands as a shining example of how we can lead India's protein revolution and unlocking the significant future growth.

Our second business in the new age business that is Pride of Cows has reported a 36% value growth, driven by new product launches such as Greek yogurt with 8 grams of protein and low fat, high protein panel and deeper penetration through quick commerce platform. Pride of Cows launched a disruptive brand campaign titled as, “what is the sauceâ€, to spark a critical conversation around the origin and authenticity of everyday products, especially milk. The campaign aims to educate consumers on the importance of choosing safe, clean and traceability sauce, highlighting our single origin farm old model as a mark of priority and trust. To amplify the message, we adopted a 360-degree integrated marketing approach.

Print media, where we took over the front page of Times of India, key city supplements such as Bombi Times, Delhi Times and Bangalore Times and even regional dailies like Sandesh and Gujarat Samachar. Digital campaigns engaging diverse and credible influencers across the industry like fashion, sports, journalism, who resonate with the theme of what is the sauce. So when it comes to news and you check the sauce, so we got Faye D'Souza, who is an award-winning journalist, a popular cricket commentor Jatin Sapru, Founder of Kamyajani and influential podcaster and entrepreneur Raj Shamani. This campaign not only strengthened our brand recall and the trust, but also reinforced Pride and our unique positioning as premium single origin dairy brand in highly commodized market.

Our other brand building initiatives remain robust and sharply focused. Through a 360-degree marketing approach, we engaged with diverse consumer segments via traditional media or digital campaigns and influencer collaborations. Just to highlight a few, we were present on the Zee Cine awards, and we also did an integration with Maharashtrachi. As we approach the festive season, -- we are well prepared with a diverse portfolio of value-added products, including Ghee, now forayed into traditional sweets, cheese to meet the seasonal demand. Our vision remains clear to transit from a dairy company into holistically led FMCG and now into health and nutrition. With a strong foundation in place, we are confident of sustained profitable growth while continuing to deliver value of our stakeholders and nourishing lives across India and beyond. Thank you so much for your continued trust and support. Over to Brian to take this forward.

[Unknown Executive]

Thanks, Akshali. We'll just wait for a couple of seconds for the question queue to line up.

[Operator]

[Operator Instructions] Our first question comes from the line of Vora from T Asset Managers.

[Unknown Analyst]

What I would like to ask is, can you elaborate on your whey protein and sports nutrition strategy? So are you planning any international partnerships or D2C brand expansions in this space?

[Akshali Shah, executive]

Sorry, your voice was a little foggy. Can you repeat the question?

[Unknown Analyst]

Okay. Am I audible right now?

[Akshali Shah, executive]

It's better.

[Unknown Analyst]

Okay. So what I wanted to ask you is, can you elaborate on your whey protein and sports nutrition strategy? So are you planning any international partnerships or D2C brand expansions in this space?

[Akshali Shah, executive]

So if you know our whey protein is probably one of the fastest growing category that we have. And we, in fact, have tailor-made and created a whey protein and did a lot of research for almost 5 to 6 years on developing a product. And we did a collab with an international scientist to get us the right product formula. Going forward, we are now forayed into a protein snack functional category where we have launched whey protein bar. And we are soon going to expand into products which are similar to that. We have newer flavors and into a snacking category of protein. So that's the plan for whey protein moving forward.

We're already a B2C brand because 80% -- 75% to 80% of our protein business comes from our website and Quick com and e-com websites and 20% of it comes from the traditional platform.

[Unknown Analyst]

Okay. Understood. And what I wanted to ask was, are you planning any international partnerships with other brands so that you can maximize your reach and increase your exports?

[Ankit Jain, executive]

So as of now, this brand is catered to, say -- this is Ankit here. I'm just adding this. This brand is catering to Indian markets only. We know India being a protein deficient. So we worked upon it, as Akshali mentioned in her opening remarks. We have worked consciously to solve the problem for the protein deficiency for the country. And in India itself, the way protein is imported, most of it is an imported one. And that is where the problem lie where you didn't know the source, there was a lot of alteration in the market. And from all -- considering all this problem, I think the solution came out was Avvatar and this is what you see as Avvatar now.

[Akshali Shah, executive]

Just to add to that, Param, that we are the pioneers and the only whey protein manufacturers of sports nutrition in India. So from scratch, from sourcing of milk to making cheese and drying of protein, everything is done at our facility and which we say that we do not need any international Collaboration to take this forward because we have everything in-house. Plus you're talking about exports. The Indian market is growing at almost 30%, 35% CAGR, and we see a great potential here in India. So we'll continue to grow this brand in India itself.

[Operator]

Our next question comes from the line of Kiran from Table Tree Capital.

[Unknown Analyst]

I have 2 clarifying questions.

[Operator]

Sorry to interrupt. You're sounding very low. If you can just increase the volume or if you can use the handset.

[Unknown Analyst]

Is it better? Is it better? Perfect. Perfect. I had 2 clarifying questions. So just on core categories, right, we are at INR 487 crores this quarter. I don't have an equivalent number of Q1 FY '25 because the company's presentation didn't have it. But if I look at Q3 onwards from where you started reporting core category, liquid milk and all that stuff, so core categories was INR 530 crore revenue business. Now in Q1, it is INR 487 crores. I'm sure you have taken pricing actions. We've increased distribution, we've increased advertising. So what amount of seasonality should we kind of consider because this has actually degrown, like INR 530 crores in Q3 to INR 487 crores in Q1.

[Ankit Jain, executive]

Yes, I would like to clarify.

[Akshali Shah, executive]

You can see the slide number -- I don't know if you have the presentation open, we have the slide 8 where we've given you the previous year breakup as well of core categories.

[Ankit Jain, executive]

I would like to clarify here. See, till last year, we were reporting value-added products, which was addition of overall portfolio. So we have classified core categories as Ghees paneer separately. And we have given the breakup for all the last Q1 for the past 4 quarter 1. And similarly, for the last 5 years in the similar slide in the investor presentation itself. So overall, 56% was the composition of the overall turnover for core categories last year Q1, which is up 14% and hence, the turnover composition now is 57%. We have mentioned the growth as well. It's 14% growth, value growth over the previous year.

[Unknown Analyst]

Got it. So there is immense amount of seasonality, sir. So that's the point I wanted to understand. Is it Q3, Q4 highest in core categories and Q1, Q2 is lower?

[Ankit Jain, executive]

Q3, Q4, see, overall, we cannot compare -- you are looking at seasonal. Of course, there is some -- during festive, during winters, different -- there is definitely a product mix which plays. But core categories is something which has been at 57% for the year as a whole last year also. So the core remains core. It has remained at 57% of last year versus same as current year Q1 FY '26.

[Unknown Analyst]

Got it. Got it. Got it. That's helpful, sir. So my second clarifying question, you have had good growth on new age business. My only request is, at least if you could give us a percentage split between Avvatar and non-Avvatar. Again, I'm not looking for Pride of Cows and other new age business products, but just Avvatar because there's an immense focus on Avvatar, just like you gave it in the initial commentary and the last question as well. The immense focus on Avvatar, what is the percentage? Should we assume a 50-50 percentage split between Avvatar and non-Avvatar within the new age business? Is that a fair assumption?

[Ankit Jain, executive]

I'm sorry, I would like to defer over here. See, the way we give our core categories where we combine Ghee, cheese and Paneer, same way we have created a new age business, which is right now Avvatar and Pride of Cows and tomorrow, there could be addition to this business stream. So we are focusing new age business. It is a premium -- strong premium business. Both are on high gross margin EBITDA margin. And hence, we have combined this category, which we are focusing as a new age business, which is more of a premium business. So we are not giving a split between the revenue for the both. However, we have given the growth numbers. Avvatar has grown 8x over the past 3 quarters -- past 3 Q1s, if you look at, and Pride of Cows has grown 36% Y-o-Y.

Yes. We just wanted to clarify, we are focusing on both. So there is an equal focus on both. And hence, we do not get into splitting the numbers. And in fact, there will be additional premium products which are going to come and which will get into this new age business as we move along.

[Unknown Analyst]

Yes. So the only reason, sir, again, just to clarify my question, the whey protein business or the protein business per se, there are many private players who are getting a lot of good valuations. So our business, given the market cap and where it is, it would be really helpful, again, something for the management to think about. If you could split Avvatar and non-Avvatar. Again, I'm not asking about pride of cows and other premium category business splits, but Avvatar and non-Avvatar would give a very helpful insight to the investors as well in terms of where our -- how our Avvatar business is growing and what kind of valuation can be ascribed to this Avvatar business?

[Ankit Jain, executive]

See, we are not looking at -- again, as I mentioned, we are not looking at one brand, Avvatar and Pride of Cows, both are core to the close to the heart. So both these brands are growing phenomenal. And hence, you see an overall evolution in the percentage contribution. However, we have given -- to give you indication, we have given the growth numbers in terms of how both brands are performing. And overall, new age business has grown 57% Y-o-Y. Again, that combined number has also been provided. So I hope that suffices.

[Operator]

[Operator Instructions] Our next question comes from the line of Resham Mehta from GreenEdge Wealth.

[Unknown Analyst]

Sir, the first question is if you could just talk about the unit economics of the cow from your Bhagilakshmi farm. Typically, let's say, what would be the per cow cost at the time of purchase? What would be the lifetime value of the cow? Like how many -- what would be the yield potential revenues over the lifetime of the cow? What is the typical lifetime of the cow? And then typically, then what is the residual value of the cow? And a related question would be that on your balance sheet, there are biological assets. So how exactly is the accounting treatment for that?

[Unknown Executive]

As far as cow is concerned, we don't buy any cow. It's our own generation. This last 15 years. So we don't have to buy any cows. We have about 4,500 cows and with the natural and all, then we are adding our stocks. So just to clarify that there is no buying of the cows in our system. As far as accounting is concerned, I think Ankit can elaborate.

[Ankit Jain, executive]

Yes. So...

[Unknown Analyst]

I think the question was on the yield and cycle...

[Unknown Executive]

Yes, yes. So we have our own specific breed. So one is that, very important for getting the yield. And second is the feeding. So feeding for feeding, we have our own crops, which are converting to silage, which gives a better quality of milk with a better yield per cow. So just to give you the indication that if the same cow it is in with the farmers, they give about 8 to 10 liters of milk, but in our farm, the average yield goes to 26 liters, so almost 3x. So that is one with a better protein and fat content. So this is also a result of the better feed and management. And as a cycle, the cow can give birth for 8 to 10x in the life cycle. It can go up to 14 also, but average 8 to 10x. So after that, the cow becomes…

[Ankit Jain, executive]

So I'll answer the question on the accounting treatment, Resham, right, Yes. So the accounting is done as per Ind AS 41. So as per Ind AS 41, all the biological assets are measured at -- of course, the initial recognition is done at a fair value less cost to sell. So there is a separate accounting standard, which applies to it. And as on the balance sheet date of March '25, the overall cow valuation was INR 87.6 crores in the balance sheet.

[Unknown Analyst]

So just trying to understand that what would be like the potential revenue from the cow over its lifetime? And what would be the cost that you would kind of incur from a feed and a maintenance standpoint? And also at the end of the life cycle, you sell the cows and if yes, like typically, what is the value that cow yields?

[Ankit Jain, executive]

Yes. So on the life cycle. Yes, 10 to 12x. So then 10x, there is a cycle which runs for a cow. Typically, what happens is we have the cow for 5 to 7 cycles. And then we sell the cow. So the cow is generally to our farmer connects because we have a strong farmer connect. So we sell it to the farmers.

[Akshali Shah, executive]

So even the next generation for them and the yield that they achieved from that is far superior because these are our farmers which we have from our connect. And eventually, for it.

[Unknown Analyst]

And what is the value that at the end of the cycle that the cow yields? -- like one cow on an average?

[Ankit Jain, executive]

See, again, because the cow has a life cycle, the assets is valued considering the revenue potential, et cetera. But however, when we sell in the market because all the cycles -- all the milking cycles are not exhausted. So typically, it ranges. Of course, we can sell between 1 lakh to 1.5 lakh after that 5 to 7 cycles.

[Unknown Analyst]

And then what -- does that reflect in your other income?

[Ankit Jain, executive]

Yes. So it is -- if there is a profit on sale, then it, of course, reflects in other income or if there is a loss on sale, it gets part of the other expense.

[Unknown Analyst]

And typically, your other income in the past few years has been in that range of INR 30 crores, INR 40 crores. So that is in lieu of this sale of cows? Or is there some other element to it?

[Ankit Jain, executive]

No. No, no, there will be other elements to it as well because typically, the cow valuation, for example, I'll take a last year example. Last year, total cow valuation was about INR 13-odd crores for the year as a whole.

[Unknown Analyst]

Okay. Okay. And would it be possible to give some rough sense of your cheese revenue between B2B and B2C?

[Ankit Jain, executive]

See cheese as a business, we have not given a specific split. Our core categories comprises 57%. However, we have given a separate split in terms of the B2B and B2C business of the overall business as a whole, whereby 65% is the B2C business and almost 35% of the business is a B2B business.

[Unknown Analyst]

But would it be fair to say that B2B cheese would be like 70% or thereabouts or perhaps more or less?

[Ankit Jain, executive]

We would not like to share those specific details.

[Unknown Analyst]

No problem. And lastly, on the -- for the...

[Operator]

Resham ma'am, may we request you return to the question queue for follow-up questions, please, as there are several other participants waiting for their turn. Our next question comes from the line of Bharat Gupta from Share Value Capital.

[Unknown Analyst]

Sorry to correct. It's Bharat Gupta from Fair Value Capital. A couple of questions, sir, from my side. So first, can you provide some breakup of revenues in terms of the regional split? Like what will be the contribution coming in from the North, South, East and West?

[Ankit Jain, executive]

Yes. So...

[Akshali Shah, executive]

So to give you a regional breakup will be very difficult because we have around 5 to 6 route to markets, which are different in nature. So to tell you specifically how much of it is coming from which region would be very difficult to give this breakup. And plus, it's very different for each business category versus if you check the new age business versus your fresh milk, which is very south and west centric to Gowardhan and Go Cheese, which are very, very different in nature. So we do not share breakup of region wise.

[Unknown Analyst]

But any market share which you can highlight with respect to any of the territories which you are catering to?

[Akshali Shah, executive]

We've already shared that we have around 22% market share in the branded Cow ghee segment and 35% market share in cheese.

[Unknown Analyst]

That is, I think, on the pan-India basis, but with respect to Western market or with respect to Northern, so what will be the contribution from the core categories? I'm just asking with respect to the market share.

[Unknown Executive]

With respect to the market share?

[Unknown Analyst]

Right.

[Unknown Executive]

See market share with respect to core category, we have given -- of course, we subscribe for the core categories market share only. And thereby, while we have a full dairy report from IMARC, but we report branded Cow ghee segment separately for the flagship brand Gowardhan for our key products. And for cheese also, we report 35% market share based on the IMARC Report. I think that report will be available. Maybe you can source it from IMARC, definitely.

[Unknown Analyst]

Sure. Secondly, with respect to the RM prices, I think the milk prices have gone up by 18-odd percent as you have mentioned in your press release. So what kind of a pricing hikes we have already taken? And like going forward, how do you see the RM prices trend to play out in the foreseeable future given out a strong monsoon season this time?

[Unknown Executive]

See, while as you rightly pointed out, there is an 18% Y-o-Y increase in the RM prices. And so with this commodity push, we have been able to maintain the gross margins, which is almost at flat Y-o-Y. This only demonstrates, of course, there are 2 parameters about it. Of course, our ability to command pricing power in the market and pass on the price increase. as well as the product mix, which has improved, and we have been able to balance with the gross margin. So I think both these parameters have worked together to help us maintain our gross margins versus sequentially, while the milk prices are 2% up sequentially, but we have been able to improve our gross margin largely due to product mix.

[Unknown Analyst]

And any further hike which we are taking...

[Operator]

Sir, may we request you to the question queue for follow-up questions, please – [Operator Instructions] our next question comes from the line of Ankur Agrawal from Surge Capital.

[Unknown Analyst]

So my first question is around gross margin. So if I look at your listed peers, most of the dairy companies have a gross margin anywhere between 25% to 30%, like high 20s. Whereas we -- if you look at us, our product mix is mostly on the value-added where 75% of the business is value-add versus say, 25% being liquid milk or bulk S&P. But still our gross margins are in the similar range of high 20s. So I'm just trying to understand why so because our value added is at 75% versus 25% for other peers.

[Unknown Executive]

So see, while you are comparing us as the listed players, please note that the listed players, there is no direct comparison because most of the listed players are region-based players, and they are largely selling milk and curd that to specific geographies, limited geographies as well as largely into ice creams. So if we were to -- there's no direct competition when it comes to a ghee or a cheese or the whey protein kind of products. While your observation is looking at all the financials, but please understand that when we have a pan-India network for these kind of products, there is an investment behind each of the brands, which goes -- which is the pricing, which is about the margin to operate at so that we can penetrate into the category. It could be even if you can take example of Avvatar, we have been able to grow phenomenally well. We have been able to price it right because there is a competition across that category as well.

So we have invested that and more so as a -- you can say, a market penetration strategy to have it. So we have been able to maintain certain gross margins. Typically, our gross margin profiles have improved over the past 3 years that you would have seen. And naturally, the natural progression will be to further increase as we move forward. So we look forward to increase as the product portfolio expands for the newer business, but there's no direct comparison. That's what I wanted to highlight.

[Unknown Analyst]

No, I get it. I think the comparison was because our working capital cycle is very different from our peers, which is understandable because we have a much higher value-added share. But at the same time, the gross margin is not compensated in terms of higher gross margin, then obviously, the ROC either way is much lower. But I got your point. The second question was around debt and the interest cost. So if I see last 2 years, our debt is fairly stable at around INR 600 crores, but our interest cost on the P&L has gone up from, say, about INR 50 crores to almost INR 90 crores. So I'm trying to understand why that has happened.

[Unknown Executive]

Sorry, sorry, your question, I could not follow.

[Unknown Analyst]

So your debt over the last 2 years is broadly stable at around INR 600-odd crores, okay? But the interest cost on the P&L has jumped from INR 55 crores in FY '23 to INR 93 crores in FY '25. So even though the debt is not increasing, but the interest cost has almost doubled. So if you can explain why is it?

[Unknown Executive]

Yes, I'll explain that. But continuing to the previous question, which is more about -- see, we are a brand, which is a national play, and we are able to set up that distribution network pan-India. So that is where it is not direct comparable. Now coming -- turning to your question on the interest cost. See, overall, our net debt is INR 560 crores, which is broadly flat across both the years. And gross debt has marginally increased, if you look at. So that is why your interest cost sits in the interest line item and there is an other income on the fixed deposit or the investments goes in the other income part.

Having said that, there is an additional interest which is being seen because of the multiple assets on lease. And for -- as per ROU accounting, the interest cost on the lease also sits -- resides in the interest cost, which over the past 2 years, we have invested and got into the operating lease aspects. So hence, you can see as per the schedules also of the interest cost that largely it has increased in the ROU part.

[Unknown Analyst]

The ROUs are fairly small for us. I think I don't have the FY '25 schedule, but FY '24, the increase in interest cost is primarily because of other interest expense, which I want to understand what it is?

[Unknown Executive]

Other interest expenses are largely related to the bank charges, the lead bank charges, any discounting which happens with respect to the receivables. These are all miscellaneous financing-related transaction, whereby if -- for example, if the receivable is 90 days, we can discount it and we can get it in advance. So these are charges pertaining to that only.

[Operator]

Our next question comes from the line of Siddharth Ved from Ved Spice.

[Unknown Analyst]

I hope I... Just wanted to know, on a Y-o-Y basis, there was a marginal decline in the EBITDA percentage due to a higher advertisement and promotion spending. So how are you viewing the return on investment on these spends?

[Unknown Executive]

See, first of all, your observation is right. There's a marginal decline, and there is a higher add Pro, which we have specifically called out as per our investor presentation. How do we look at is more of a -- see, return on the AdPro is more on the long term. So we continue to focus on brand building initiatives. That's why we are present across and we are focusing on consumer cheese. We are focusing on Avvatar for all the digital campaigns. There are several campaigns on Pride of cows. All these gets reflected in the -- of course, the overall revenue growth. And that's where you see the portion on the skim milk powder or the ingredient business has declined. But however, the other core categories as well as the new age business has done phenomenally well. And we are happy to invest behind the brand, and we will stay put on to the strategy for investing into the brand.

However, we understand and we will be able to -- we will manage it within a certain threshold. We are not here to go overboard on the ad spends. And there is a certain plus or minus in particular quarters. That is what we overall manage. But besides the brand investments, if you look at the gross margins are flat, mainly because of the product mix as well as because of the pricing, which we have been able to pass on to the consumers.

[Operator]

Our next question comes from the line of Yash Sinha from MIPL Family Office.

[Unknown Analyst]

I wanted to broadly understand the variation in gross margin between the core categories. So your core products, your new age products, skim milk, et cetera, just to kind of understand the movement quarter-on-quarter in your margins.

[Ankit Jain, executive]

Yes, Yash. I'm sure you will appreciate that the category-wise gross margins are core part of the business to operate for the company, and it is maintained at the company's level. Even if you were to look at the peers or benchmark, whether Nestle or Marico, you will not be able to get the gross margin at a category level because it is generally the price-sensitive information. And of course, the company's confidential information. And hence, we would like to abstain from sharing.

[Unknown Analyst]

Okay. That's fair. But would it be a fair assumption to make that given that your value-added products have grown about 50% year-on-year, where your margins have either stagnated or declined marginally that those entities are currently more of a drag on your margins and the profitability is yet to come?

[Unknown Executive]

So there are 2 aspects. I'll help you understand. One, the core categories have not grown 50%. They have grown 14% year-on-year for the quarter 1, while new age business has grown 57%. And hence, that has, of course, contributed to the overall gross margins. But having said that, in core categories, when there is a commodity push, you will be able to appreciate that whenever you pass on certain -- the cost push and whenever -- if you are trying to pass on the same in the value terms on a per liter or a per kg basis on the same thing, then because of the fraction, the overall percentage margin comes down always in an inflation cycle because you tend to pass on only the relative cost push, protecting your absolutes. So I think that is why you look at -- there is -- the percentage margin drops. But however, with the improved profitable mix, I think we have been able to maintain our overall profit margins, and that's why you see the P&L where it is.

[Unknown Analyst]

Got it. And last question is across our category, would you be able to share what volume we've been able to do through slightly newer age e-commerce channels like quick commerce?

[Unknown Executive]

While we have not given the volumes at a channel level, but just to highlight that our volume growth for the core categories was 9% for the quarter 1 and value growth was 14%. So the delta 5% is nothing but the inflation, which is -- and hence, we see overall 14% growth in the core categories. Now coming to your question specifically on the channel, I think channel composition is something which has not been specifically shared. However, we can update you that overall, the total business comprises of B2C and B2B business, whereby 65% is a B2C business and 35% is a B2B business.

Of course, Quickcom is a faster-growing channel, et cetera, et cetera, but we do not share particular numbers. See, we have been able to write on -- I'll update you on Quikcom. I think thanks to Quikcom, we have been able to ride on to that network. That's why you see in Pride of Cows, there is a stupendous growth with respect to the other portfolio other than the milk, which is Ghee, paneer and curd. Similarly, we look at -- we have launched a travel pack for Avvatar and Avvatar also listed in Quikcom. Similarly, you look at Paneer as a category, which is growing significantly on Quicom. So of course, Quikcom has their own advantages whereby -- so we have to be on -- we have to be agile enough to be able to ride on to that network and which is the proactive call, I think the company is there across the channels. So it's not that we are not present in any of those channels.

[Operator]

Our next question comes from the line of Debashish Neogi from Capital.

[Unknown Analyst]

First of all, congratulations to the team actually, you all have created great brands, which is evident. Now my question is, allow me 2 minutes to give a context to the question. So on one hand, we are seeing our B2C channel sales is more than 2-third. Our value-added product, we are -- our contribution to the total revenue, again, is more than 65%, 70%. Now this compares to Hudson of only 30%, while I understand they are regional players and we are national player. But in the previous con call, I think Ankit mentioned that our new age business actually has more than double the margin of the base business.

So my question is, if the new age business is growing and we have a double margin on those business, why it's not reflected in the operating margin? Because FMT is all about brand. The brand is very, very strong. So why it's not reflected in the numbers? Is it because there are expenses for pan-India distribution, which is significantly higher and which is not yielding that throughput, which it's supposed to yield or there are some strategic funding because of which the profit is coming down because you're giving at the consol level, right? There would be strategic funding for the new age business. So what is it which is not reflecting in the number? Because FMT is about pricing power. So we don't have pricing power in the rest of the geographies?

[Ankit Jain, executive]

Yes. Deb, I would answer each of your questions. See, regarding your -- you started with competition. See, competition is a regional play. Milk has traditionally been a regional play where it is not economical to transport water. So hence, the dynamics on a regional play with respect to EBITDA margins is absolutely different versus the national player and that too who spends heavily on the AdPro, I think and focusing on building the brand is something a different strategy. So we are on to -- maybe you can say a dairy FMCG who wants to create brand, build brand with a focused efforts on brand building initiatives.

As I would like to reaffirm what I mentioned in the last call versus this call. Yes, the gross margins are superlative in new age business and almost double of the average of the company's gross margin. However, what -- when we look at the percentage increase is only from 6% to 3% which should ideally translate to a certain mathematical number. But as I mentioned in the previous question, what happens is when we pass on a certain cost push, the cost push is passed -- when in the percentage terms, we are not able to pass on that in percentage terms. It is always that the cost push is passed on to the consumers so that the consumers do not take that additional beat of the additional margin on the increase in the price. And hence, we see the mix of Q1 is improved product margin, offset by a marginal decrease in the pricing. It is not our ability to command pricing in the market. We are a premium brand when it comes to ghee. Today also, we are priced significantly higher than Amol, maybe INR 100 a liter or maybe more than that. And similarly with Patanjali.

So it is our ability to command pricing in the market, which is evident that we have been able to grow the core categories at the 9% volume growth despite a significant price increase. Maybe just to give you example, Ghee, which was priced at MRP of INR 700, now it is priced at INR 790 a liter. So that is the kind of change in the pricing profile, which a market has been able to absorb and despite we have been able to grow. So again, that builds our confidence that we are on the right track, and we continue to stay focused with brand building initiatives. I hope that answers.

[Unknown Analyst]

No, I understand what you're saying, Ankit. My question is not with respect to last quarter. I don't look at quarter. I'm looking at say, next 3 to 5 years. And seeing as a business, and if it is FMCG, we are severely as per me, we have very strong brands, okay? And we are severely undervalued because if you see how the market is seeing it is not an FMCG company because otherwise, our market cap to sales is less than 1, severely undervalued. And we have been talking about that we are professionalizing the company, we are moving from a commodity to FMCG, but the market doesn't believe that because why it is not believing because it's not reflected in the number.

Why it is not reflected in the number? Because of 2 reasons, because ROE and ROCE is lower than competition. And it is lower because our is capital intensive. That is one of the reasons. We have biological assets on our books and the profits are lower, the margins are lower. There, my question is, we are dealing in brands. So if we are dealing in brands, okay, why I can understand that we will take some time lag in passing the price increase. I'm not talking quarter. I'm talking years, I'm talking 3 years, why the margins are lower? Because it didn't speak about brand power.

[Ankit Jain, executive]

Over the past can you hear me?

[Unknown Analyst]

Yes, I can hear. What I'm saying, Ankit, is that -- yes, you're audible. I'm saying why with the value-added products, our margin is so low with market share of 22% and 25% Am I audible?

[Unknown Executive]

Yes, very much. And let me answer. See, there is a conscious effort. I'll apprise you with the details. See, overall, if you look at the past 3 years and then coming 3 years will be separate. So in the past 3 years, of course, our EBITDA margins have improved from 5% to 7% to 8.5% year-on-year, largely because -- see, of course, we have been able to grow with the 18% CAGR for the past 3 years. We already have a setup distribution network completely because the supply network over here is a 3 method supply chain for the wet transport, the coal transportation for cheese and the ambient transportation. Besides the pan-India distribution network, even on the sourcing front, we are able to capitalize much because our yields for the procurements are improving per BMC, et cetera.

So of course, the efficiency, the scale -- as the scale improves, the efficiency is coming and which is reflecting in the overall EBITDA margin profile, which is improving year-on-year. Our aspiration is also to grow it consistently, move to a double digit and then, of course, slowly enter into the teens category. So this is what our conscious efforts and as a company, we are all targeted towards that. So for the next couple of years, definitely, you will see us moving up the ladder from a single digit or a high single digit to at least to a double-digit level in the -- over the next couple of years, I would say, maybe in, say, 12 months, 18 months, 24 months, not giving a specific time frame, but yes, that is what our aspiration is to be.

[Unknown Analyst]

No, fair enough. Good answer, Ankit. So I'm not looking at guidelines or I'm not looking at specific numbers. So I'm saying the internal aspiration in 2 years on an ROCE point of view should be above 20%. That's a fair internal aspiration?

[Unknown Executive]

Yes, yes. So with the improved margin profile, of course, the ROCE should significantly improve because we have taken -- again, you will see the last investor presentation. Overall, we have worked upon reducing the working capital cycle, which is, again, one of the important part of the capital employed. So we have put in a conscious effort to reduce the overall working capital. Similar -- so that's where we see upliftment in the ROCE also in the past 3 years and same way as the margin with the same debt, see, as you know, even with the same credit lines, we have been -- in the last 5 years, we have been able to double our turnover with the same credit lines. So we have not added genuinely any additional credit lines.

So besides that, if we are able to jump shift it, so hopefully, with the improved aspiration for the improved EBITDA margin, we would be able to jump shift on ROCE as well. But again, here, we are not giving any particular guidance. I fully understand.

[Operator]

Deb, sir, may we request you return to the question. Our next question comes from the line of Aditya from Securities Investment Management.

[Unknown Analyst]

Just wanted to understand how much of our milk procurement is through agents and how much is from our own distribution network?

[Unknown Executive]

So whatever milk we collect, we procure our own and 60% is through agents. And we are trying to increase our own milk procurement because of the -- we want to have sustainable milk procurement with the quality. So we are increasing our own milk procurement. Right now, it's 40-60, 40% our own and 60%. Just on a lighter note, both the milk are our own only from our own network. They are same farmers. So it's only just a matter of channelizing.

[Unknown Analyst]

Sir, any reason why we have such a higher share from agents? Because what we understand is other players -- other listed players majorly procure from their own distribution network, which gives them an advantage in pricing and also in terms of supply availability. So, why do we have 60% coming from?

[Unknown Executive]

Even if we have what we call it from the other sources, they are just like our own, they are -- these parties are associated with us since last 2, 3 decades, and they are consistently supplying the milk with the quality what we need. So it's not that they are on and off and they don't -- we keep adding the suppliers. They are our own suppliers. And then also, we are increasing our own milk procurement by putting the bulk in the villages. But even the other sources also, they are consistent suppliers to us with the quality what we want. So it's just a matter of how we finalize the mill.

[Unknown Analyst]

Okay. And sir, now just wanted to understand the economics of cheese and whey. So for producing 1 tonne of cheese, how much do we get as a byproduct?

[Unknown Executive]

Yes. So just to give you some rough figures that for making 1 kilo of cheese, we need about 9 liters of milk. And when we make cheese, then 90% comes as a way. So that gives you the equation of milk to cheese to whey. So for 1 liter kilo needs 9 liter of milk. And when you take 9 liter of milk, 90% goes as a way and 10% is a cheese.

[Unknown Analyst]

Understood. So now when we are producing our quantity of cheese, so the amount of whey which we are getting, is it now purely sold as Avvatar or there is also some B2B sales of whey?

[Unknown Executive]

Yes, it's a very complicated filtration system, which we have a very high technology state-of-the-art plant. So we keep extracting whey protein then out of whey protein, we also have lactose. So lactose goes to the -- all the pharmaceutical companies as a replacement of the sugar. So for the baby food and also basically, it's all whey derivatives is what we call it, depending on what is the percentage of protein we have. So we can have protein from 28% to 60% to 80% to 90%. And some of that protein is used as a raw material for Avvatar or it can be sold as B2B also. But right now, because Avvatar consumption is increasing, so we consume more of our protein for Avvatar.

[Unknown Analyst]

And what would be the rough proportion of the total which...

[Unknown Executive]

Please understand. See, institution business is a separate business. Ingredient business split we have already shared. And overall, our B2B sales comprises 35%. So we do not get into specific in terms of how much whey do we sell or how much whey do we consume in-house. I hope you appreciate it.

[Operator]

Our next question comes from the line of Darshil Jaw from Crown Capital.

[Unknown Analyst]

So a lot of my questions have been answered. So just wanted to get -- I think in the last call, we were thinking like we have a goal of reaching INR 10,000 crores revenue. So like I don't want maybe like a short-term guidance, but over the long term, we still maintain our guidance like we can grow at 18%, right?

[Ankit Jain, executive]

Yes. Sorry, you want the breakup of... 100...

[Unknown Analyst]

I was saying that we have an internal target, I think, reaching INR 10,000 crores revenue, right? So wanted to know, is that still like in a play for the next 4 years? Or how do we see our revenue growth trajectory, sir?

[Unknown Executive]

This is what we are targeting for next, I would say, next 5 years, right, from whatever status what we have today. And that is possible because we have all the ingredients to do that. And that's what we have been telling you the way we are expanding our distribution, the way we are building our brands, the way we are creating new categories and value-added products. So all these channels are already put into the system. And now we have to just take the benefit of all the inputs what we have done to reach to those figures. Of course, we need a lot of mail. For that also, we have done a lot of efforts in getting more mail from our own system. So this is possible now.

[Ankit Jain, executive]

Yes. See, I would like to add, sir. Fundamentals have been taken care of. See, I think we have all this while we have worked upon focusing on having the right fundamentals in place, right building blocks in place to ensure that we are able -- we are geared up for the INR 10,000 crore aspiration. It continues to be our aspiration and we are certain that we will be able to achieve it soon.

[Unknown Analyst]

Okay. Okay. That's great to hear, sir. And sir, just wanted to know like I'm a bit new to the business. So I just wanted to know, is that like a seasonality impact for us like because just wanted to see like quarter-on-quarter, how does our flow go through? Or is it similar business? Just wanted to chew your brain on that a bit.

[Unknown Executive]

Yes, there is a little bit pinch of seasonality. As you know, that as a part of the consumer community, we know what kind of seasonality is there in our kind of business. Of course, festive seasons have a little bit more consumption. That also depends on kind of monsoon we have in India, and that also drives the consumption post monsoon because of the farmers have better crops and income and all. So it all depends on the seasonality from the point of view of the agriculture economy, how it's growing or overall economy is growing as well as the festival season is coming. So in coming season, we know that monsoon is very good in this year. Ph this will drive more consumption in coming festive seasons.

[Akshali Shah, executive]

Just to add to that, if you see the past 3 years trend, we have actually done far better in the Q2, Q3 and Q4 quarters. And we see a lot of growth in numbers during the festive season and the winter because of the chip consumption goes high.

[Unknown Analyst]

Yes, correct, correct. That Yes, yes. So in general, our Q2, Q3 are better than what Q1. Q1 would be the slackest quarter for us, if that's a fair inference.

[Unknown Executive]

You enjoy pizza in December more than June.

[Unknown Analyst]

Yes, that's a fair, fair thing. And I know a lot of people have asked about EBITDA and you've given a good explanation. But just wanted to know like in general, what would be our aspiration, like where do we see as the business that our EBITDA can reach?

[Ankit Jain, executive]

See, again, thank you for noting on the previous questions about answering on the Y-o-Y changes in EBITDA. But as I just mentioned in the previous question itself, we are looking at -- our aspiration is, of course, inching up ahead the way we have been inching up from 5% to 7% to now 8.5% in the last year. So of course, this year's target is to, of course, inch up from the previous year. Having said that, we look at -- in the medium term, we look at moving -- inching up to double digits and then getting into teens slowly. So that's our aspiration.

[Operator]

Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Mr. Rahul Kumar Srivastav, the CEO, for closing comments. Ladies and gentlemen, that concludes the conference call for Parag Milk Foods Limited for today. On behalf of Parag Milk Foods, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.