Parag Milk Foods surges over 14% as promoter increases holding

Shares of Parag Milk Foods climbed 14 per cent to Rs 145 on the BSE on Monday after its promoter acquired additional 0.24 per cent stake in the company through open market. The stock of packaged foods company hit an all-time low of Rs 125 in early morning deal today.

On Friday, the company's promoter, Devendra Shah, had acquired 200,000 equity shares, representing 0.24 per cent stake in the company, through open market. Post-acquisition, Shah's holding in the company increased to 18.08 per cent from 17.84 per cent, according to stock exchange disclosures.

Parag Milk Foods in a regulatory filing said it has received intimation from Shah, disclosing his acquisition of 200,000 equity shares of the Company from the market, on November 15, 2019.

In the past month, the stock has underperformed the market by falling 19 per cent on weak set of September quarter (Q2FY20) results. In comparison, the S&P BSE Sensex was up 3 per cent during the same period till Friday.

The company’s EBITDA (earnings before interest, tax, depreciation and amortisation) during the quarter declined 4 per cent to Rs 56 crore from Rs 58 crore in Q2FY19. EBITDA margin contracted 140 bps at 8.7 per cent which was impacted mainly due to disruptions in milk availability caused by prolonged monsoons. The management said the substantial improvement in milk availability has been seen since Dusshera with a slight moderation in milk prices.

“The company’s working capital deteriorated due to higher inventory of ghee and butter, higher credit given to retailers due to the festival season and early payment to creditors due to milk shortage. Free cash flow (FCF) for FY20 is expected at around Rs 60-65 crore (Rs 33 crore in 1H) and milk subsidy receivables Rs 21 crore if not received in FY20 could lead to an increase in provisions by a significant extent,” analysts at Elara Capital said in result update.

At 12:06 pm; the stock was trading 13 per cent higher at Rs 144 on the BSE, as compared to 0.28 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more than doubled today, with a combined 682,996 shares changing hands on the NSE and BSE so far.