Parag was established in 1992 by Mr. Devendra Shah who is the main sponsor and the Chairman of the Group. Mr. Shah has over 25 years of experience in the field of dairy and allied activities. His two brothers, Mr. Pritam Shah (Managing Director) and Mr. Parag Shah (Director) are also co-sponsors in the Company and responsible for its day to day operations. The Company is privately held, with all local sponsors.

Currently, the three promoters and their family own ~58% of Parag. Private equity funds, IDFC and Motilal Oswal own ~21% and ~12% respectively.

The total project cost is estimated at US$32.7 million, of which US$13.9 million or 42% has already been funded through an equity investment by IDFC in September 2012. IFC proposes to invest up to US$17 million in the project.

15.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
Equity

* These investment figures are indicative

The Company currently has milk processing plants at two locations – Manchar in Maharashtra, Western part of India and Palamner in Andhra Pradesh, Southern part of India - both sites located in rural areas.

The project involves setting up the following at the existing Company sites – i) a Whey plant in Manchar, ii) UHT milk plant in Palamner, iii) plant automation in Manchar and Palamner, and iv) chilling centers at both Manchar and Palamner.

Improvement in food safety standards & technology: In India majority of the milk & milk products have very poor traceability till farm level. Also contamination and adulteration of milk is common owing to significant supply-demand gap and lack of extensive cold chain network. An organized sector player like Parag will help improve food safety standards. Also, Parag is ahead in technology as compared to other players in the Indian dairy sector.

Enhanced supply chain linkage with farmers and food suppliers: Parag currently collects milk from ~60,000 farmers directly or through third parties and is focusing on growing the procurement network by setting up more chilling centers and bulk coolers. This increased demand of milk will lead to increase in number of farmers in the supply chain. It will also support other input suppliers to the industry including feed and veterinarian suppliers.

Development of medium and small enterprises: Parag distributes its products through 60+ super-stockists, 1,000+ distributors and over 120,000 retail outlets thus having a far reaching impact on supporting medium and small enterprises across the country.

Improved incomes in rural and peri-urban areas: The project will create direct and indirect employment and result in other development benefits such as linkages with local suppliers, as also seen in our previous project with Pran Dairy, Bangladesh. Also, Parag sells cows from its own dairy farm to the local population after the cow has its 5th / 6th lactation. These are superior breed cows with yields better than those reared locally and will hence help improve rural incomes.

Supporting growth/guiding the critical Indian dairy industry: Expecting a shortfall in supply and to improve yields, NDDB expects a gradual increase in the share of the organized sector to 60% from the current share of 30%. IFC investment will help this medium sized dairy Company to expand rapidly and develop best practices to increase yield that would be disseminated down to farmers who form a critical link in Company''s supply chain.

E&S related guidance: Parag''s operations show poor housekeeping, multiple issues related to management systems, human resources policy, air emissions, effluents, farm manure management, resource efficiency. IFC will be able to guide the Company on several aspects, as it embarks on the process of newly professionalizing and developing management system based approaches to quality and energy management, which will then be expanded to environmental and safety management.

Global Knowledge: IFC can share global knowledge with the Company on a continuous basis. Productivity of Indian cattle is between 800 and 1,000 litres of milk per animal per year as compared to between 7,000 and 8,000 liters per year for the best varieties around the world. IFC, leveraging its relationship with companies around the world, can help the Company with international best practices.

Access to financing matching investment profile: Parag''s proposed project expansion is large and will benefit from the flexibility of a long-term financing with appropriate grace period that is not easily available in the local market for companies of medium size.

Business advisory & work with targeted farmers to extend coverage: Parag currently collects milk from ~60,000 farmers directly or through third parties. IFC would be able to guide the client on appropriate business strategy, environmental and food safety standards which are necessary for sustainable growth of the enterprise. In view of the scale of expansion the option of providing training through the ''Business Edge'' product would also be offered to the client. IFC''s proposed study along with Gates Foundation on the diary sector focusing on (a) smallholder dairy farm productivity; (b) smallholder dairy farmer awareness and practice of food safety and (c) Water use-efficiency and GHG emission reduction from smallholder dairy farms, will potentially be very useful for the client.

This is a Category B project according to IFC’s Environmental and Social Review Procedure, because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.



Key environmental and social (E&S) issues associated with this Project include: development and implementation of management systems covering environment, health and safety and food safety; assurance of fair, safe and healthy working conditions in compliance with local regulatory requirements and relevant Performance Standards; resource efficiency of the operations (water, energy, milk); monitoring and management of air emissions, wastewater treatment and discharge, solid and other waste disposal; the impacts of operations on local ambient air quality; life and fire and safety management including emergency preparedness and response; and the supply chain of milk.

Please refer to the related Environmental and Social Review Summary (ESRS) document for this project.

Please refer to the Environmental and Social Action Plan (ESAP) tab in the related Environmental and Social Review Summary (ESRS) document for this project.