Indian private-equity firm IDFC Alternatives has invested IRP1.55bn (US$28.8m) in local dairy group Parag Milk Foods.

The funds will used to build capacity in various products, strengthen Parag's procurement network and provide a partial exit for another domestic private-equity firm, Motilal Oswal Private Equity, which had invested in the company in 2008.

Parag posted a turnover of around INR8.8bn in its 2012 fiscal year, up 40% from the previous year. It markets the Gowardhan and Pride of Cows brands and also recently launched a UHT brand called Go.

"The dairy sector is at a very interesting cusp in the economy of India," said IDFC Alternatives managing partner Satish Mandhana. "It has the potential to build the rural economy."

Devendra Shah, Parag Milk Foods chairman, added: "Parag is committed to bring new and exciting products to the market and emerge amongst the top value-added food companies in India. We believe that the investment from IDFC will help us stay committed to these goals."