India’s Dairy Industry to Achieve 13-14% Revenue Growth This Fiscal
Key Factors Contributing to Growth:
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Increased Consumer Demand: The consumption of value-added products (VAP), which include ghee, paneer, butter, curd, ice cream, cheese, yoghurt, and whey, is expected to rise significantly, supported by higher income levels and a shift towards branded products. The HORECA (hotels, restaurants, and cafes) segment will also contribute to the increased demand.
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Improved Milk Supply: A favourable monsoon outlook is expected to enhance cattle fodder availability, leading to a projected 5% increase in raw milk supply, from approximately 230 million tonnes last fiscal to 240-245 million tonnes this fiscal. This growth is further supported by the normalisation of artificial insemination and vaccination processes, as well as genetic improvements in indigenous breeds.
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Stable Procurement Prices: Steady milk procurement prices are anticipated to boost the profitability of dairies, with operating profitability projected to improve by around 40 basis points to approximately 6% this fiscal.
Financial Outlook:
Despite an increase in debt levels due to higher working capital requirements and ongoing capital expenditures, the credit profiles of dairy companies are expected to remain stable. Key financial metrics include:
- Debt Levels: Gearing is projected to remain stable at 1.8 times by March 31, 2025, compared to 1.7 times a year earlier.
- Debt Protection Metrics: Interest coverage ratio is expected to be comfortable at 10-11 times this fiscal.
- Capital Expenditures: Annual capex is expected to remain healthy at Rs 2,600-2,700 crore, consistent with the past two fiscal years.
Mohit Makhija, Senior Director at CRISIL Ratings, commented, “Amidst modest growth of 2-4% in realisation, the dairy industry’s revenues are seen rising on healthy 9-11% growth in volumes. VAP segment – a 40% contributor to industry revenues – will be the primary driver, fueled by rising income levels and consumer transition towards branded products.”
Rucha Narkar, Associate Director at CRISIL Ratings, added, “While the revenue and profitability of dairies will improve this fiscal, debt levels are also expected to increase, mainly for two reasons. One, healthy milk supply during flush season will result in higher skimmed milk powder (SMP) inventory. Two, continued milk demand will require increased debt-funded investments for new milk procurement, milk processing capacities, and expanding distribution network.”
The industry’s steady growth is supported by strong balance sheets, ensuring stable credit profiles despite the additional debt for working capital and capex. The overall outlook for India’s dairy sector remains positive, with the continued expansion of value-added products and improved raw milk supply driving revenue growth.
