India’s dairy industry is poised for significant revenue growth of 13–14% this fiscal year, driven by strong consumer demand and an increased supply of raw milk, according to a recent analysis by CRISIL Ratings.
The report, which examined 38 dairies representing 60% of the organized segment’s revenue, highlighted that robust demand for value-added products (VAP) and favourable monsoon prospects contributing to ample milk availability will support this growth. The demand surge is expected to be complemented by a 5% increase in raw milk supply, thanks to improved cattle fodder availability and normalization of artificial insemination and vaccination processes after previous disruptions.
Key Insights:
- Value-Added Products Driving Growth: VAP, which accounts for 40% of industry revenues, will be the primary growth driver. This segment’s rise is fueled by increasing income levels and a consumer shift towards branded products, particularly in the HORECA (hotels, restaurants, and cafes) segment.
- Stable Credit Profiles Despite Higher Debt: Although higher working capital requirements and continued capital expenditure will increase debt levels, credit profiles are expected to remain stable due to strong balance sheets. The industry’s gearing ratio is projected to stay at 1.8 times by March 31, 2025, up from 1.7 times a year earlier, with debt protection metrics remaining comfortable.
- Profitability and Operational Efficiency: Steady milk procurement prices are expected to improve the profitability of dairies, with operating profitability anticipated to increase by approximately 40 basis points to 6% this fiscal year.
Expert Opinions:
Mohit Makhija, Senior Director at CRISIL Ratings, noted, “The dairy industry’s revenues are expected to rise on the back of healthy 9–11% volume growth, amidst modest 2-4% growth in realizations. The VAP segment will significantly drive this growth, supported by rising income levels and consumer transitions towards branded products.”
Rucha Narkar, Associate Director at CRISIL Ratings, added, “Revenue and profitability will improve, but debt levels will increase mainly due to higher skimmed milk powder (SMP) inventory during the flush season and ongoing investments in milk procurement, processing capacities, and distribution network expansion.”