India’s dairy sector is set to achieve robust revenue growth of 13–14% in the financial year 2024–25, driven by strong consumer demand and an improved supply of raw milk, according to a report by Crisil Ratings. The industry’s expansion is expected to be fuelled by the rising consumption of value-added products and increased sales in the HORECA (Hotels, Restaurants, and Cafes) segment.
Crisil Ratings highlighted that favourable monsoon conditions are expected to boost the supply of raw milk by 5% this fiscal year, which will further support the industry’s growth. The improved availability of cattle fodder and the normalization of artificial insemination and vaccination processes, which had previously faced disruptions, are key factors contributing to the increased milk supply.
Despite the modest growth of 2–4% in realization rates, the dairy sector is anticipated to see 9–11% growth in volumes, particularly in the value-added products segment, which accounts for 40% of industry revenues. This growth is attributed to rising income levels and a shift towards branded products among consumers.
Yet, the increased raw milk supply will require higher working capital for dairy companies, leading to a rise in debt levels. This, combined with ongoing capital expenditure by organized dairies over the next two fiscal years, is expected to push debt levels higher. Nonetheless, the sector’s credit profiles are expected to remain stable due to strong balance sheets.
Rucha Narkar, Associate Director at Crisil Ratings, noted that the healthy milk supply during the flush season would result in higher skimmed milk powder (SMP) inventory, which typically accounts for 75% of the working capital debt of dairies. Additionally, continued demand for milk will necessitate increased investments in new milk procurement, processing capacities, and the expansion of distribution networks.
Largely, the dairy sector is poised for a positive outlook this fiscal year, with improved profitability and stable operating margins.