India’s organised dairy sector is expected to register robust revenue growth of 13–15 per cent in the current fiscal, up from an estimated 11 per cent in the previous year, driven by sustained consumer demand, higher sales volumes and phased price increases, according to CRISIL Ratings.
The ratings agency said volume growth of 8–10 per cent is likely to be supported by the essential nature of milk and traditional dairy products such as butter and ghee, alongside rising demand for value-added dairy offerings.
Milk prices are projected to rise by 4–5 per cent during the fiscal due to increasing production costs and slower growth in milk supply. Dairy companies are expected to gradually pass these higher costs on to consumers, particularly in value-added categories, leading to retail price increases of around 5–6 per cent across milk product segments.
According to Shounak Chakravarty, Director, CRISIL Ratings, weather-related challenges linked to El Niño conditions, including an intense summer and below-average monsoon, may affect cattle productivity. Rising fodder costs are also expected to limit raw milk production growth to around 4 per cent year-on-year, compared with a CAGR of nearly 5 per cent between fiscals 2020 and 2025.
CRISIL also highlighted strong growth prospects in value-added products such as protein-rich and probiotic offerings. While these categories currently contribute less than 5 per cent of the market, they are expected to grow at more than 20 per cent in the coming years.
The report further noted that increasing consumer preference for quality products is accelerating the shift toward branded dairy products, supporting the expansion of organised players.
Despite revenue growth, operating margins are expected to remain stable at approximately 4 per cent as companies use price hikes to offset increased procurement costs. Capital expenditure is also expected to remain healthy, supported by stronger cash flows and stable balance sheets.
CRISIL expects credit profiles of dairy companies to remain stable, while weather conditions and the execution of new capacities will continue to be key factors influencing sector performance.