A recent report by CRISIL Ratings has highlighted a robust outlook for the organized dairy industry in the fiscal year 2023–24, anticipating substantial revenue growth of 14–16%. This growth is attributed to the increasing demand for value-added products (VAP) and the steady consumption of liquid milk. The improved supply of raw milk is expected to result in fewer price hikes, leading to enhanced profitability for the sector.
The report suggests that the strong revenue growth in the VAP segment witnessed in recent years is likely to persist, with an estimated growth rate of 18–20% in the current fiscal year. This growth trajectory could result in the share of VAP in overall revenue rising to 40%, up from 35% recorded four fiscal years ago, according to Mohit Makhija, Senior Director at CRISIL Ratings.
Makhija further emphasised that demand from both retail and institutional segments remains robust, thus continuing to propel the growth of VAP. On the flip side, the report forecasts a growth of 8–10% in liquid milk revenue for the fiscal year, driven by steady demand.
Reflecting on the past fiscal year, the report notes that disruptions in raw milk supply led to multiple retail milk price hikes, resulting in a 19% increase in the topline but negatively impacting the profitability of the organized dairy sector.
However, the upcoming fiscal year paints a more positive picture, with healthier balance sheets leading to the prediction that the credit profiles of organized dairies will remain strong.
Overall, the anticipated revenue growth of 14–16% for the current fiscal year will be driven by substantial volume growth of 9–10% and higher realizations. The report highlights that milk price hikes are expected to be less intense this year, with an estimated increase of around Rs. 2 per litre, compared to a cumulative increase of Rs. 5-7 per litre in the previous fiscal. This moderation is attributed to improved raw milk supply due to better fodder availability, timely vaccination, and artificial insemination of cattle.
Furthermore, the report projects that the profitability of organized dairies is likely to improve by 20–50 basis points in the current fiscal year, reaching 5.5%. The overall credit risk profiles are expected to remain stable as capital expenditures will be funded by a prudent combination of debt and equity.
In conclusion, the organized dairy industry in India is poised for healthy growth in the fiscal year 2023–24, supported by factors such as increased demand for value-added products and stable consumption of liquid milk.