Strong demand for value added products and stable consumption of liquid milk will lead to a 14-16 per cent revenue growth for the organised dairy industry in 2023-24, a report said on Thursday.
With raw milk supply improving, there will be fewer price hikes and profitability will recover 20-50 basis points, Crisil Ratings said in the report.
“We believe the strong revenue growth in VAP (Value Added Products) seen over the past few years will continue.
This fiscal, the segment should grow 18-20 per cent and consequently, the share of VAP in overall revenue could rise to 40 per cent from 35 per cent four fiscals back,” Crisil Ratings Senior Director Mohit Makhija said.
He also said that given that demand from both retail and institutional segments remained strong, the share of VAP will continue to rise and on the other hand, liquid milk revenue will grow 8-10 per cent this fiscal backed by steady demand.
Further, the report said that in the last fiscal, disruptions in raw milk supply had led to multiple hikes in retail milk prices, pushed up the topline 19 per cent but impacted profitability of the organised dairy sector.
In this milieu, given healthy balance sheets, the credit profiles of organised dairies will remain strong, he said.
The overall revenue growth of 14-16 per cent this fiscal will be driven by healthy volume growth of 9-10 per cent and by higher realisations.
“Milk price hikes will be much less intense this fiscal at around Rs 2 per litre compared with a cumulative Rs 5-7 per litre last fiscal, primarily because of two reasons — improvement in raw milk supply on better availability of fodder, and timely vaccination and artificial insemination of cattle.
“Additionally, the full impact of previous price hikes will improve the profitability of organised dairies by 20-50 bps this fiscal to 5.
5 per cent,” Crisil Ratings Director Anand Kulkarni said.
Last fiscal, milk procurement prices had risen 14 per cent on account of several challenges on the supply side such as significant increase in fodder cost, impact on yields due to cattle disease and disruptions in artificial insemination schedules.
The credit risk profiles are expected to remain stable as capex will be funded by a prudent mix of debt and equity, it added.
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