New Delhi, November 05, 2022: With rising milk prices and boosting growth of hotels, restaurants and catering segment, the revenue of India’s dairy industry is expected to reach 12-14 per cent in this financial year, stated a report.
According to the report published by Investment Information and Credit Rating Agency of India Limited (ICRA), Indian dairy companies are estimated to attain a revenue growth of 12-14 per cent in FY23 on a year-on-year basis. The revenue growth will be led by the rejuvenation of the HoReCa segment and an increase in milk retail prices.
Despite showing progress in its revenues, the dairy sector of the country may suffer due to the expected shrinking of its operating profit margins by 120-160 bps on a year-on-year basis. This is mainly due to the rise in input cost pressure that will overpower the benefit of rising retail prices.
After analysing all the aspects behind the growth of the dairy industry, ICRA has predicted a stable credit profile for the industry. The credit profile will be supported by a favourable demand outlook and moderate debt levels.
Impact of Lumpy skin disease on milk production in FY 23
Highly prevalent Lumpy Skin in cattles is another factor that impacted the milk production in the current financial year. The disease was prevalent among cows in northern states.
The impact of the disease was brought down with the help of a successful immunisation programme. Even though Icra expects a slight impact in milk production growth to 4-5 per cent in FY23.
“Raw milk procurement prices increased in FY22, led by healthy demand and constricted milk availability as a result of disruption in cattle insemination programmes earlier during the pandemic. Raw milk prices have continued to rise in the current fiscal too, owing to rising cattle feed and fodder prices for dairy farmers,” Icra Sector Head and Vice President Sheetal Sharad said.
She also mentioned the rise in logistics, processing and packaging costs as other factors that will impact milk supply.
“Given the healthy demand expectations over the festive and wedding seasons, we anticipate raw milk prices to stay firm in H2 FY23 as opposed to a typical correction in the flush season. Retail prices for dairy products have thus gone up in the current fiscal to make up for higher costs,” she added.
The earnings from value-added products (VADPs) will experience a healthy YoY growth of 18-20 per cent in FY22, stated the report. Scorching summer, relatively high temperatures, and the waning impact of pandemic spurted the growth.
Revenue from the liquid milk segment to expand, high input cost still a challenge
The liquid milk segment will also grow in the current year. However, the industry may face the challenge of rising input costs. Revenues in the liquid milk segment are predicted to grow by 7-9 per cent in FY2.
Sheetal Sharad believes that increased input costs for dairy companies will pose a challenge to boost growth. That’s why consumers might face more retail price hikes in the coming time.
She also stated that the year may see a moderation in the credit metrics for dairy companies due to margin pressures.Along with this, regular raw milk supply with LSD under control will also help in moderation according to the reports published in livemint.com.
As most of the company will be focusing on VADP capacity expansion, ICRA has predicted a moderate growth in capex.
