Strong demand for worth added merchandise and steady consumption of liquid milk will lead to a 14-16 per cent revenue development for the organised dairy industry in 2023-24, a report mentioned on Thursday.
With uncooked milk provide enhancing, there will probably be fewer worth hikes and profitability will recuperate 20-50 foundation factors, Crisil Ratings mentioned within the report.
“We consider the sturdy revenue development in VAP (Value Added Products) seen over the previous few years will proceed.
This fiscal, the section ought to develop 18-20 per cent and consequently, the share of VAP in total revenue might rise to 40 per cent from 35 per cent 4 fiscals again,” Crisil Ratings Senior Director Mohit Makhija mentioned.
He additionally mentioned that on condition that demand from each retail and institutional segments remained sturdy, the share of VAP will proceed to rise and on the opposite hand, liquid milk revenue will develop 8-10 per cent this fiscal backed by regular demand.
Further, the report mentioned that within the final fiscal, disruptions in uncooked milk provide had led to a number of hikes in retail milk costs, pushed up the topline 19 per cent however impacted profitability of the organised dairy sector.
In this milieu, given wholesome steadiness sheets, the credit score profiles of organised dairies will stay sturdy, he mentioned.
The total revenue development of 14-16 per cent this fiscal will probably be pushed by wholesome quantity development of 9-10 per cent and by larger realisations.
“Milk worth hikes will probably be a lot much less intense this fiscal at round Rs 2 per litre in contrast with a cumulative Rs 5-7 per litre final fiscal, primarily due to two causes — enchancment in uncooked milk provide on higher availability of fodder, and well timed vaccination and synthetic insemination of cattle.
“Additionally, the complete influence of earlier worth hikes will enhance the profitability of organised dairies by 20-50 bps this fiscal to 5.
5 per cent,” Crisil Ratings Director Anand Kulkarni mentioned.
Last fiscal, milk procurement costs had risen 14 per cent on account of a number of challenges on the availability facet comparable to vital improve in fodder price, influence on yields due to cattle illness and disruptions in synthetic insemination schedules.
The credit score threat profiles are anticipated to stay steady as capex will probably be funded by a prudent mixture of debt and fairness, it added.
