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New Indian Express
4 days ago
- Business
- New Indian Express
Indian dairy firms to see 11–13% revenue growth this fiscal: CRISIL
CHENNAI: India's dairy industry is poised for robust growth in FY 2025, driven by sustained demand, an increasing share of value-added products (VAP), and favourable input conditions. According to CRISIL Ratings, dairy companies are expected to witness revenue growth of 11–13% this fiscal, outpacing the ~10% growth recorded in the previous year. This expansion is supported by improved product mix, rising consumer demand for protein-rich and nutritious products, and higher retail prices. Key Drivers: Strong consumption patterns, increasing retail milk prices, and accelerated growth in the VAP segment, including cheese, yogurt, paneer, and flavored milk are considered to be the key factors that will drive the growth for the industry. Continued expansion in organised dairy retail and cold-chain infrastructure could also push the growth for the key players. Profitability Trends Operating margin for the companies expected to improve by 20–30 basis points (bps), reaching approximately 5.3%. This is mainly supported by improved product realisations, limited increase in procurement prices (2–3%), thanks to healthy milk supply, and rising share of high-margin VAP in the product portfolio. Stable fodder prices and productivity gains from widespread adoption of artificial insemination will also boost the profitability. Value-Added Products (VAP) Outlook Crisil expect the growth in the value added product segment at 16–18% in FY 2025. The share in product mix is expected to rise to about 45%, up from 40% two years ago. "The VAP segment is expected to clock a strong 16–18% growth this fiscal and an improved product mix, healthy volumes and rising retail prices will be the key growth drivers in this segment, ' says Shounak Chakravarty, Director, Crisil Ratings The other important growth drivers for the Indian diary sector include shifting consumer preferences, rising nutritional awareness, and increasing demand for protein-rich diets. Capital Expenditure (Capex) According to Rucha Narkar, Associate Director, Crisil Ratings, the sector's capex growth is projected to increase by about 10%, reaching approximately Rs 3,400 crore this fiscal. Over 60% of this will be allocated towards expanding VAP capacity and the remainder for enhancing liquid milk processing and supply-chain infrastructure. Despite the capex increase, credit profiles remain stable due to strong cash flows and balance sheets. ' The VAP segment will account for more than 60% of the overall capex — a trend seen over the past three fiscals,' says Narkar. Credit Profile & Financial Metrics Interest coverage ratio in the dairy sector is expected to remain strong at more than 8 times, estimates Crisil. While, the net cash accruals to repayment obligation is estimated at about 2.6 times (vs. 2.8 times last fiscal). These figures reflect a healthy balance sheet condition, with sufficient headroom to absorb higher capex without straining liquidity, expects Crisil. Risks and Watch Factors However the industry is not free from risk. A normal and timely monsoon remains critical to maintain fodder availability and milk productivity, and timely commissioning of planned expansions is essential to meet rising demand and sustain profitability margins, warns Crisil.
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Business Standard
5 days ago
- Business
- Business Standard
Dairy companies likely to record 11-13% revenue growth in FY26: Crisil
Dairy companies are likely to witness 11-13 per cent revenue growth this financial year on strong demand, increasing share of value-added products (VAP) and higher milk prices, a report said on Monday. The profitability will improve by 20-30 basis points (bps), aided by better realisations, healthy milk supply keeping procurement prices in check and a favourable shift towards VAP, which fetches higher margins, Crisil Ratings said in a report. The rating agency further stated that to capitalise on the healthy growth momentum, companies will ramp up capital expenditure (capex) by 10 per cent this fiscal. A sizable portion of this capex will be to enhance capacities for VAP, a segment that continues to outpace the traditional liquid milk category, it added. Despite the higher capex, credit profiles of dairy companies are expected to remain stable because of improving cash flows and strong balance sheets, the report said. "The VAP segment is expected to clock a strong 16-18 per cent growth this fiscal, driven by changing consumer tastes, rising nutritional awareness and preference for protein-rich diets. Consequently, its share in the product mix will increase to 45 per cent from 40 per cent a couple of years back. In contrast, growth for liquid milk should be stable at 10 per cent. "Overall, improved product mix, healthy volumes and rising retail prices are expected to help dairy companies to see a revenue growth of 11-13 per cent in FY26," Crisil Ratings Director Shounak Chakravarty said. A favourable monsoon forecast is also expected to support the dairies, while stable fodder prices and increased adoption of artificial insemination are likely to boost productivity, which will ensure a steady availability of raw milk, therefore, limiting the increase in procurement prices to a modest 2-3 per cent this fiscal, said the report. According to Crisil Ratings, profitability will benefit from improving realisations and a modest increase in procurement prices, resulting in a 20-30 bps improvement in operating margin to 5.3 per cent, supporting the overall cash generation. "Capital expenditure of dairy companies is expected to rise 10 per cent this fiscal to Rs 3,400 crore. The VAP segment will account for more than 60 per cent of the overall capex - a trend seen over the past three fiscals - given its higher growth potential. The balance capex will be for augmenting liquid milk processing capacities and shoring up supply-chain infrastructure," Crisil Ratings Associate Director Rucha Narkar said. Despite high debt levels owing to the capex, credit profiles will remain stable, supported by strong balance sheets and healthy cash accrual, she added. Debt protection metrics are also expected to remain comfortable this fiscal, and the capital structure will remain steady, it stated. Crisil Ratings added that a normal monsoon and timely ramp-up of newly commissioned capacities need to be watched. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Time of India
5 days ago
- Business
- Time of India
Dairy firms in India to see 11-13 pc higher revenue growth this fiscal
New Delhi: Dairy companies in India will see revenue grow 11-13 per cent this fiscal, compared with 10 per cent last fiscal, on strong demand dynamics, increasing share of value-added products (VAP) and higher milk prices at the retail level, a report showed on Monday. Profitability, too, will improve 20-30 basis points (bps), aided by better realisations, healthy milk supply keeping procurement prices in check and a favourable shift towards VAP, which fetch higher margins, according to the Crisil Ratings report. To capitalise on the healthy growth momentum, companies will ramp up capital expenditure (capex) by 10 per cent this fiscal. A sizeable portion of this capex will be to enhance capacities for VAP, a segment that continues to outpace the traditional liquid milk category. Despite higher capex, credit profiles will remain stable because of improving cash flows and strong balance sheets. "The VAP segment is expected to clock a strong 16-18 per cent growth this fiscal, driven by changing consumer tastes, rising nutritional awareness and preference for protein-rich diets," said Shounak Chakravarty, Director, Crisil Ratings. Consequently, its share in the product mix will increase to 45 per cent from 40 per cent a couple of years back. In contrast, growth for liquid milk should be stable at 10 per cent. Overall, improved product mix, healthy volumes and rising retail prices will be the key growth drivers," he mentioned. What will also support dairies is a favourable monsoon forecast, stable fodder prices and increased adoption of artificial insemination to boost productivity, which will ensure steady availability of raw milk, thereby limiting the increase in procurement prices to a modest 2-3 per cent this fiscal. Profitability will benefit from improving realisations and a modest increase in procurement prices resulting in a 20-30 bps improvement in operating margin to 5.3 per cent, supporting overall cash generation. The prospects and healthy demand supply dynamics are already encouraging dairies to ramp up capex. "Capital expenditure of dairy companies is expected to rise 10 per cent this fiscal to Rs 3,400 crore. The VAP segment will account for more than 60 per cent of the overall capex - a trend seen over the past three fiscals - given its higher growth potential," said Rucha Narkar, Associate Director, Crisil Ratings.
Time of India
5 days ago
- Business
- Time of India
Dairy companies likely to record 11-13% revenue growth in FY26: Crisil Ratings
Dairy companies are likely to witness 11-13 per cent revenue growth this financial year on strong demand, increasing share of value-added products (VAP) and higher milk prices, a report said on Monday. The profitability will improve by 20-30 basis points (bps), aided by better realisations, healthy milk supply keeping procurement prices in check and a favourable shift towards VAP, which fetches higher margins, Crisil Ratings said in a report. The rating agency further stated that to capitalise on the healthy growth momentum, companies will ramp up capital expenditure (capex) by 10 per cent this fiscal. A sizable portion of this capex will be to enhance capacities for VAP, a segment that continues to outpace the traditional liquid milk category, it added. Despite the higher capex, credit profiles of dairy companies are expected to remain stable because of improving cash flows and strong balance sheets, the report said. Live Events "The VAP segment is expected to clock a strong 16-18 per cent growth this fiscal, driven by changing consumer tastes, rising nutritional awareness and preference for protein-rich diets. Consequently, its share in the product mix will increase to 45 per cent from 40 per cent a couple of years back. In contrast, growth for liquid milk should be stable at 10 per cent. "Overall, improved product mix, healthy volumes and rising retail prices are expected to help dairy companies to see a revenue growth of 11-13 per cent in FY26," Crisil Ratings Director Shounak Chakravarty said. A favourable monsoon forecast is also expected to support the dairies, while stable fodder prices and increased adoption of artificial insemination are likely to boost productivity, which will ensure a steady availability of raw milk, therefore, limiting the increase in procurement prices to a modest 2-3 per cent this fiscal, said the report. According to Crisil Ratings, profitability will benefit from improving realisations and a modest increase in procurement prices, resulting in a 20-30 bps improvement in operating margin to 5.3 per cent, supporting the overall cash generation. "Capital expenditure of dairy companies is expected to rise 10 per cent this fiscal to Rs 3,400 crore. The VAP segment will account for more than 60 per cent of the overall capex - a trend seen over the past three fiscals - given its higher growth potential. The balance capex will be for augmenting liquid milk processing capacities and shoring up supply-chain infrastructure," Crisil Ratings Associate Director Rucha Narkar said. Despite high debt levels owing to the capex, credit profiles will remain stable, supported by strong balance sheets and healthy cash accrual, she added. Debt protection metrics are also expected to remain comfortable this fiscal, and the capital structure will remain steady, it stated. Crisil Ratings added that a normal monsoon and timely ramp-up of newly commissioned capacities need to be watched.
