India’s Dairy Industry to Grow by 13-14% in 2024-25, Says Crisil Ratings
New Delhi, India – India’s dairy industry is expected to see a healthy revenue growth of 13-14% in the financial year 2024-25, according to Crisil Ratings. This growth is driven by strong consumer demand and an improved supply of raw milk.
Key Drivers of Growth
The demand for dairy products will be supported by rising consumption of value-added products and a good monsoon, which will improve the supply of raw milk. Mohit Makhija, Senior Director at Crisil Ratings, stated that the industry’s revenues are expected to rise due to a 9-11% growth in volumes.
The value-added products segment, which contributes 40% to the industry’s revenues, will be a primary driver of this growth. Rising income levels and a shift towards branded products are fueling this demand. Additionally, increased sales of liquid milk in hotels, restaurants, and cafes (HORECA) will also support revenue growth.
Improved Milk Supply
The supply of raw milk is expected to increase by 5% this fiscal year, thanks to better cattle fodder availability due to a favorable monsoon. Other factors contributing to the improved supply include the normalization of artificial insemination and vaccination processes, genetic improvements in indigenous breeds, and increased fertility rates of higher yield breeds.
Financial Implications
While the dairy industry’s revenue and profitability are expected to improve, debt levels are also anticipated to rise. This is due to higher working capital requirements for increased milk supply and continued capital expenditure by organized dairies. Rucha Narkar, Associate Director at Crisil Ratings, mentioned that the healthy milk supply during the flush season will result in higher skimmed milk powder (SMP) inventory, which accounts for 75% of the working capital debt of dairies.
Despite the increase in debt, the industry’s credit profiles are expected to remain stable, supported by strong balance sheets.
Doubts Revealed
Dairy Industry -: The dairy industry involves the production, processing, and distribution of milk and milk products like cheese, butter, and yogurt.
13-14% -: This percentage shows how much the dairy industry is expected to grow. If it grows by 13-14%, it means it will become bigger by that amount.
2024-25 -: This refers to the financial year starting in 2024 and ending in 2025. Companies and governments often plan their budgets and growth for these periods.
Crisil Ratings -: Crisil Ratings is a company that evaluates the financial health and creditworthiness of other companies and industries.
Consumer Demand -: This means how much people want to buy milk and milk products. Higher demand means more people are buying these products.
Raw Milk Supply -: This is the amount of fresh milk available from cows, buffaloes, and other animals before it is processed into other products.
Value-added Products -: These are products made from milk that have extra value, like cheese, yogurt, and flavored milk.
Liquid Milk Sales -: This refers to the sale of milk in its liquid form, as opposed to being made into other products like cheese or butter.
HORECA Segment -: HORECA stands for Hotels, Restaurants, and Catering. This segment includes businesses that buy large amounts of food and drink to serve to their customers.
Debt Levels -: This refers to the amount of money that companies in the dairy industry owe to banks or other lenders.
Working Capital Needs -: This is the money that companies need to run their day-to-day operations, like buying milk and paying workers.
Capital Expenditure -: This is the money spent by companies to buy or upgrade physical assets like machinery, buildings, or equipment.
Credit Profiles -: This is a measure of how likely companies are to repay their debts. A stable credit profile means they are expected to pay back what they owe on time.