Dairy Industry Set for Healthy Revenue Surge Amid Strong Demand

Dairy companies are poised for 11-13% revenue growth this financial year due to strong demand, a shift to value-added products, and higher milk prices. Despite rising expenditures, credit profiles remain stable, supported by improved cash flows and balance sheets. VAP drives growth with increased consumer interest.

Dairy companies are on course for a substantial 11-13% revenue growth this financial year, driven by robust demand, an increasing shift towards value-added products (VAP), and rising milk prices, according to a report by Crisil Ratings.

The report emphasizes an improvement in profitability by 20 to 30 basis points due to favorable price realizations and a stable milk supply, which keeps procurement costs contained. A significant portion of the capital expenditure, set to increase by 10%, will focus on expanding VAP capacities, outstripping traditional liquid milk's growth.

Despite the capital intensity, the sector's credit profiles are projected to remain stable thanks to healthy cash flows, as VAP steers double-digit growth amid changing consumer preferences towards protein-rich diets. Favorable monsoon predictions and stable fodder prices further bolster this positive outlook.

(With inputs from agencies.)