The industry is projected to maintain a stable credit profile, supported by a favorable demand outlook and moderate debt levels
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 Hotel- Restaurants and Catering (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, said report.
The report also stated that the earnings from Value-Added Products (VADPs) will experience a healthy YoY growth of 18-20 per cent in FY22. Scorching summer, relatively high temperatures, and the waning impact of pandemic spurted the growth.
According to ICRA report, 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 FY22.
After analysing all the aspects behind the growth of the dairy industry, ICRA has estimated 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
Highly prevalent Lumpy Skin in cattle class animals 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.
