Dairy industry revenue likely to witness 12-14% growth in FY23: Report

The strong revival of the hotels, restaurants and catering (HoReCa) segment and the increase in retail prices are likely to help the dairy industry achieve 12-14 per cent revenue growth this fiscal, according to a report.

Indian dairy companies are estimated to achieve revenue growth of 12-14 per cent in FY23 on a year-on-year basis, backed by a strong revival in demand, especially the HoReCa segment and an increase in retail prices, Icra said in a report on Thursday.

However, the operating profit margins are expected to contract by 120-160 bps on a year-on-year basis as the retail price hikes are expected to provide only partial support to the input cost pressures, it added.

Icra expects the industry to maintain a stable credit profile, supported by a favourable demand outlook and moderate debt levels.

Milk production yields in the first half (H1) of FY23 were hampered by the prevalence of Lumpy Skin Disease (LSD), notably among cows in the northern states.

Although a successful immunisation programme helped contain the disease, Icra expects a slight moderation in milk production growth to 4-5 per cent in the current fiscal.

“Raw milk procurement prices increased in FY22, led by healthy demand and constricted milk availability as a result of disruption in cattle insemination programmes earlier during the pandemic. Raw milk prices have continued to rise in the current fiscal too, owing to rising cattle feed and fodder prices for dairy farmers,” Icra Sector Head and Vice President Sheetal Sharad said.

While erratic monsoons in various parts of the country impacted fodder availability, rising prices of grains like maize, wheat and soybean led to soaring cattle feed concentrate prices, she noted.

“Apart from that, the prevalence of LSD briefly limited milk availability. Furthermore, companies faced rising logistics, processing and packaging expenses.

“Given the healthy demand expectations over the festive and wedding seasons, we anticipate raw milk prices to stay firm in H2 FY23 as opposed to a typical correction in the flush season. Retail prices for dairy products have thus gone up in the current fiscal to make up for higher costs,” she added.