Indian dairy companies are set to see higher revenue growth of 11-13% this fiscal year, up from 10% last year. This growth is driven by strong demand for dairy products, increasing retail milk prices, and a growing focus on value-added products like cheese, curd, butter, and yogurt.
According to Crisil Ratings, profitability for dairy firms will also improve by 20-30 basis points. This improvement comes from better pricing, steady milk supply, and the shift towards higher-margin value-added products. Operating margins are expected to rise to 5.3% this fiscal, boosting cash flow and overall financial health.
Demand For VAP Grows
Value-added products (VAP) are becoming more popular among Indian consumers, with the segment expected to grow by 16-18% this year. Changing food preferences, increased awareness of nutrition, and a preference for protein-rich diets are key reasons behind this surge. As a result, VAP’s share in the product mix will rise to 45%, up from 40% a few years ago.
While value-added products continue to grow fast, the traditional liquid milk category will see a steady 10% growth. The improved balance between liquid milk and VAP will help dairy firms maintain a healthier mix of offerings and better profitability.
Milk Supply Remains Stable
Dairy firms will benefit from a good monsoon forecast, stable fodder prices, and better productivity due to the increasing use of artificial insemination in cattle. These factors will ensure a steady milk supply and keep procurement prices under control. The expected rise in procurement costs is just 2-3%, which is manageable.
To make the most of the growing demand, dairy companies plan to increase capital expenditure by 10% this year, reaching Rs 3,400 crore. Over 60% of this spending will go toward expanding VAP production capacity. This focus reflects the strong market potential in this segment, which continues to outpace liquid milk in growth and returns.
Despite higher investment, the credit profile of dairy firms will stay stable due to better earnings and strong financial positions. The combination of healthy demand, rising profitability, and controlled costs makes this a promising year for India’s dairy sector.
