New Delhi, 2 June (IANS). Dairy companies in India, strong demand dynamics, value-edged products (VAPs) and high milk prices at retail level can register 11-13 percent revenue in this financial year due to high milk prices.
In the last financial year, dairy companies recorded 10 percent revenue growth. This information was given in a report on Monday.
According to Crisil Ratings report, due to better receipts, healthy milk supply and favorable changes towards VAP, profitability will also improve 20–30 basis points (BPS), which gives high margin.
Companies will increase capital expenditure (capex) by 10 percent in this financial year to take advantage of healthy growth speed.
A large part of this capital expenditure will be to increase capacity in VAP. This is a segment that is overtaking the traditional liquid milk category.
Despite high capital expenditure, the credit profile will remain stable due to improvement in cash flow and strong balance sheet.
“The VAP segment is expected to increase by 16–18 percent in this financial year, which is due to the changing choice of consumers, increasing nutritional awareness and priority for protein-rich diet in this financial year.”
He further said, “As a result, its stake in the product mix will increase from 40 percent to 45 percent. Conversely, liquid milk growth should be stable at 10 percent. Overall, better product mixture, healthy volume and rising retail prices will be the major drivers of development.”
Dairies will also help with an increase in adopting artificial insemination to promote favorable monsoon forecasting, stable fodder value and productivity, which will ensure stable availability of raw milk, which will limit a slight 2-3 percent increase in purchased prices in this financial year.
Improvement in receipts and slight increase in procurement values will increase profit, resulting in the operation margin of 20–30 BPS with 5.3 percent. This will support overall cash creation.
Prospects and healthy demand supply dynamics are already encouraging dairies to increase capital expenditure.
Rucha Narkar, Associate Director of Crisil Ratings, said, “Dairy companies are expected to increase by 10 percent to Rs 3,400 crore in this financial year. The VAP segment will be more than 60 percent of the total capital expenditure.”
-IANS
SKT/ABM
