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Credit Rating Agency ICRA in its latest report has said that Indian dairy industry is likely to achieve 12-14 per cent revenue growth in the current financial year (FY23) on the back of strong revival of the hotels, restaurants and catering (HoReCa) segment and the increase in retail prices. However, it said 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. 

Rating agency 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, it expects a slight moderation in milk production growth to 4-5 per cent in the current fiscal.

According to the report, 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. It said raw milk prices have continued to rise in the current fiscal too, owing to rising cattle feed and fodder prices for dairy farmers. 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. Apart from that, it said the prevalence of LSD briefly limited milk availability. Furthermore, companies faced rising logistics, processing and packaging expenses.