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Crisil Ratings in its latest report has said that India's organised dairy sector is likely to achieve 11-12 per cent revenue growth this financial year (FY23), the second straight year of double-digit growth, mainly driven by healthy demand for value-added products (VAP). It said revenue growth of the organized dairy sector this financial year will be a notch below the last fiscal's 13 per cent growth.

According to the report, this revenue growth will be driven by a healthy demand for VAP (28 per cent of overall sales), even as sales of liquid milk stays steady and the full-year benefit of retail price hikes implemented last fiscal is realised. Within VAP, strong recovery is expected in the demand for ice cream, curd and flavoured milk, the report stated. However, it said operating profitability would moderate to 5 per cent this fiscal, because of a rise in procurement prices as well as transportation and packaging costs. It also said the improved operating performance, along with adequately managed balance sheets and better control over working capital will support a revival in the capex plans of dairies and yet keep their credit outlooks 'stable'.

The report expects demand for ice cream, curd and flavoured milk items to peak this summer due to inordinately hot temperatures. The last two summers were affected by COVID-19. That, along with stable demand growth for household consumption-driven products such as ghee and paneer, strong recovery in the HoReCa (hotels, restaurants and cafe) segment, and price hikes of last fiscal will drive 13-14 per cent revenue growth in VAP this fiscal.