According to a survey, the dairy industry is predicted to rise by 9-11 percent in 2021-22, owing to increased per capita consumption of milk and milk products, as well as changing dietary requirements due to urbanisation. In a report, Icra predicted that industry-wide demand will expand by 9-11 percent in the financial year 2021-22, while maintaining a long-term stable forecast for the dairy business.
Domestic milk output is expected to rise by 5% to 6% in the fiscal year 2021-22, thanks to regular rainy weather and the start of the flush season early in some areas.
Sheetal Sharad, Icra Vice President and Sector Head, stated, “Demand recovery
was stunted by the resurgence in Covid-19 cases in the first quarter FY22, and
the impact was severe in institutional segments. However, there has been a
healthy revival in demand in recent months with a sharp fall in fresh Covid cases
and resumption in business activities. The organised dairy segment, which accounts
for 26-30 percent of industry (by value) has seen faster growth compared to the
unorganised segment and we expect the trend to continue.
The milk sector, which accounts for more than half of the dairy industry, is
expected to stay flat, while the bulk of value-added dairy product categories are
expected to rise by 13-15 percent. However, based on consumers& aversion to
cold dairy products following the pandemic, demand recovery for a few VADP
categories such as frozen yoghurt and ice cream may be gradual.
According to the report, “As procurement remained strong in H1 FY22, most
industry players maintained high SMP inventory levels. Additional working capital
debt is projected as a result of this, as well as the soft SMP prices, while
inventory levels are expected to drop from FY23 onwards as demand-supply
Because of the higher margins, the rating agency anticipates private players to
continue to invest in the VADPs category.
The government's continuous backing and low cost of capital will keep the
business afloat, allowing it to expand its processing capacities.
Given the slow pace of recovery, pure-play ice-cream manufacturers' financial
risk profiles are projected to be under pressure in the short future.”
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