Source: thehindubusinessline.com

India’s organised dairy sector will see a ‘Cream run’ through 2018 with special focus on value-added products. The sector will see capacity augmentation to around 1,050 lakh litres per day (LLPD) with an overall capex infusion of around ₹15,000 crore in next three years, ratings agency Crisil highlighted in its latest report on organised dairy players.

Increased disposable income and quality consciousness among the consumers along with greater preference for branded milk and milk products, would drive the growth for organised dairy players, who would see faster growth in next three years as against 22 per cent seen in last five years. Commenting on the report, Anuj Sethi, Director, Crisil Ratings, said, “Nearly a third of the overall capex is expected to be undertaken by the largest domestic dairy player, Gujarat Co-operative Milk Marketing Federation (which sells under the ‘Amul’ brand), through its member co-operatives.”

“These expansions will be strategically planned to ensure there is geographical diversification that strengthens milk procurement. The revenue share from the organised segment could rise to 25 per cent by 2018 from 19 per cent in 2015,” the report named ‘Cream Run’ stated.

Crisil rated 84 firms comprising 60 per cent of the organised dairy capacity in India. The organised segment rakes up revenues of ₹75,000 crore currently.

The sector is increasingly becoming attractive for private equity players, as it is ranked among the top 10 sectors monitored closely by PE players. From accounting for just 2 per cent of total PE investment a decade ago, the Indian dairy sector is now attracting over 6 per cent on a much larger base. Over ₹900 crore has been invested in the sector since 2010.

However, management of logistics costs and secured procurement would be crucial to profitability and cash flows in the business, it added.

According to NDDB and Crisil Research estimates, the country produces around 3,800 LLPD of milk, accounting for a fifth of the global output. About 40 per cent of this is retained by producers (farmers) for household consumption; another 41 per cent share is with the unorganised segment. Only 19 per cent is procured, processed and sold through by organised dairies currently.

Dairy Products
                                   Dairy Products

On the milk prices, Crisil maintained that increased availability would keep milk prices stable in the near term. But it would affect cash generation of the players primarily engaged into liquid milk.

The growth for organised dairy players is driven by value-added products, which grew 23 per cent annually compared with 15 per cent for liquid milk. In the branded segment, consumption of paneer, cheese, curd, butter, ice-cream and lassi has increased faster than milk.

The share of value-added products in fiscal 2015 is estimated at 43 per cent, up from 35 per cent in fiscal 2010.

Comments

comments