Dairy sector to grow 15%

India’s organised dairy sector is expected to clock 13–15% revenue growth in FY27, supported by sustained demand, steady volume expansion and staggered price increases, according to a report released on Monday.

Crisil Ratings said revenue growth is likely to accelerate by 200–400 basis points this fiscal. Volume growth is expected at 8–10%, driven by the essential nature of milk and traditional dairy products such as butter and ghee. Rising demand for value-added products will also support the sector.

However, higher raw milk procurement costs are likely to push up retail prices. El Niño conditions, a harsh summer and the risk of a below-average monsoon may affect cattle yields this year. Raw milk production growth is expected to slow to 4%, compared with a compound annual growth rate of 5% between FY20 and FY25.

As a result, milk prices are expected to rise by 4–5%, while average retail prices across milk product segments may increase 5–6% this fiscal. Companies are expected to pass on higher costs to consumers in stages, with sharper increases likely in value-added categories. 

Despite price hikes, demand is expected to remain strong due to growing health awareness and rising preference for protein-rich and probiotic dairy products. 

These value-added products currently account for less than 5% of the market, but are expected to grow at over 20% going forward. The shift from unbranded to branded products is also expected to aid organised players. 

Operating margins, however, are likely to remain range-bound at around 4%, similar to last fiscal.  Credit profiles are expected to stay stable, supported by healthy cash generation, strong balance sheets and steady working capital cycles. Debt-to-Ebitda is projected to improve to 2.3 times from 2.5 times, while interest coverage may remain strong at over 6 times.

Looking ahead, weather-related disruptions to milk supply, rising fodder costs and the pace of capacity expansion will remain key monitorables.  However, robust consumer demand, premium product expansion and stronger branded penetration are expected to keep the organised dairy sector resilient, supporting steady growth and stable credit profiles in FY27.