Revenue of the poultry sector in India will grow by ~10 per cent this fiscal year on the back of sustained demand growth amid moderating realisations even as new capacities come on stream and drive-up volume. According to a report by CRISIL Ratings, the growth will be on a high base set by the ~25 per cent topline surge during the last fiscal. Further, besides revenue, operating profitability is also likely to bounce back 70 basis points (bps) during the fiscal as input feed costs decline on softer soy and maize prices. “This will help strengthen credit profiles despite additional debt set to be contracted for capacity increase over the medium term,” CRISIL Ratings said.
CRISIL Ratings did an analysis of 45 poultries, generating close to Rs 5,000 crore revenue last fiscal to gather the insights on the sector. “Consumption of broiler meat and eggs is seen rising to ~5.2 lakh tonne (up 11-13 per cent on-year) and 150 billion (up 6-8 per cent), respectively. This is led by improvement in rural demand, higher per-capita consumption of meat, and increasing preference for protein-rich diet. Increased volumes will support sectoral revenue growth despite dampening realisations,” said Himank Sharma, Director, CRISIL Ratings.
It said that broiler meat realisation is likely to drop 6-8 per cent on-year to Rs 114- 116 per kg this fiscal due to increased supplies with new capacities coming onstream. However, poultry feed costs, driven largely by maize and soy, may moderate from their highs in the last year, thereby propping up operating margins to over 5.5 per cent — 70 bps higher, on-year.
The expected increase in revenue and profitability, the report said, will allow companies to internally fund incremental working capital requirements. “Deleveraging is expected to continue in the poultry sector, supported by improving volumes and healthy profitability. The addition in debt will not have a bearing on financial risk profiles. Credit profiles are expected to strengthen, with total outside liabilities to tangible net worth ratio improving to around 1 time from almost 1.4 times before the pandemic, while debt protection metrics will also improve this fiscal,” said Jayashree Nandakumar, Director, CRISIL Ratings.
The report said that key monitorables will be sharp movements in feed prices, bird flu incidences, heat waves, and the extent of rural and semi-urban demand.