India’s dairy sector is poised for a robust revenue growth of 11–13% in FY2025–26, buoyed by strong consumer demand and the rising dominance of value-added dairy products (VAPs), according to a recent analysis by ratings agency CRISIL.

With growing urbanisation, evolving dietary preferences, and a shift towards health-focused consumption, the value-added product segment, which includes cheese, yoghurt, paneer, ghee, and probiotic beverages, is expected to grow by 16–18% this fiscal year. This surge is gradually redefining the product portfolio of major dairy players, with VAPs projected to account for 45% of the total product mix, up from 40% just two years ago.

While liquid milk sales remain stable with a projected 10% growth, the expanding appetite for nutritious, premium dairy alternatives is pushing companies to invest aggressively. Capital expenditure (capex) is set to increase by 10%, reaching Rs 3,400 crore (USD 398 million), with more than 60% allocated to boosting VAP production capabilities.

“India’s dairy sector is entering a new growth phase, where scale, innovation, and premiumization are shaping the next frontier,” said an industry expert from Dairy Dimension. “A strong VAP pipeline and healthy milk supply dynamics are expected to sustain both top-line and margin expansion.”

CRISIL’s analysis of 34 dairy companies—collectively generating Rs 90,000 crore (USD 10.54 billion) in annual revenue—also points to a 20–30 basis point improvement in profitability, with operating margins expected to rise to around 5.3%. This is attributed to better realisations, a favourable monsoon forecast, and stable fodder prices, all of which contribute to a well-supplied raw milk market.

Additionally, advances in productivity through broader adoption of artificial insemination and herd improvement initiatives are helping limit milk procurement price inflation to just 2–3%, further aiding cost control.

Despite an uptick in debt resulting from capital expenditures, companies are expected to maintain stable credit profiles due to their strong balance sheets and healthy cash flows. However, sectoral growth will remain contingent on a normal monsoon and time-operationalisation of new capacities.

Related Story: India's dairies to milk 13-14% revenue growth in FY25 on strong demand - Dairy Dimension