February 25, 2025

 

India's poultry sector to see 50 points drop in operating profitability in next fiscal year

 

 

The Indian poultry industry is set to see a decline of about 50 basis points in operating profitability in the next fiscal year, driven by a rise in feed costs, even as strong demand fuels revenue growth of 8-10%, as per a Crisil Rating agency report released on February 20.

 

Despite the pressure on margins, the report states that poultry companies' credit profiles are expected to remain stable, supported by modest capital expenditures, limited debt addition, and steady cash flows.

 

An analysis of 30 poultry companies rated by Crisil Ratings, with a collective revenue of around ₹10,000 crore (US$1.15 billion) in the last fiscal year, suggests that profitability gains seen in the past two years due to softening feed prices will narrow as the cost of corn and soybean rises.

 

"The price of soya, which makes up about 30% of the total feed cost, declined in the last fiscal and the current one due to a bumper crop," said Jayashree Nandakumar, director at Crisil Ratings. "However, with soya acreage expected to shrink, prices are likely to rise in the next fiscal."

 

Nandakumar also highlighted that corn, which constitutes around 60% of overall feed costs, is set to become more expensive due to increasing demand for ethanol production.

 

Over the past two years, corn prices in India have experienced a significant upward trend. In fiscal year 2023, the procurement price of corn was ₹1,962 (US$22.56) per quintal, which increased to ₹2,090 (US$24.04) in fiscal year 2024 and to ₹2,225 (US$25.59) in fiscal year 2025, as per Statista.

 

Even with this cost pressure, revenue growth will continue, supported by a steady rise in domestic consumption of broiler chicken and eggs, as the Crisil Ratings report states.

 

Per capita poultry consumption in India remains well below the global average, leaving room for expansion, driven by changing dietary habits, higher disposable incomes, and increasing urbanization.

 

Rishi Hari, associate director at Crisil Ratings, stated that with strong demand and rising feed costs, overall realisation for the poultry industry is expected to grow by 4-5% in the next fiscal.

 

"The average price of broiler chicken per kilogramme would rise by 3-5%, while the average price of a dozen eggs would see a 2-4% increase year-on-year," said Hari.

 

The rise in broiler chicken prices has led to an increase in the cost of a non-vegetarian thali.

 

To manage feed costs, companies are likely to maintain larger feed inventories during the harvest season, leading to a slight rise in gross current assets to 60-65 days.

 

Meanwhile, post-pandemic capacity expansions have ensured sufficient buffer, reducing the need for major debt-funded investments. As a result, interest coverage ratios are expected to remain comfortable at 3.1-3.5 times, with gearing steady at around one time.

 

Despite a largely stable outlook, volatility in feed costs, fluctuations in poultry prices, and the risk of bird flu outbreaks remain key factors for the industry to watch in the coming months.

 

However, experts in the poultry sector believe that expanding poultry farms, modernising facilities, and adopting efficient production practices will drive poultry meat production growth.

 

"The sector's expansion will depend on demand patterns, technology adoption, government policies, and feed availability," said Ricky Thaper, joint secretary of the Poultry Federation of India. "There is also a need for investments in cold chain infrastructure and high-capacity processing plants of international standards."

 

"A shift to ethanol production from maize could impact domestic supply, affecting both the poultry and biofuel sectors," Thaper added. "To meet the rising demand from poultry, starch, and biofuel industries, India must consider allowing GM maize imports and boosting domestic production."

- Mint