The Indian poultry industry is forecasted to experience a slight dip in operating profitability by approximately 50 basis points in the upcoming fiscal year, primarily due to escalating feed costs. However, strong demand is expected to drive revenue growth by 8-10%, according to a recent report by Crisil Ratings.
Despite the pressure on margins, Crisil’s report suggests that poultry companies’ credit profiles will remain stable, backed by modest capital expenditures, limited debt expansion, and steady cash flows.
An analysis of 30 poultry companies rated by Crisil, with a combined revenue of around INR 10,000 crore in the past fiscal year, indicates that the profitability gains seen in the last two years, driven by lower feed prices, will be constrained as the cost of maize and soya rises.
Feed Prices and Cost Pressures
“The price of soya, which makes up around 30% of the total feed cost, fell in the last fiscal year due to a bumper crop. However, soya acreage is expected to decrease, leading to higher prices in the next fiscal,” said Jayashree Nandakumar, director at Crisil Ratings.
Additionally, maize, which constitutes about 60% of feed costs, is expected to become more expensive due to rising demand for ethanol production.
Maize prices in India have been steadily rising over the past two years. In fiscal year 2023, the procurement price for maize was INR 1,962 per quintal, which rose to INR 2,090 in fiscal year 2024 and is set to reach INR 2,225 in fiscal year 2025, according to Statista.
Revenue Growth Amidst Rising Costs
Despite the cost pressures, the poultry sector is expected to continue its revenue growth, supported by a steady increase in domestic consumption of broiler chicken and eggs. The Crisil Ratings report highlights that per capita poultry consumption in India remains significantly below the global average, offering room for expansion as changing dietary habits, rising disposable incomes, and urbanization drive demand.
Rishi Hari, associate director at Crisil Ratings, noted that despite rising feed costs, the overall revenue realization for the poultry industry is anticipated to increase by 4-5% in the next fiscal year. “The average price of broiler chicken per kilogram is expected to rise by 3-5%, while the average price of a dozen eggs will see a 2-4% increase year-on-year,” said Hari.
The price increase in broiler chicken has already led to higher costs for non-vegetarian meals.
Managing Feed Costs and Preparing for the Future
To address the rising feed costs, companies are likely to maintain larger feed inventories during the harvest season, slightly increasing their gross current assets to 60-65 days. Moreover, post-pandemic capacity expansions have ensured sufficient buffer capacity, minimizing the need for major debt-funded investments. This is expected to keep interest coverage ratios stable at 3.1-3.5 times, with gearing remaining steady around one time.
While the outlook remains largely stable, the industry must remain vigilant regarding feed cost volatility, fluctuations in poultry prices, and potential risks from bird flu outbreaks.
Industry experts believe that expanding poultry farms, modernizing facilities, and adopting efficient production practices will drive poultry meat production growth. “The sector’s expansion will depend on demand trends, technological advancements, government policies, and feed availability. There is also a pressing need for investments in cold chain infrastructure and high-capacity processing plants,” said Ricky Thaper, joint secretary of the Poultry Federation of India.
He also noted that the shift towards ethanol production from maize could impact domestic supply, affecting both the poultry and biofuel industries. He stressed the importance of considering GM maize imports and boosting domestic production to meet rising poultry demand while also catering to the starch and biofuel industries.
Source: Mint
