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Informist, Monday, Jul 29, 2024

 

MUMBAI – The revenue of domestic refiners of edible palm oil is expected to grow 10% in 2024-25 (Apr-Mar) because of steady demand and higher realisations, CRISIL Ratings said in a report. "The operating profitability is seen rising 40-50 basis points to 3.5% due to favourable prices and continuation of duty-free imports," it said.

 

The rating firm said healthy balance sheets and the absence of major debt-funded capital expenditure, over the medium term, will keep the credit risk profiles of palm oil refiners stable. This was reflected in the rating agency's study of nine companies that accounted for a third of industry revenue of 750 bln rupees.

 

"In the latest Budget, the government’s endeavour to strengthen the domestic production of oilseeds to support domestic availability was amply clear, but the outcome could be a little long-drawn. In the meantime, global CPO (crude palm oil) output is expected to remain stagnant at 78-79 mln tn, leading to a price rise of 7-8% this fiscal. Along with steady volume increase, this will lead to Indian edible palm oil industry revenues rising 10% this fiscal," Rahul Guha, director, CRISIL Ratings, said.

 

The country has enough refining capacity but does not produce much crude palm oil to feed the refineries and is dependent on the world’s largest producers, Malaysia and Indonesia, for over 90% of its requirement of crude palm oil. Over the years, the global palm acreage has stagnated owing to sustainability and environmental concerns, ultimately leading to price rises, the report said.

 

Currently, palm oil accounts for 38-40% of total edible oil consumption in India. Palm oil is used largely in the food processing and hotels, restaurants and catering segments, which account for 45-50% of overall consumption. The rest comes from household and industrial segments.

 

Rising urbanisation and increased consumption of processed and outside food will keep palm oil demand firm, the rating agency said. Hence, the industry is set to witness volume growth of 3-4% this fiscal to 9.3 mln tn, it said. 

 

CRISIL noted that the impact of geopolitical challenges and international edible oil trade dynamics will also bear watching.  End

 

Reported by Sandeep Sinha

Edited by Rajeev Pai

 

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