The demand for edible oil in the country is rising on the back of rise in per capita consumption, growing urbanisation and steadily rising affluence levels, Care Ratings said in a report.
The growth in production of domestic edible oil has not been able to keep pace with the growth of consumption, it said, adding that this gap is being met by the imports that account for almost 55-65 per cent of the total oil consumption during the past five years.
Demand for edible oil is mainly driven by increase in per capita consumption of the commodity, rising income levels and improvement of living standards, the report said.
Continuous increase in the gap between demand and supply has forced India to go for huge import from leading exporter countries of edible oil, it said.
The demand supply gap is becoming wider mainly due to limited availability of oil seeds, shifting of acreage to other crops and increase in demand of edible oil.
"However, the Indian edible oil market continues to be under-penetrated as the current per capita consumption level of India (at 14.4 kg per year for 2014-15) is much lower than global averages (24 kg per year). Furthermore, domestic consumption of edible oil is expected to increase with enhancement in income level and population," it said.
More than 14 million tonnes of edible oil worth Rs 64,396.49 crore was imported during OY (oil year) FY15 ending in October.
Edible oil Industry has witnessed financial stress due to droughts, rising production costs and cheaper imports thus forcing several small firms to shut shop, it pointed out.
The performance of the companies in edible oil sector for medium term period will depend upon the demand of CPO (crude palm oil) post recent increase in import duties on refined edible oils and movement of domestic edible oil prices.
Performance of Rupee against US Dollar, anticipated sales volumes and profitability margins from the specialty fats business with comprehensive product range including bakery shortenings, chocolate and confectionery fats, ice cream fats and a range of cooking oils will also define the performance of the companies, it said.
Care Ratings has estimated the near-term outlook for edible oil companies to be stable on steady edible oil domestic demand and improvement in operating margin due to increasing refining operation.
