The wheat milling industry logged a compound annual growth rate of 5-6 per cent in revenue in the last three years.
SMEs have a significant share of about 70 per cent in the wheat milling industry, given low entry barriers and relatively low capital-intensity. Stiff competition and limited ability to pass on the rise in wheat prices
has historically meant thin operating margins of 2-3 per cent for SME
Revenue growth is expected to moderate further in fiscal year 2020 as demand tapers. This is mainly because consumers in urban and semi-urban locations are shifting to packaged and branded flour because of the convenience it offers, along with easier availability and a rise in income levels in recent years.
Besides, the biscuit industry, a major consumer of wheat flour, is witnessing a moderation in demand. As a result, SME
millers who are contract manufacturers for large biscuit manufacturers are facing the heat. Given all this, no significant capacity addition is expected in the wheat milling industry in the near term.