The Indian fast-moving consumer goods (FMCG) sector is expected to have a dull quarter, with some companies performing better than others. Marico Ltd reported a high single-digit revenue growth in the quarter, driven by steady growth in key segments and pricing tweaks in its domestic business. On the other hand, Dabur India Ltd’s update was disappointing, with growth expected to slow down due to delayed and truncated winters and tepid urban demand.
Godrej Consumer Products Ltd (GCPL) expected high single-digit sales growth in rupee terms, with a mid-single-digit volume growth. Hindustan Unilever Ltd (HUL) volumes are expected to be flat in the quarter, and the company’s revenue growth is likely to be 2% year-on-year.
Nestle India Ltd is expected to perform better, with consolidated revenue growth of 5% year-on-year and domestic sales rising 5-6%. However, gross margins are expected to be under pressure due to input cost inflation and lacklustre revenue growth.
The sector’s overall performance is expected to be impacted by gloomy demand, with urban demand remaining affected by low wage growth and high inflation. Nomura Global Markets Research expects overall consumer demand/volumes in the quarter to remain unchanged from the previous quarter.
Investors will be closely watching management commentary on rural and urban demand trends, but a significant recovery in urban demand is not expected immediately. Until volumes improve and inflation softens, optimism may need to be tempered. The Nifty FMCG index has underperformed the benchmark Nifty 50 over the past six months, falling 16% compared to 11%.