Indian FMCG Companies Predict Stronger Second Half Driven by Improved Demand and Tax Benefits

Indian Fast-Moving Consumer Goods (FMCG) companies, having reported their second-quarter results, anticipate a significantly stronger performance in the latter half of the current financial year. This optimism stems from expected improvements in demand conditions. The disruption caused by Goods and Services Tax (GST) implementation in the September quarter is anticipated to subside, paving the way for better sales. Furthermore, GST-related price cuts and reductions in income tax are projected to stimulate volume growth.

Aggregate financial data from eight major FMCG firms shows modest year-on-year growth in the second quarter, with revenue up by 1.7% and profit by 1.1%. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) growth remained flat, and EBITDA margins were stable at 24% compared to 24.5% in the previous year. Companies like Hindustan Unilever, Nestle India, Godrej Consumer Products, Dabur India, ITC, Colgate-Palmolive, Varun Beverages, and Gillette India have declared their results, while others like Britannia and Tata Consumer Products are yet to announce theirs.

Executives express confidence. Priya Nair, CEO & MD of Hindustan Unilever, expects normal trading conditions by November and a gradual market recovery. Sudhir Sitapati, MD & CEO of Godrej Consumer Products, foresees sequential performance strengthening through FY26 with high single-digit volume growth. ITC expects a stronger second half due to favourable macro-economic conditions and GST cuts. Nestle India plans to accelerate investments in brands and manufacturing capacity. However, some beverage companies like Dabur and Varun Beverages noted that extended rainfall in Q2 impacted demand. Companies are also making strategic moves: Varun Beverages is expanding into Africa with Carlsberg, Dabur is launching Dabur Ventures for digital-first investments, and Godrej Consumer Products is acquiring the male grooming brand Muuchstac.

Impact: This news suggests a positive turnaround for the Indian Fast-Moving Consumer Goods sector, which is a significant contributor to the economy. Improved demand and company performance can lead to increased investor confidence, potentially boosting stock prices of affected companies and the broader market. The sector's growth is often seen as a proxy for rural and urban consumption health. Impact Rating: 7/10

Heading: Difficult Terms GST: Goods and Services Tax, a unified indirect tax system implemented in India. Ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's operational profitability. UVG: Underlying Volume Growth, which measures the increase in the quantity of goods sold, excluding factors like acquisitions or divestitures. MoA: Memorandum of Association, a legal document that defines a company's purpose, powers, and structure.