NEW DELHI : Homegrown fast-moving consumer goods (FMCG) major Marico Ltd expects India's urban demand, especially in categories such as packaged foods, to perk up in the coming quarters aided by tailwinds from the recently-cut goods and services tax rates. This sets up a more stable outlook for the company after a quarter marked by input cost rise and tax-related disruption.
NEW DELHI : Homegrown fast-moving consumer goods (FMCG) major Marico Ltd expects India's urban demand, especially in categories such as packaged foods, to perk up in the coming quarters aided by tailwinds from the recently-cut goods and services tax rates. This sets up a more stable outlook for the company after a quarter marked by input cost rise and tax-related disruption.
"I expect the demand situation to be stable, going forward. Whatever policies the government has taken have ensured that rural demand has been steady and consistent," Saugata Gupta, managing director and chief executive officer said in an interview on Monday. "Some of the GST benefits, especially in food, will benefit urban areas. So overall, I expect the demand situation to be stable."
Revenue trends
On Friday, the company posted a consolidated net profit of ₹420 crore, down marginally from ₹423 crore a year earlier. Its earnings before interest, taxes, depreciation, and amortization (Ebitda) rose 7% year-on-year to ₹560 crore, though the Ebitda margin contracted by 350 basis points, reflecting higher input costs. Consolidated revenue from operations grew 31% y-o-y to ₹3,482 crore. Revenues from the company's India business were at ₹2,667 crore, up 35%, aided by price hikes in core portfolios.
Marico's consolidated revenue from operations had risen over 12% to ₹10,831 crore last fiscal year. Food products had brought in revenue of over ₹900 crore for the company in FY25.
On Monday, market researcher NielsenIQ said India's FMCG sector reported a 5.4% y-o-y rise in volumes for the September quarter, a sequential moderation on account of the disruptions related to transition to the new GST rates, while the value of sales jumped 12.9%.
The industry as a whole saw rural markets growing faster than urban for the seventh consecutive quarter. Urban volumes reported a sequential slowdown.
"As far as we are concerned, we are not seeing so much difference between urban and rural. Yes, rural is slightly ahead of urban, but the stress in urban general trade continues and that probably reflects in the numbers," Gupta said.
Input cost pressures
He said 30% of the company's India portfolio saw a reduction in prices after the GST rationalizaton.
"The sector had disruption from around 4 September to the first 10 days of October. Now, it's back to square one. We are seeing far more stable volumes," the CEO said. "Some portfolios had price-point packs, where we increased grammage; in the rest we took price drops. We have passed on the GST benefits."
GST tailwinds will specifically help demand for the company's packaged foods market. "The fact that all food is now at 5% means there is a significant opportunity for unbranded to branded conversion," he added.
Among the key inputs that saw elevated price pressures during the September quarter was copra, a key raw material for the Parachute coconut oil portfolio. Prices of copra are up 113% y-o-y. As a result, Marico undertook a 60% price hike in Parachute products over the past year. Parachute coconut oil brings in 36% of the company's India revenue.
Gupta said prices are now easing from their peaks. "Copra is 16% off its peak. We believe that by March it is expected to be better," he said, adding that cooling copra prices could prompt the company to pass on the benefit to consumers.
In the September quarter, the company's gross margin shrank about 810 bps from a year ago.
Growth strategy
Analysts said Marico has delivered a strong performance for the quarter, with broad-based growth across categories despite input cost pressures and GST-led disruptions.
"Even with a 60% price increase in coconut oils, volumes remained resilient, reflecting brand strength. Over 90% of the portfolio gained market share, supported by better execution under Project Setu and healthy traction in organized trade," said Manoj Menon of ICICI Securities. Project Setu is the company's effort to expand direct distribution, which was launched in FY25.
The company that sells edible oils, hair oils, and personal care products, has been actively diversifying its portfolio. Its food portfolio includes brands such as Saffola Oats and True Elements muesli. Its premium personal care segment features brands such as Beardo, Just Herbs, and a portfolio from Plix—a plant-based nutrition brand it acquired in 2023.
The CEO said the company will continue to look at both organic and inorganic opportunities, going forward.
"We are a strategic investor of choice for many founders who do not have the option of an IPO (initial public offering). We are very happy to support founders building businesses to last, not just to sell," Gupta added.