Godrej Consumer Products

Marginal impact of localized lockdown; essentials & hygiene to see uptick: Godrej Consumer

Update on the Indian Equity Market:


On Monday, Nifty plunged 3.5% at 14,310 due to rising COVID-19 cases, vaccine supply issues and the possibility of a lockdown in various parts of the country. Within NIFTY50, DRREDDY’S (+7.1%), CIPLA (+2.7%), and DIVISLAB (+1.1%) were top gainers, while TATAMOTORS (-9.7%), ADANIPORT (-8.9%), and INDUSINDBK (-8.6%) were the top losing stocks. Among the sectoral indices, PSU BANK (-9.3%), MEDIA (-8.1%) and REALTY (-7.5%) were the highest losers, and there were no gainers.


Marginal impact of localized lockdown; essentials & hygiene to see uptick: Godrej Consumer


Excerpts of an interview with Mr. Sunil Kataria, CEO, India and South Asian Association of Regional Cooperation (SAARC) at Godrej Consumer Products (GODREJCP), aired on CNBC-TV18 dated on 9th April 2021:

  • All the SAARC countries have continued to do well and growth has been robust for Godrej Consumer. Exports faced challenges in the 1HFY21 primarily because of lockdown, but it bounced back strongly in 2HFY21.
  • Thumb rule for FMCGs is whenever FMCG grows well, the Indian rural growth lead by 1.5x of urban growth. Pre covid, rural growth had gone down to 0.8x of urban, but the good news is now it has regained to 1.5x-1.7x of urban growth.
  • Mr Kataria expects
    • Good monsoon and with strong rural investment done, rural story will continue to hold very strong.
    • In this Budget, there is a lot of investment gone behind infrastructure sector which will stimulate demand and growth in core sectors. This will lead to good urban growth.
  • The top 3 important areas for Godrej Consumer are:
    • Household insecticides: Godrej Consumer is the category leader in this segment and have done most of the innovations here. India’s outlook towards health and hygiene has changed permanently, a strong momentum in this category is seen by Godrej Consumer this year and expects to continue to hold this momentum
    • Health and Hygiene: Godrej Consumer have done a lot of investment will continue to invest in this segment. It has moved beyond personal wash into being personal and home hygiene portfolio.
    • Go-To-Market Strategy: Sharp investments done in building a next level of GTM, this will be a big enabler in future.
  • Godrej Consumer Products posted a strong Q4FY21 update. The company said it has clocked in broad-based sales across all key categories and sees India sales growth around 30 percent this quarter.
  • This time, the COVID upsurge will see more of localized lockdowns rather than very far-ranging, wide impacting lockdowns. Therefore, a localized geography-based limited impact will happen on demand, which could impact certain discretionary categories.
  • People have started taking hygiene categories more casually and some stabilizing of demand is happening. Essentials and hygiene categories are expected to see an uptick again.
  • The whole consumption demand has looked up well across most of the segments and Mr. Kataria is pleasantly surprised with the kind of recovery in the demand that has happened even after the festive season.
  • Growth has been broad-based across all segments and that gives a lot of confidence and it talks about the quality of company’ growth across all the 3 segments – soap, hair color and household insecticides.
  • The company has taken calibrated price hikes across the portfolio and it is going to keep a close watch on price and demand of the products. More price increases are expected going forward if inflation continues, but not at the cost of volume growth. Therefore, some short-term pressure on gross margins is expected to be seen.

Asset Multiplier Comments

  • Post the virus outbreak, FMCG companies have stepped up supply chain agility and increased the GTM approach to ensure adequate stock. Teams have been put on “hyper-alert” to ensure that supply chains are uninterrupted in the case of disruptions due to localised lockdowns and curfews.
  • Overall, FMCG companies might get impacted due to regional lockdowns but this time it would be milder than last time lockdowns.

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of GODREJCP was ₹ 715 as of 12-April-2021. It traded at 40x/ 35x the consensus EPS estimate of ₹ 18.5/20.9 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 814/- implies a PE multiple of 39x on FY23E EPS of ₹20.9/-.


Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Rural India has felt more of a squeeze from the slowdown, says Adi Godrej, chairman, Godrej Group

Update on the Indian Equity Market:

On Friday, NIFTY ended up 433 pts up (+4.5%) at above 10,023 level. It was an eventful and highly volatile session with significant gains after posting a record intra-day recovery. The Nifty50 index was locked in 10 per cent lower circuit early morning, prompting a halt in trading for 45 minutes. However, once the markets re-opened, the headline indices Sensex and Nifty shot up as much as 5,381 points and 1,604 points, respectively, from their early morning lows. The volatility index surged over 24 per cent during the session.

PSU Bank (+11.7%), Financial Services (+6.2%), and Metal (+6.5%) were the top performing sectors. Media (-0.6%) was the only loser for the day.

Among stocks, SBI (+14.9%), TATA Steel (+14.5%), and HDFC (+10.5%), were the top gainers. UPL (-7.2%) ZEEL (-4.2%) and NESTLE IND (-3.7%) were the top losers.

Rural India has felt more of a squeeze from the slowdown, says Adi Godrej, chairman, Godrej Group

While the discretionary spend in rural areas has not risen as per expectations, FY21 is likely to deliver better numbers than the ongoing fiscal, says Adi Godrej, Chairman of the Godrej Group.

Edited excerpts of an interview with Mr Adi Godrej, Chairman of the Godrej Group; dated 13th March 2020:

When asked about his views on GST implementation he said that the implementation of GST has been good for the economy and it would not be correct to attribute the decline in GDP growth to the new tax regime. There are other factors like the China and US trade war or the killing of an Iranian general by the Americans that might have impacted the economy; we can’t be sure. So, it’s a combination of geopolitical and other factors that have affected GDP growth. He also added that there is no doubt that the economy has slowed down, but it will recover, if only slowly and expects FY21 to be better than FY20.
He commented that for FMCG products, the slowdown has been more pronounced in the rural areas, though rural growth was ahead earlier. The rural economy has been impacted by the slowdown in production and an irregular monsoon. Also, the discretionary spend of the rural population has not grown as per expectations. He expects to fare better in FY21, though a lot would depend on government policy going forward.
When asked about his suggestion on steps that should be taken by government to boost overall consumption, he suggested that there might be no tax on agriculture, but animal husbandry is taxed fully, bringing under the net income from poultry, dairy, fisheries, etc. which affects rural growth.
He informed that Godrej Agrovet was affected but it managed to recover from the lows and the business is expected to grow provided the government accepts the suggestion of treating animal husbandry on a par with agriculture.
He stated that Godrej Consumer Products Ltd (GCPL) performed better in 3QFY20. The international businesses have been performing well as the economies there have done well, especially Indonesia, which is a large market for GCPL. The hair care business is rated number one in Africa; new products are being introduced in the haircare and repellant segments, besides those to prevent dengue and malaria.
When asked about the real estate business performance and company’s focus on residential or the commercial segment given the slowdown, he said that real estate business over the last two years we have had record sales and that the company will continue to grow both businesses though commercial segment as it is doing better. The factor contributing to such kind of growth even in a phase where construction projects are facing liquidity and demand-related obstacles is the reputation of the group and trust of the people on the brand.
When asked about his vision on India and Godrej group in next five to ten years he stated that he believes India has a great future. On purchasing power parity, India will be the largest economy in the world by 2050. At present, India is ranked third after China and the US and will overtake both. India will also overtake China on population. As far as the Godrej Group is concerned, it will keep growing faster than the economy.
Consensus Estimate: (Source: market screener, investing.com website)

The closing price of Godrej Consumer Products Ltd was ₹ 525/- as of 13rd March 2020. It traded at 36x/ 31x/ 28x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 15.6/18.1/20 respectively.
Consensus target price of ₹ 750/- implies a PE multiple of 37.5x on FY22E EPS of ₹ 20/-.

Godrej Consumer confident of ramping up production when required says CEO Gambhir

Update on the Indian Equity Market:

On Friday, NIFTY closed 2.6% lower at 10980 because of the coronavirus scare and the Yes Bank crisis. RBI’s action of seizing control of Yes Bank and the possible consequences on the financial system weakened the market sentiments. The top losers for the day were Yes Bank (-54.9%), Tata Motors (-9.5%) and Zee (-7.3%). The few gaining stocks included Bajaj Auto (1.5%), GAIL (0.8%) and Maruti (0.4%).  All the sectors were in the red. The top losing sectors were Nifty PSU bank (-5.3%), Nifty Media (-4.8%) and Nifty Metal (-4.4%).

Excerpts from an interview of Mr. Vivek Gambhir, Managing Director and CEO, Godrej Consumer Products Ltd published in Live Mint dated 06th March 2020:

  • The surge in demand for hand sanitizers and soaps in the wake of fears of the COVID-19 epidemic will not have any significant impact on earnings for GCPL since it constitutes a small business segment.
  • The rabi harvest has been good and the demand from the rural market is expected to start picking up in the next one or two quarters.
  • The market is seeing a temporary demand in hand soaps, hand sanitizers, small soaps, and handwashes as well. GCPL has enough production capacity and will be ramping up the same to fulfill the demand.
  • According to Mr. Gambhir, the Company will definitely see some temporary spikes in demand mainly in April- May timeframe.
  • GCPL is rolling out some new digital campaigns to educate consumers about the coronavirus and what they can do to protect themselves.
  • The hand sanitizers and Rs 10 soaps are around 30% of the entire soap segment for the company. The company will see an uptick in demand but will not be material enough at this stage.
  • In regard to ramping up the production capacity, Mr. Gambhir said that they have enough production capacity to meet the increased demand and don’t see any challenges in meeting those demands. GCPL is also seeing some request for export orders from other parts of the world but these are relatively small numbers and won’t be material.
  • For the soap business in India, GCPL has seen strong volume growth in Q3 and has continued to gain market share in both their brands Godrej No 1 and Cinthol. There has been some value degrowth in this particular segment but the imbalance between volumes and value is expected to be corrected over the next couple of quarters. GCPL has taken a 5% hike in soap prices given some of the increases in palm oil derivatives. The Company will evaluate if there is a need for further increase in prices. With some price increases, the Company will be able to drive a better balance between volume growth and value growth. At the same time GCPL is intensifying some of its cost reduction programs and is hoping to maintain the margins. However, if it is required to take a dip in the margins for a quarter or two to drive the volumes, they are prepared for it.  Next year, the Company is expecting a better performance from both India and international business and on the margin front, they hope to sustain the levels if not improving.
  • FMCG sector has been experiencing challenges over the last few quarters with regards to a weakening consumer sentiment, sagging rural demand and liquidity pressures in the channel still continue.
  • GCPL expectation is that over the next one-two quarters, the industry will start seeing a recovery in demand particularly led by the rural sector which has been a big cause of concern.
  • The rural sector has been growing at 0.5x the growth rate which was 1.2x or 1.3x a few quarters ago. The deterioration in growth has been significantly fair. Recently there has been some gradual recovery because the rabi crops have been good. The rural inflation also augurs well for rural consumers. It is putting more money in the hands of farmers.

Consensus Estimate: (Source: market screener website)

  • The closing price of Godrej Consumer Product Ltd was ₹ 640/- as of 06-March-2020.  It traded at 41x/ 35x/ 32x the consensus earnings estimate of ₹ 15.6/18.1/20.0 for FY20E/FY21E/FY22E respectively.
  • The consensus target price is ₹ 754/- which implies a PE multiple of 38x on FY22E EPS of ₹ 20.0/-.

It’s a perfect storm in the consumer goods sector, says Godrej’s Gambhir

Update on the Indian Equity Market:

On Tuesday, NIFTY50 closed 0.9% higher at 12,082. NIFTY50 gainers include Tata Steel (+4.6%), Bharti Airtel (+4.5%), Vedanta (+3.4%) and Hindalco (+3.3%). NIFTY50 losers include Sun Pharma (-1.3%), GAIL (-0.9%) and Bajaj Auto (-0.7%). Metal (+2.9), IT (+1.9%) and Media (+1.0%) were the top sectoral gainers. Pharma (-0.3) and Realty (-0.3%) were the only losing sectors.

Excerpts from an interview with Mr Vivek Gambhir, MD & CEO, Godrej Consumer Products Ltd (GCPL). The interview was published in Livemint dated 16th December 2019

  • For packaged consumer goods companies, rural growth slowed to a seven-year low in the September quarter, according to market researcher Nielsen India.
  • A general gloom in consumer sentiment and stagnating wages continue to impact sales of daily goods in India’s hinterland said, Mr Vivek Gambhir.
  • The slowdown has been persistent for the last three or four quarters according to Mr Gambhir. GCPL saw the first signs around October 2018. Over the last few quarters, along with the slowdown in demand, they have seen liquidity pressure in the channels (wherein traders and distributors have limited access to cash or credit from the market). Similarly, over the last three to six months, consumer sentiment has also worsened. So, in some ways, what the Company is seeing currently is a perfect storm in the FMCG sector with the confluence of slowing demand, channel liquidity pressure and weakening consumer sentiment which has been exacerbating the situation.
  • Reasons for the slowdown: Data on real wage growth in the rural sector shows that real wages have been flat or declining over the last one or two years. According to him, what consumers do is, once certain products are within their spending basket, they spend on them for a while. Then they start dipping into their savings. Even savings rates have come down in India recently. But when sentiment becomes sour, then things start affecting the sector.
  • GCPL has seen such a similar kind of situation in its first couple of quarters. They have seen a volume growth of 6-7%, which is not a bad volume growth. Volume growth is not translating into value growth because of consumer incentives and offers. He believes that is the right call to take as the P&L is quite healthy. GCPL is sitting on attractive margins. The need of the hour is to stimulate demand. Ideally, GCPL would like to be at double-digit volume growth and the efforts going forward will be to get back there.
  • In a slowdown, home and personal care get impacted more than food, according to him. The indulgence categories like beauty products and chocolates continue to grow as consumers like some ‘feel-good” factor even in a slowdown. The slowdown has been quite pervasive and has impacted most categories, particularly in rural India. Within the home and personal care, discretionary categories such as skin creams, conditioners, hair oil, hair colour get impacted. But more items are considered as discretionary for rural consumers given their lower income levels.
  • In the last two or three months, both staples and discretionary have been impacted quite a bit; that is consumer sentiment has worsened. People had very high expectations post the elections. Since they did not see any improvements, the mood seems to have worsened.
  • Views on changing goods and services tax (GST) slabs again: At this stage, trying to do too much with GST rates will be a mistake in his opinion. Companies need time to let the GST rates settle. There are a lot of implementation issues that need to be addressed. The Companies need to continue to work with various stakeholders, particularly small businesses and, in GCPL case, channel partners, to help them deal with what has been one of the largest tax reforms in Indian history post-independence. At this stage, trying to do too much with GST rates to drive short-term collections may not be the right strategy. It is important to stay the course, rather than to make rate changes that are currently being discussed.

Consensus Estimate (Source: market screener website)

  • The closing price of Godrej Consumer Products Ltd was ₹ 677/- as of 17-December-19. It traded at 43x/37x/33x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 16.0/18.6 /20.7 respectively.
  • Consensus target price of ₹ 753/- implies a PE multiple of 36.4x on FY22E EPS of ₹ 20.7/-.

Godrej Consumer Products: On track for a gradual recovery in volume growth

Update on the Indian Equity Market

On Thursday, NIFTY closed 79 points lower to 11,234 reversing Wednesday gains. Result season began today with TCS and IndusInd bank. Market movements will be influenced by quarterly financial performances. Amongst the NSE 50, top gainers were BHARTIARTL (+4.4%), GRASIM (+3.7%), RELIANCE (+2.7%) while INDUSINDBK (-6.0%), YESBANK (-5.4%) dragged index down. In the sectoral indices, Pharma remained stable; while all others saw a decline. Banks (-2.7%), Realty (-2.1%), Financial Services (-1.9%) were the biggest losers.

Godrej Consumer Products: On track for a gradual recovery in volume growth

Key takeaways from the interview of Mr Vivek Gambhir, MD & CEO, Godrej Consumer Products Limited (GODREJCP); dated 9th October 2019 with CNBC TV18:

  • GODREJCP expects to deliver higher single-digit volume growth in 2HFY20 if the recovery sustains. There is a Month on Month (MoM) volume growth since July 2019.  The demand in 2QFY20 was stable Quarter on Quarter (QoQ).
  • GODREJCP has been launching new products in the insecticides segment. It expects to turnaround this segment on the back of new innovations. 
  • In the soaps segment; GODREJCP has maintained the price levels in the competitive pricing environment.
  • Margins are volume-driven. The company is positive on maintaining margins as long as the volume growth sustains.
  • GODREJCP enjoys a strong market position of the ‘Ezee’ and ‘Genteel’ brands in the liquid detergents segment. It intends to capitalize on the market leadership and scale up the presence in the liquid detergents and specialist laundry solutions over the next few years.

Consensus Estimate (Source: market screener website)

  • The closing price of GODREJCP was ₹ 680/- as of 10-October-19. It traded at 43x/ 36x/ 33x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 16.0/ 18.7/ 20.9 respectively.
  • Consensus target price of ₹ 688/- implies a PE multiple of 33x on FY22E EPS of ₹ 20.9/-