Consumer goods firms may post tepid growth in Jul-sep
NEW DELHI: India’s largest packaged consumer goods firms are expected to record another tepid quarter of volume growth as makers of soaps and hair oils continue to face headwinds both in rural and urban markets.
Firms across the board have been reeling from a cooling off in consumer demand, aggravated by a slowdown in rural markets, a liquidity crunch among traders and wholesalers, and flooding in parts of the country.
Hindustan Unilever Ltd (HUL), which sells Lux soaps and Knorr soups and is considered the bellwether for the consumer goods sector, will start the earnings season with the release of its September quarter earnings on Monday. Its commentary on urban and rural demand will help analysts gauge the demand for goods of daily use such as soaps, shampoos and detergents.
On an average, analysts expect packaged consumer goods firms to register revenue growth between 6.4% and 9.3% while recording volume growth between 3% and 6%, according to estimates by several brokerage firms. Analysts expect volume to grow at a modest pace during the quarter. “We expect most consumer goods companies to report low single-digit volume growth,” Abneesh Roy at Edelweiss Research said in a report last week, citing macroeconomic factors such as the liquidity crisis that has hurt wholesalers as well as retailers, weak overall macroeconomic scenario, and slower ramp-up of the Pm-kisan scheme.
The second quarter of the current fiscal year, the report said, is “likely to mark the slowest volume growth for consumer goods companies since Q1FY18, which was impacted by goods and service tax-related de-stocking.” Volume growth for the consumer goods companies dropped by 3.7% in Q1FY18, according to data from Edelweiss.
The news isn’t surprising. In July, research firm Nielsen had slashed its annual outlook for the sector on the back of a weak monsoon and stagnating rural incomes, especially lowering its growth forecast for the second half of the year to 9-10% from its previous forecast of 11-12%. Nielsen follows a January to December calendar year.
More recently, in September, Credit Suisse warned that consumer goods firms could post their slowest revenue growth in FY20 in the last 15 years as lower farm incomes, the liquidity crunch and rising unemployment mar growth at makers of packaged foods and soaps.
Nielsen had also warned of a sharp slowdown in rural growth, which has historically remained ahead of urban markets. Rural growth is slowing down double the rate of urban in recent quarters, Nielsen noted in its second quarter update for the sector. MUMBAI: Altico Capital India Ltd, the real estate-focused lender that defaulted on interest payments in September, has proposed to sell loans worth around ₹2,000 crore as part of its debt resolution plan, two people directly aware of the development said.
The resolution plan is expected to be submitted to Altico’s lenders and investors by the end of next week, the people cited above said on condition of anonymity.
The Mumbai-based real estate lender has already identified the assets that it plans to sell as part of its resolution plan and it will offer the proceeds from such a sale, upfront to its lenders, said the first person mentioned above. “The immediate plan right now is to monetize these assets. We already have a strong interest for these properties mainly from lenders who are in a similar business.”
“Altico currently has a collateral cover of close to ₹11,000 crore against its present loan book size of around ₹7,000 crore.”
Located across seven cities, including Mumbai, Chennai and Bengaluru, these assets are land parcels, commercial and residential projects at different stages of constructions. The company’s portfolio of real estate investment spread across 30% commercial office, 60% residential and the remaining in logistics and warehousing.
ANALYSTS EXPECT THE FIRMS TO POST REVENUE GROWTH BETWEEN
6.4% AND 9.3% AND VOLUME GROWTH BETWEEN 3% AND 6%