Startup
FMCG firms worry over high inflation, squeezing urban market; hint price hike
Leading FMCG companies reported a decline in margins in the September quarter on account of higher input costs and food inflation, which ultimately slowed down the pace of urban consumption.
Rising prices of commodity inputs such as palm oil, coffee, and cocoa were also accentuated, and some FMCG firms have hinted at a price hike.
HUL, Godrej Consumer Products Ltd (GCPL), Marico, ITC, and Tata Consumer Products Ltd (TCPL) have expressed concerns over squeezing urban consumption, which according to industry experts, forms 65%-68% of FMCG total sales.
“We think this is a short-term hit, and we will recover the margins through judicious price increase and stabilising of costs,” said GCPL Managing Director and CEO Sudhir Sitapati in a Q2 earning statement.
GCPL, makers of Cinthol, Godrej No 1, and HIT, had a steady quarter given the headwinds of oil costs and tough consumer demand in India, and its standalone EBITDA margin was lower, caused entirely by high inflation in palm oil.
The rural markets, which were earlier lagging, continued their growth journey ahead of urban. Besides, FMCG players reported growth from premium products and sales through quick-commerce channels.
Another FMCG maker Dabur India also said the demand environment was challenging in the September quarter marked by “high food inflation and a resultant squeeze in urban demand.”
The maker of Dabur Chyawanprash, PudinHara, and Real juice reported a decline of 17.65% in its consolidated net profit to Rs 417.52 crore and revenue from operations slipped 5.46% to Rs 3,028.59 crore.
Recently, Nestle India Chairman and Managing Director Suresh Narayanan also raised concerns over the decline and said the “middle segment” is under pressure as high food inflation continues to cripple household budgets.
“It is extremely clear that the market is facing muted demand. The growth in the F&B sector, which used to be in double digits a couple of quarters ago, is now down to 1.5%-2%,” he said.
Over the rise of food inflation, Narayanan said there is a “sharp uptick” in prices of fruits and vegetables and oil prices.
“This could lead to an increase in prices if raw material costs become unmanageable for companies. We are ourselves facing a difficult situation as far as coffee and cocoa prices are concerned,” he said.
Nestle India, which owns brands such as Maggi, Kit Kat, and Nescafe, also reported a marginal decline of 0.94%, and its domestic sales growth was at 1.2%.
Narayanan also pointed out that Tier I and the towns and rural areas below it seem reasonably stable. However, “pressure points” are coming from megacities and metros.
TCPL MD and CEO Sunil D’Souza also said urban has softened and has an impact on consumer spending in urban areas.
“My hypothesis is probably food inflation is higher than what we think it is, and the impact is far higher,” said D’Souza in the earnings call for the September quarter.
HUL CEO and MD Rohit Jawa said the market volume growth trajectory remained muted in this quarter. At an MAT (moving annual total) level, total FMCG volume growth has slowed down slightly in recent months.
“The pattern is quite clear that urban growth has trended down in the recent quarter(s) and rural has continued to grow gradually and has now, for the past few quarters, been ahead of urban and also continues to be ahead of urban this time,” Jawa said in an earnings call.
HUL, which owns power brands such as Surf, Rin, Lux, Pond’s, Lifebuoy, Lakmé, Brooke Bond, Lipton, and Horlicks, reported a 2.33% decline in consolidated net profit.
Similarly, Marico also reported “rural growing at 2X the pace of urban” on a year-on-year basis. It also reported “higher input costs in the core portfolios”. Though it already had price hikes in the coconut oil portfolio and a favourable reversal in the pricing cycle in Saffola oils.
“In view of the higher-than-anticipated degree of inflation in copra prices and sharp import duty hike in vegetable oils, the company will focus on its stated revenue growth aspiration while remaining watchful on the margin front during the second half of the year,” it said.
ITC, which operates in the FMCG segment with brands such as Aashirvaad, Sunfeast, Bingo!, and YiPPee, reported a marginal drop of 35 basis points in margins amidst inflationary headwinds in input costs.
It faced “subdued demand conditions” due to unusually heavy rains in parts of the country, high food inflation, and sharp escalation in certain input costs during the quarter.
The on Friday allowed prepaid payment instruments holders to make and receive UPI payments through third-party mobile applications.
It has been decided to enable Unified Payments Interface (UPI) payments from/to full-KYC prepaid payment instruments (PPIs) through third-party UPI applications, the central bank said in circular.
“A PPI issuer shall enable holders of only its full-KYC PPIs to make UPI payments by linking its customer PPIs to its UPI handle. UPI transactions from PPI on the issuer’s application shall be authenticated using the customer’s existing PPI credentials,” it said.
Such a transaction will, thus, be pre-approved before it reaches the UPI system.
A PPI issuer, in its capacity as a payment system providers, should not on-board customers of any bank or any other PPI issuer, the RBI said.
The RBI’s decision is aimed at providing more flexibility to holders of PPIs such as gift cards, metro rail cards, and digital wallets, among others.
Currently, UPI payments from/to a bank account can be carried out using the UPI application of that bank or of any third-party application provider.
However, UPI payments from/to a PPI can only be carried out using the mobile application provided by the PPI issuer.
UPI is an instant real-time payment system developed by National Payments Corporation of India to facilitate inter-bank transactions through mobile phones.
PPIs are instruments that facilitate purchase of goods and services, conduct of financial services, and enable remittance facilities against the value stored therein.
In a renewed push to make the state of Bihar an attractive investor destination, the second edition of Bihar Business Connect 2024 registered commitments of Rs 1.8 lakh crore from various industry segments. The two-day event concluded on December 20 with 423 Memoranda of Understanding (MoU) between various industries across sectors and the state government.
The annual event, which was attended by national and global investors, also focused on encouraging MSMEs and startups in the state to set up a base for employment generation and encouraging entrepreneurship.
The event saw presentations from MSMEs and startups which have availed of government schemes including the plug-and-play facility to set up production units, a seed fund under the Bihar Startup Policy, and other benefits.
“Today we (state of Bihar) are ready to reclaim our place. With a population of 14 crore and a wealth of skilled youth excelling in exams like the UPSC, our potential is immense. It is time to harness this talent, uplift every section of the society and drive Bihar forward,” said Deputy Chief Minister of Bihar, Samrat Chaudhary, at the event.
Deputy Chief Minister Vijay Kumar Sinha added that the state has maintained double-digit growth for the past fifteen years and is charting its way to progress in different industrial sectors.
At the conclusion of the event, the state saw commitments of nearly Rs 90,734 crore from the renewable energy sector, the highest among all investments. Sun Petro Chemicals committed to an investment of Rs 36,700 crore. Dilip Shanghvi, Managing Director of Sun Petrochemicals, said that the company will make the investment in Bihar to set up solar projects and pumped hydro projects in the state. The renewable sector also saw commitments from Adani Group and NHPC.
Other sectors contributing significantly to the investments included general manufacturing, with commitments to the tune of Rs 55,888 crore, and the food processing industry, with commitments of Rs 13,663 crore. In the latter, SLMG Beverages, which is a leading bottler and distributor of Coca Cola beverages, committed to an investment of Rs 3,000 crore in the state.
Nitish Mishra, Industries and Tourism Minister in the Government of Bihar said, “Over the past 19 years, Bihar has risen from a negative growth rate to achieving historic milestones, now contributing significantly to the country’s growth.” He added that the MoUs signed in the current edition of the Bihar Business Connect were threefold of the previous year.
The event also saw the announcement of upcoming policies as part of a presentation by Bandana Preyashi, Secretary, Department of Industries at Government of Bihar. These included the Bihar Food Processing Policy 2024, Bihar Pharmaceuticals Promotion Policy 2024, Bihar Plastic Manufacturing Promotion Policy 2024, Biofuel Production Promotion Policy 2024 and the Bihar Wood Based Industries Policy 2024. She further added that new land parcels were being selected to meet sectoral needs, in addition to 1,800 acres of land made available.
SaaS fintech platform Prepaid Ocean Services Ltd plans to acquire at least two companies in the next financial year to drive growth, a top company official said on Friday.
The new-age fintech this week raised Rs 595 crore through a qualified institutional placement.
“We are evaluating 5 to 6 potential targets in the SaaS FinTech space, including areas like merchant card software, accounts receivables, and FASTag solutions with plans to acquire at least two companies in the upcoming financial year,” Zaggle founder and Executive Chairman Raj Narayanam said.
“We are aiming for a billion-dollar revenue target within the next 5 to 6 years,” Raj noted.
The company is looking to strategically accelerate its growth trajectory through strategic acquisitions, he added.
Zaggle recently invested about Rs 48 crore to acquire stakes in two companies. It picked up a 98.32% controlling stake in Span Across IT Solutions (TaxSpanner) by infusing Rs 32.07 crore, and another Rs 15.60 crore was invested to secure a 26% stake in Mobileware Technologies.
Zaggle this week raised Rs 595 crore from investors, including Bank of India ELSS tax saver, Societe Generale – ODI ICICI Prudential Technology Fund and Nuvama Enhanced Dynamic Growth Equity (Edge) Fund through a qualified institutional placement.
A board committee approved the allotment of 1.13 crore equity shares at Rs 523.20 per share to eligible qualified institutional buyers on Monday.
Zaggle had reported a three-fold jump in consolidated net profit to Rs 20.3 crore for the July-September quarter. Revenue from operations for the September quarter was Rs 302.5 crore, up 64.22% over the year-ago period.
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