Margin pressures may ease for GCPL in H2

Disruption during Q2 may result in lower volumes and revenues

- RAM PRASAD SAHU

The stock of fast-moving consumer goods (FMCG) major Godrej Consumer has lost 12.6 per cent over the past month. While the lower goods and services tax (GST) rate isa positive, the gains will start to flow inthe December quarter as well as in the medium term.

During the short term (Q2), there is disruption that may result in lower volumes and revenues while margins, too, are expected to be under pressure. The company, inapre-quarter update, pointed out that a third of GCPL’s portfolio — primarily toilet soaps as well as smaller categories like talcum powders, shampoos, and shaving creams — will benefit from the reduced GST rate of 5 per cent compared to the earlier 18 per cent.

However, the rate reductions have resulted in some short-term adjustments across trade channels, as distributors and retailers focused on liquidating existing inventories. This has delayed the flow of new orders and temporarily deferred consumer purchases, impacting both growth and profitability.