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By Sethuraman N R
(Reuters) -Shares of India’s Godrej Consumer Products slumped 9% on Monday, set for their worst day since March 2020 and dragging down its peers in the fast moving consumer goods sector after the firm warned of stress on demand and profit margins in the third quarter.
The stock fell to its lowest since Jan. 18, its biggest one-day percentage drop since the onset of the pandemic. The decline dragged down the consumer goods index by 2.2%. The benchmark Nifty 50 was down about 0.1% on the day.
Including Monday’s decline, the consumer index has shed about 14% so far this quarter and is set for its worst ever quarterly performance as Indian consumer companies continue to feel the pinch of still-high inflation and a consequent fall in demand.
Godrej Consumer said on Friday that two-thirds of its India business is under demand and margin stress due to higher raw material costs and unfavourable weather.
The company’s update will “likely add to investor concerns” on the consumer industry as a whole, which has been facing a slowdown, Jefferies said in a note.
To partly offset higher costs in palm oil, a key ingredient for Godrej’s soap business that contributes one-third to its standalone revenue, the company undertook measures including price increases during the quarter.
“Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantry,” Godrej said.
The warning by Godrej will also impact peers, Jefferies said, adding that recent analyst meetings with Hindustan Unilever and Colgate-Palmolive India have not provided confidence about a recovery in consumption.
(Reporting by Sethuraman NR; Editing by Sonia Cheema)
