The Fast Moving Consumer Goods (FMCG) sector is the fourth largest sector in the Indian economy with household and personal care accounting for nearly 50% of FMCG sales in the country. The revenue of the FMCG sector is currently in the vicinity of Rs 3.4 lakh crore and is expected to double in the next three years. The urban segment, which accounts for a revenue share of around 55% of the overall revenue generated by the FMCG sector, has been growing rapidly over the years on the back of growing awareness and easier access of products. Plus the changing lifestyle of the youth will be the key growth driver for this particular sector. But in the last few years, the semi urban and the rural segments have been growing at a faster pace compared to urban India led by a combination of increasing income, higher aspiration levels and increased demand for branded products in rural areas. The revenues of FMCG companies are likely to grow at a much faster clip, as the retail market in the country is expected to grow along with, supported by moderate inflation, increase in private consumption and rural income. On the other hand, with the share of the unorganised market in the FMCG sector falling, the organised sector’s growth is expected to rise significantly, also augmented by growth in the modern retail industry. There are many blue chip FMCG companies like HUL, Colgate Palmolive India Ltd, Dabur, Glaxo SmithKline Consumer, Britannia, etc., who have delivered excellent returns for investors over the last many years. Colgate Palmolive has just recently delivered its first quarter numbers of FY 2019-20 with net sales growing by 4% to Rs 1,075 crore, led by domestic growth of over 6%, while the net profit stood at Rs 169 crore for the same quarter increasing by over 5%. The company saw some moderation in demand in the rural markets, but the management considers this slowdown to be temporary and expects a smart pickup over the next two quarters. The company is India’s leading provider of oral care products such as toothpaste, toothbrush, mouthwash, tooth powder, etc., under the Colgate brand. It provides personal care products like shower gels and liquid hand wash under the Palmolive brand name. The company has been ranked India’s No. 1 Most Trusted Oral Care Brand for the last eight consecutive years. Global brokerages have maintained a positive view on the ColPal stock in the next few quarters. Even the domestic large funds have put an accumulate view on the stock currently resting at Rs 1,173 to appreciate by around 20% in the next one-year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.