Sucheta Dalal :Volume growth Counters Drought
Sucheta Dalal

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Volume growth Counters Drought   

September 16, 2009

 

One of the sectors that was supposed to witness a slowdown due to widespread drought was the fast-moving consumer goods (FMCG) segment. But it seems that the sector has turned lucky on two counts—sharp correction in the prices of the raw materials (except raw tea) and surprising volume growth. All FMCG categories from soap and detergents to edible oils are slated to enjoy good growth despite drought. In many cases, FMCG firms are able to reduce prices to boost volumes. “The entire FMCG sector is witnessing volume growth,” says Sugata Gupta, CEO Consumer Products Business, Marico Ltd. Marico is passing on the benefit of lower raw material cost to the consumers by giving extra product for free with its Saffola edible oil, claims Sugata. Of course, the sector’s market valuation is another matter. Post the recent run up, the sector is trading at fairly rich valuations of 20x on its FY11E earnings. Analysts expect the sector to grow at 20% this fiscal year by value. This sector has reported volume growth of 7.8% from FY01 to FY09.  Meanwhile, Marico has listed its Bangladesh company on the Dhaka and Chittagong exchanges by diluting a 10% stake and raising around taka 27 crore. -Pallabika Ganguly

-- Sucheta Dalal



 



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