A CRISIL Ratings study of 77 fast-moving consumer goods (FMCG) companies, which it says accounted for about a third of the estimated Rs 5.6 lakh crore sector revenue last fiscal, has release some findings.  The report says that the FMCG sector will see revenue grow 7-9% this fiscal, riding on higher volume growth, supported by an expected revival in rural demand and steady urban demand. This follows an estimated 5-7% growth in fiscal 2024. Product realisations are expected to grow in low single digits with marginal rise in prices of key raw materials for the food and beverages (F&B) segment, it said. That said, key raw material prices for personal care (PC) and home care (HC) segments are seen to be stable. Increasing premiumisation and growth in volume will expand operating margin by 50-75 basis points to 20-21%, it added. 

The margin expansion would have been higher but for rising selling and marketing expenses amid heightened competition among organised and unorganised players alike. The F&B segment accounts for nearly half the sector revenue while PC and HC segments form a quarter each. Says Aditya Jhaver, Director, CRISIL Ratings, “We expect volume growth of 6-7% in fiscal 2025 from the rural consumers (~40% of overall revenue), supported by expectation of better monsoon benefitting agricultural production, and hike in minimum support price supporting farm incomes. Higher government spending on rural infrastructure, primarily through Pradhan Mantri Awaas Yojana-Grameen (PMAY-G) for affordable houses, will aid higher savings in rural India, supporting their ability to spend more.” 

On the other hand, volume growth from urban consumers will remain steady at 7-8% during fiscal 2025 supported by rising disposable incomes and continued focus on premium offerings by the players, especially in the personal care and home care segments, it says. 

Says Rabindra Verma, Associate Director, CRISIL Ratings, “Revenue growth will vary across product segments and firms. The F&B segment is expected to grow 8-9% this fiscal, aided by improving rural demand, while the personal care segment will grow 6-7%. The home care segment, which outpaced the other two segments last fiscal, is expected to grow 8-9% this fiscal, led by continued premiumisation push and steady urban demand.” 

The credit profiles of CRISIL Ratings-rated FMCG companies will continue to be ‘Stable’, supported by their healthy cash generating ability, strong balance sheets, and sizeable liquid surpluses.  

The report adds that the players will continue to eye inorganic small/mid-sized opportunities which will help them expand product offerings, especially in fast-growing premium segments targeting key higher income groups. 

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