India’s fast-moving consumer goods (FMCG) industry saw the growth of ~12.2% in value in April-June quarter of 2023 as a result of increased consumption growth, as per the data released by NIQ India (formerly NielsenIQ). Industry saw volume growth of ~7.5%, which was the highest growth that has been seen in previous 8 quarters. Price growth was at ~4.4%, and this was lowest in at least 9 quarters. This was seen after overall FMCG industry saw increased inflation equating into price-led growth for more than 2 years. Top consumer goods companies exhibited that price-led growth continues to taper off, with volume-led growth returning over upcoming few quarters.
Research suggested that 2Q23, thus far, was the strongest quarter over the previous year and a half as with positive momentum was seen across all the growth areas. Revival in rural markets, which was in negative territory, was mainly because of non-food. This together with 21% growth in Modern Trade should support the momentum in the ongoing festive season.
By 2025, India’s Consumer Electronics and Appliances Industry should get categorised as the 5th largest globally. Indian Appliances and Consumer Electronics (ACE) market is expected get double over upcoming 3 years, touching ~US$ 17.93 billion (INR1.48 lakh crore) by the year 2025. Indian appliances and consumer electronics industry came in at US$ 9.84 billion in 2021, this industry should grow to reach INR 1.48 lakh crore (US$ 21.18 billion) by the year 2025. Electronics hardware production in India came in at US$63.39 billion in 2021. Therefore, top consumer goods companies are expected to benefit from increased growth opportunities.
Foreign direct investment in Appliances and Consumer Electronics (ACE) industry approximately doubled to reach US$481 million by the end of June 2022, exhibiting a rise from US$198 million in 2021. Between April 2000-December 2022, electronic goods were able to attract FDI inflows worth US$3.75 billion.
With this in mind, we will now have a look at top consumer goods companies to purchase as investors celebrate Diwali.
1. V-Guard Industries
V-Guard Industries Ltd has been categorised as a leading Indian electricals and home appliances manufacturer, which has its headquarters in Kochi. It is engaged in manufacturing voltage stabilizers, electrical cable, electric pumps, electric motors, etc.
The company’s consolidated net revenues saw an increase of ~18% year-over-year in FY23, touching INR4,126 crore. Even if the revenues from the recently acquired Sunflame business are excluded, year-over-year growth came in at ~16.3%.
Business in Southern markets saw an expansion of ~9% in comparison to previous fiscal year in comparison to ~26.4% growth in Non-South markets. Given the company’s diversified revenue base and contribution from Non-South markets (which has surpassed 45%) is what makes growth remarkable.
However, FY23 saw margin pressures too as a result of inflation and higher commodity prices throughout segments. The company saw some stabilisation in the commodity prices.
The company’s strong brand equity, high-quality products and strong and healthy consumer relationships should aid its resilient business model, that consists of diversified product portfolio and established distribution network. Given the strong macro and demographic growth enablers, expansion into non-south markets and shift from unorganised to organised should continue to act as principal growth enablers.
2. Vedant Fashion
Vedant Fashions Limited is the parent company to Manyavar, Mohey and Mebaz.
In FY23, the company’s strong portfolio and product diversity supported the growth in revenues of ~30.2% to INR 13,549 million, with EBITDA increasing by ~30.1% to INR 6,783 million. The company’s strategy resulted in exceptional profitability with profit coming at INR 4,291 million and industry-leading PAT margin at 31.7%.
The company consistent growth with gross profit coming at INR 9,126 million, exhibiting a rise of 31.2% year-over-year, and PBT of INR 5,758 million, year-over-year growth of ~36.1%. Industry-leading gross margin was at ~67.4% and impressive ROCE of ~95.3% exhibit the company’s ability to consistently generate strong cash flows. This solidified its position as a leader in the industry.
It expects that share of men’s wear should attribute ~44% of retail apparel market in FY25. This comes out to the highest growth rate of between 20% – 22% in FY22-FY25. This growth is expected to stem from availability of wide range of brands, designs, colours, and favourable young demographic in the country.
3. Godrej Consumer Products Limited
The company has been categorised as a leading emerging markets FMCG company.
In 2Q24, the company’s consolidated sales saw the growth of 6% in INR terms, supported by volume growth of 10% and constant currency growth of 16% year-on-year. India business sales went up by ~9% year-on-year, as a result of volume growth of ~11%.
2Q24 consolidated EBITDA saw the growth of 30% year-on-year, with 2Q24 consolidated net profit increasing 17% year-on-year (without exceptional items and one-offs).
The company’s quality of profits improved consistently in the previous few quarters, with reported consolidated gross margin increasing by ~700 bps year-on-year and 110 bps in comparison to previous quarter.
The company is focused on volume-led growth and on healthy investments in brands and improved profitability. It has a strong balance sheet and it is on track to reduce wasted cost. It continues to aim profitable and sustainable volume growth throughout its portfolio through category development.
The company’s Africa, USA and Middle East cluster saw sales growth of ~17% in constant currency terms. Its performance in INR terms was adversely affected by devaluation of Naira.
While above are some of the top consumer goods companies, there are several other companies in this space which investors should consider buying as they celebrate Diwali.
Experts believe that softening of India’s inflation rate and fall in food inflation should favourably support overall industry. Therefore, top consumer goods companies are expected to benefit from this positive momentum as spending in festive season continues to remain at higher levels.
As per Department for Promotion of Industry and Internal Trade, electronic goods exports from India came in at US$ 11.1 billion between April 2020-March 2021 (FY21). In May 2022, India exported US$1.34 billion worth of electronic goods.