• Ratings
  • Press Release
  • CRISIL Ratings
  • FMCG
  • Fiscal
  • Revenue Growth
May 08, 2018 location Mumbai

FMCG revenues seen rising 300-400 bps this fiscal

Better operating performance will benefit credit profiles

Revenue growth in the Rs 3.4 lakh crore fast moving consumer goods (FMCG) sector is seen rising 300-400 basis points (bps) to ~11-12% in fiscal 2019 from ~8% in fiscal 2018, driven by revival in rural demand and new product launches. This will lead to a significant improvement in the operating performance of FMCG companies and benefit their credit profiles.


Disposable incomes and demand are expected to rise following higher minimum support prices for crops, more non-agriculture rural employment, and expectation of adequate monsoon. Continuing product launches and greater acceptance of ayurvedic and herbal products will also help.


Ergo, growth in FMCG revenue from the rural segment (~40-45% of FMCG revenues) will improve to 15-16% in fiscal 2019 compared with ~10% estimated for fiscal 2018. Growth had recovered partially from the 5% range during fiscals 2016 and 2017 – a period that saw sluggish rural demand resulting from weak monsoons, intense competition and demonetisation. On the other hand, growth in revenue from urban segment is expected to remain steady at 8%.


But the rate of revenue growth may not be uniform across firms, as per an analysis of ~49 FMCG companies1 (representing 45% of the industry’s revenue).


Mid-sized and large firms (revenues over Rs 250 crore and Rs 1,000 crore, respectively) will have an edge because of better operating efficiencies in the Goods and Services Tax (GST) regime. Large firms are seen growing toplines 300-400 basis points to 11-12% in fiscal 2019 compared with 8% in fiscal 2018, while mid-sized firms will continue to grow at 15-17% on the back of wider geographical reach and customisation of products to regional preferences.


On the other hand, smaller firms (revenues below Rs 250 crore) will continue to be buffeted by intense competition and GST, and register modest growth.


“Given the prospects, we see large and mid-sized FMCG firms augmenting growth through two flanks: new launches and acquisitions,” said Anuj Sethi, Senior Director, CRISIL Ratings. “Small regional players with established brands are likely to be acquired by larger peers – even if such deals are expensive – to reduce time to market.”


Going forward, operating profitability of large and mid-sized FMCG firms is expected to sustain at healthy double digit levels. Rising costs and higher promotional spend will largely be offset by savings on logistics, transportation and from supply chain efficiencies. On the other hand, competitive intensity and regulations will continue to crimp small companies, resulting in thin profitability.


As for the credit ratio (rating upgrades/downgrades), it has remained at over 1 time for CRISIL-rated FMCG firms over the past three fiscals, mainly supported by healthy balance sheets. Better operating performance and improving product diversity will further strengthen business profiles of these firms.


“Going forward, we expect the positive trend in credit ratio to sustain for large and mid-sized firms driven by improving business profiles,” said Amit Bhave, Director, CRISIL Ratings. “Also, healthy cash generation and prudent working capital management, along with deep pockets will allow for higher spend on acquisitions.”


1 CRISIL’s analysis includes 48 rated companies and a large unrated domestic player which has grown substantially on the ayurvedic and herbal platform, expanding rapidly in the food & hair care segments


  • Media Relations

    Saman Khan
    Media Relations
    CRISIL Limited
    D: +91 22 3342 3895
    M: +91 95940 60612
    B: +91 22 3342 3000

  • Analytical Contacts

    Anuj Sethi
    Senior Director - CRISIL Ratings
    CRISIL Limited
    B: +91 44 6656 3100


    Amit Bhave
    Director - CRISIL Ratings
    CRISIL Limited
    D: +91 22 3342 3113