Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil A1+' rating on the commercial paper programme of Godrej Consumer Products Limited (GCPL).

 

The rating continues to reflect the strong business risk profile of GCPL characterised by its diversified revenue profile across geographies (mainly India, Indonesia, Africa, the US, Latin America, and the Middle East) and product segments (home care, personal care and hair care). The company has strong brands with leadership position across various segments in all the countries it operates in. The rating also factors in the robust financial risk profile of GCPL due to sizeable cash accrual and prudent cash policy.

 

For the nine months ending December 31, 2024 (9m-FY25), operating income remained flat at Rs 10,766 crore compared with Rs 10,711 crore for the corresponding period of the previous fiscal. This was primarily on account of de-growth in the Africa business following divestment of Hair segment of East Africa in March 2024 and devaluation of Nigerian currency in fiscal 2024. Nevertheless, during the same period, India business grew by 6% led mainly by home care segment while the Indonesia business saw 7% growth on the back of steady volume and category development initiatives. Businesses in Latin America also performed well in line with their corresponding economic growth. Operating income for fiscal 2025 is expected to grow marginally with stabilisation of the Africa business expected from Q4-FY25. This coupled with continued healthy growth in other geographies, operating income is expected to improve from the current fiscal 2026 onwards. Operating margin also moderated to 20.8% in 9m-FY25 against 21.6% for the corresponding period of the previous fiscal. This was on account of higher raw material prices of palm oil derivatives affecting the soaps category. While moderated, this margin still remains healthy and is expected to hold steady at around current levels over the medium term.

 

Gross debt has increased significantly over past two fiscals to Rs 3,751 crore as on September 30, 2025 (from Rs 3,155 crore as on March 31, 2024 and Rs 1,034 crore as on March 31, 2023) and is expected to remain elevated by March 2025. Notwithstanding, GCPL was net cash positive as on September 30, 2024 and will remain net cash positive over the medium term; cash and equivalents (including liquid investments) stood at ~Rs 3,800 crore as on September 30, 2024. Strong cash accrual over Rs 2,000 crore, comfortable capital structure and financial flexibility of the Godrej group further support the financial risk profile.

 

GCPL paid substantial dividends of Rs 1,534 crore in the first half of fiscal 2025 and Rs 511 crore in fiscal 2024, following three fiscals of no dividend pay-outs. The company is expected to continue to distribute dividends as per the dividend policy. Cash accrual should be sufficient to meet regular dividend payouts along with maintenance capital expenditure (capex) of Rs 500-600 crore per annum. However, significantly higher-than-expected dividend pay-outs affecting accretions to reserves or large debt funded acquisitions and/or capex may impact financial risk profile and will remain key rating sensitivity factors.

 

These strengths are partially offset by the macroeconomic, geopolitical and currency risks in overseas operations, exposure to intense competition and susceptibility of the operating margin to changes in raw material prices.

Analytical Approach

For arriving at the rating, Crisil Ratings has combined the business and financial risk profiles of GCPL and all its subsidiaries as they are in the same business.

 

Crisil Ratings’ has also amortised goodwill and trademarks over 5-10 years, leading to differences in the profit after tax (PAT) and net worth from reported numbers.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Diversified revenue profile: Revenue is diversified across geographies and product segments. In 9m-FY25, 61% of the revenue was generated from India and remaining 39% from overseas. Africa, Indonesia and other geographies (includes USA, Latin America and the Middle East) accounted for 18%, 14% and 7% respectively, of total revenue. Revenue is also distributed across product segments with personal care accounting for 55-60% and home care 35-40%. GCPL has a demonstrated track record of acquiring strong local brands and generating synergies by combining operations of the acquired entities to drive scale and profitability. While operating income remained flat year-on-year at Rs 10,766 crore in 9m-FY25, this was primarily on account of de-growth in the Africa business following divestment of Hair segment of East Africa in March 2024 and devaluation of Nigerian currency.

 

In 9m-FY25, India business grew by 6% led mainly by home care segment while the Indonesia business saw 7% growth on the back of steady volume growth and category development initiatives. Businesses in Latin America are performing well in line with their corresponding economic growth. However, Africa business experienced de-growth on account of divestment of Hair segment business in East Africa in March 2024 which will stabilise from Q4-FY25 onwards. This coupled with continued healthy growth in other geographies, operating income is expected to improve from the current fiscal 2026 onwards. Operating margin also moderated to 20.8% in 9m-FY25 against 21.6% for the corresponding period of the previous fiscal. This was on account of higher raw material prices of palm oil derivatives affecting the soaps category. While moderated, this margin still remains healthy and is expected to hold steady at around current levels over the medium term.

 

Strong brands with market leadership across segments and geographies: GCPL has a strong brand portfolio in India and abroad. In India, GCPL is a market leader in the household insecticide, hair colour and air fresheners segments and second largest player in the soaps category. It has a leading market position in all segments it operates in - household insecticides, air fresheners and wet tissues in Indonesia and dry hair extensions (hair braids) and ethnic hair colour segments in Africa. Brands acquired during fiscal 2024, such as Park Avenue (second largest in deodorants) and Kamasutra (among top five players in the sexual wellness category) also hold strong market position in their respective categories. The dominant leadership position across various segments provides pricing power in those segments, helping the company to maintain profitability.

 

Moreover, the company has a strong focus on innovation and simplification, which has led to healthy contribution to the overall growth through new launches over the years. Godrej’s strong brand with differentiated price points will support revenue over the medium term. GCPL has successfully cross pollinated some products across markets and has launched new products in the insecticide, detergent and air fresheners segments in India. The new launches during fiscal 2025 have gained traction during the initial phases and are expected to ramp up over the medium term. The ability to successfully launch and scale up revenue from new products across geographies will be a key monitorable.

 

Robust financial risk profile with sizeable cash accrual and prudent cash policy: While gross debt has increased significantly in past two fiscals to Rs 3,751 crore as on September 30, 2025 (from Rs 3,155 crore as on March 31, 2024 and Rs 1,034 crore as on March 31, 2023), GCPL is net cash positive as on September 30, 2024 which is expected to continue over the medium term despite the elevated debt level. It continues to maintain adequate cash and equivalents (including liquid investments) on its books which stood at ~Rs 3,800 crore as on September 30, 2024. This increase in debt was on account of funding the acquisition of the FMCG business from Raymond Consumer Care Ltd and incremental working capital requirement. GCPL’s financial risk profile is expected to remain robust over the medium term on account of strong cash accruals over Rs 2,000 crore, adequate capital structure and financial flexibility of the Godrej group.

 

GCPL paid substantial dividends of Rs 1,534 crore in the first half of fiscal 2025 and Rs 511 crore in fiscal 2024, following three fiscals of no dividend pay-outs. The company is expected to continue to distribute dividends as per the dividend policy. Cash accrual should be sufficient to meet regular dividend payouts along with maintenance capex of Rs 500-600 crore per annum. However, significantly higher-than-expected dividend pay-outs affecting accretions to reserves or large debt funded acquisitions and/or capex may impact financial risk profile and will remain key rating sensitivity factors.

 

Weaknesses:

Exposure to macroeconomic, geopolitical and currency risks in overseas markets: GCPL has a presence in Asia, Africa and Latin America. These economies may face macroeconomic challenges as seen in the past, which can limit growth in the overseas operations of GCPL. Also, geopolitical events such as change in government and local unrest could also affect operations. This risk in Africa has been mitigated by diversified presence in countries in south, west and east Africa. Currency fluctuations can harm the profitability of overseas operations, which have been volatile over the past few years. Recent devaluation of currency seen in Argentina and Nigeria led to decline in revenues from those countries in reported currency terms during fiscal 2024. While performance in these geographies have improved in fiscal 2025, currency fluctuation could have an adverse impact on operations and will remain a monitorable.

 

Susceptibility to fluctuation in raw material prices and intense competition: Palm oil and crude derivatives (chemicals) are the major raw materials. Crisil Ratings-adjusted operating margin was 21.0% in fiscal 2024 against 18.3% in fiscal 2023 supported by softening of input prices and the company’s category development initiatives to boost demand for its products. During 9m-FY25, operating margin moderated to 20.8% against 21.6% for the corresponding period of the previous fiscal on account of higher raw material prices of palm oil derivatives affecting the soaps category. While GCPL benefits from its market leadership and diversified revenue profile across segments and geographies maintaining profitability, significant increase in raw material prices can lead to decline in operating margin.

 

Also, the Indian FMCG industry has both organised and unorganised players across various segments and product categories. GPCL continues to face stiff competition from existing as well as new entrants in the segments it operates in. That said, product launches and cross-pollination of products have helped the company maintain its market share and operating profitability.

Liquidity: Strong

Cash and cash equivalents (including liquid investments) stood at ~Rs 3,800 crore as of September 2024. GCPL is expected to maintain its net cash position despite its substantial dividend payout in fiscal 2025 and over the medium term. The company has sizeable capex plans (Rs 500-600 crore annually) to augment manufacturing capacities over the medium term, which are expected to be funded largely through internal cash accrual. Liquidity is also supported by bank limits over Rs 140 crore having minimal utilisation in the twelve months through December 2024. Along with strong cash accrual over Rs 2,000 crore and comfortable capital structure, association with Godrej group having an established track record and a strong reputation among lenders and investors in capital markets provides additional flexibility.

 

ESG profile of GCPL

Crisil Ratings believes that the Environment, Social, and Governance (ESG) profile of GCPL supports its already strong credit risk profile. The FMCG sector has moderate environmental and social impact, driven by its raw material sourcing strategies, waste intensive processes, and its direct impact on the health and wellbeing of customers.

 

GCPL has focused on mitigating its environmental and social risks over the past several years.

 

Key ESG highlights of GCPL:

• GCPL aims to achieve net zero emissions by 2035. In line with this target, it reduced its scope 1 and 2 emission intensity by ~7% in fiscal 2024 compared to fiscal 2022.
• Further, the company aims to increase the share of renewable energy in its overall energy mix to 35% by fiscal 2026. Against this target, the share of renewables in its total energy mix stood at ~24% in fiscal 2024.
• With respect to of gender diversity in the workforce, GCPL reported a higher-than-peer share of female employees and workers (~20% and ~35% respectively).
• GCPL aims to achieve a 50% reduction in lost time injury frequency rate (LTIFR) among the workforce by fiscal 2025-26, from fiscal 2023 base year LTIFR of 1.0. In alignment with this target, the LTIFR among workers reduced to 0.45 in fiscal 2024.
• The company’s governance structure is characterized by a Board comprising of 50% independent directors and 50% women directors, a dedicated investor grievance redressal system, and extensive financial disclosures.

There is growing importance of ESG among investors and lenders. GCPL’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given the high share of market borrowings in its debt and access to capital markets.

Rating sensitivity factors

Downward factors

• Significant decline in market share and operating margin, impacting the business risk profile
• Large, debt-funded capex or acquisitions, weakening the financial risk profile
• Interest coverage ratio below 7 times on sustained basis

About the Company

GCPL, part of the Godrej group, was formed in 2001 when the personal care segment of Godrej Soaps Ltd was demerged into a separate entity. GCPL's standalone business includes household insecticides, soaps, hair colourants, air fresheners and liquid detergents. Its manufacturing plants are in Assam, Himachal Pradesh, Jammu and Kashmir, Madhya Pradesh, Meghalaya, Puducherry, Sikkim and Tamil Nadu. Over the past 10 years, GCPL has made several overseas acquisitions to build its presence in key emerging markets outside India, with focus on Asia, Africa and Latin America. It also acquired the FMCG business of RCCL during April 2023, having brands such as Park Avenue (for deodorants), Kamasutra, KS and Premium in a slump sale transaction, to enter underpenetrated product categories of deodorants and sexual wellness.

 

For 9m-FY25, profit after tax (PAT) was Rs 1,440 crore and total income Rs 10,766 crore, compared with Rs 1,333 crore and Rs 10,711 crore respectively for the corresponding period of the previous fiscal.

Key Financial Indicators^

Particulars	Unit	2024	2023
Operating income	Rs crore	14,096	13,316
Profit after tax	Rs crore	82	1,611
PAT margin	%	0.6	12.1
Adjusted debt / adjusted net worth	Times	0.40	0.12
Adjusted interest coverage	Times	10.4	14.9

^As per analytical adjustments made by Crisil Ratings

Any other information: Not Applicable