Top 40 Marketing Companies of India

Top 40 Marketing Companies of India

S.No	Site
1.	Hindustan Lever Network
2.	Tata Mc Graw Hill
3.	Proctor and Gamble
4.	Godrej
5.	Ogilvy & Mather
6.	Maruti Udyog Ltd
7.	ITC Limited
8.	Videocon
9.	Tata International
10.	Essar
11.	Bharat Petroleum
12.	Ishir Infotech
13.	Everready.com
14.	Pantaloon Retail India Limited
15.	Direct India.com
16.	Amul
17.	Louis Berger
18.	Hindustan Petroleum Corporation Ltd.
19.	Indian Oil
20.	Parle
21.	Opal Infotech
22.	Dr. Reddy's
23.	Dabur
24.	Westside
25.	BizIndia
26.	Mother Dairy
27.	101 EmailPro
28.	Mediaturf
29.	C-sam inc
30.	Advent Infosoft Pvt. Ltd
31.	Nirma
32.	Cheasyy Solution
33.	Digital Arts
34.	Direm
35.	Abhikalp Design Studio
36.	Connecturf
37.	Topranker.in
38.	Adwise Advertising P Ltd
39.	Nexigen Enterprise Services Private Limited
40.	E2 Solutions Channel Technologies
41.	Beats of Music Audio Visuals
42.	Webchutney
43.	emaven Solutions
44.	PC Centre
45.	Midas Web Technologies
46.	3S Global
47.	Mosaic ITES Services
48.	BIM (Best-i-marketing.com)
49.	PerevodRu

An Overview of the FMCG Industry in India

What are Fast Moving Consumer Goods (FMCG)?

Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.

A subset of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products.

White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc.

In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India. According to the AC Nielsen India study, the industry grew 5.3% in value between 2004 and 2005.

Indian FMCG Sector:

The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1 billion. Well-established distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income.

The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands.

Exhibit I
THE TOP 10 COMPANIES IN FMCG SECTOR

S. NO.	Companies
1.	Hindustan Unilever Ltd.
2.	ITC (Indian Tobacco Company)
3.	Nestlé India
4.	GCMMF (AMUL)
5.	Dabur India
6.	Asian Paints (India)
7.	Cadbury India
8.	Britannia Industries
9.	Procter & Gamble Hygiene and Health Care
10.	Marico Industries

Source: Naukrihub.com

The companies mentioned in Exhibit I, are the leaders in their respective sectors. The personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India.

The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have faster development than the stagnating personal care category. Amul, India's largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series of products at various prices.

In the household care category (like mosquito repellents), Godrej and Reckitt are two players. Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitt's Mortein at Rs 149 crore. In the shampoo category, HLL's Clinic and Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying hard to be positioned on top. Clinic is nearly double the size of Sunsilk.

Dabur is among the top five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints is India's largest paint company, with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World

Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space.

Outlook

There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. It's the quality, promotion and innovation of products, which can drive many sectors.

Fast-moving consumer companies are fast-moving stocks in bourses too

Long considered as ‘defensive’ stocks meant to be held only as a cushion during a market collapse, FMCG companies are charting phenomenal growth and their stocks prices are keeping pace

It is common perception that stocks of fast moving consumer goods (FMCG) companies are defensive stocks. They often take a backseat to the more fancied and hyped growth stocks like software, automobiles or media. It is believed that these stocks should only be considered as a defence mechanism during bear phases. When the broader market is down, these stocks hold their ground reasonably well, offering stability to the portfolio while other stocks take a beating.
Well, the 'stability' logic still holds water. FMCG products, by their very nature, are essential for the daily requirements of all households-be it detergents, soaps, toothpaste etc. Demand for such bare essentials remains steady even during economic downturns. That is why these companies witness steady growth even when other industries are reeling from the consequences of a slowdown.

But, for years now, the performance of FMCG stocks has been far from defensive. It is time that FMCG stocks are stripped off this oft-repeated and generalised 'defensive' tag. Like their products, the stocks are fast-moving as well. Many of the stocks have surged to new all-time highs, outperforming the broader market indices handsomely.

Companies like ITC, Dabur, Godrej Consumer Products, Nestle and GSK Healthcare have performed quite well over the past five years. As a result, their stock prices have also exhibited phenomenal growth. In 2003, ITC was Rs40. Currently it is trading at Rs291. In 2006, GSPL was trading at Rs27 and now finds itself at Rs99. Similarly, Dabur and Nestle were trading at Rs12 and Rs500 in 2003-they are now trading at Rs192 and Rs2,811 respectively. GSK Healthcare, which is now trading at Rs1,655, was trading at Rs201 in 2003.

In the last quarter of the previous financial year the results have been especially great. While the Sensex has fallen by 2% between 4 January 2010 and 4 June 2010, the FMCG index has risen by a healthy 10%. Other sectoral indices like auto, banking and software have only risen by 6%, 7% and 2% respectively during this period. The future looks as bright. A KR Choksey report on the FMCG sector states, "We expect FMCG companies to continue their growth story with improvement in the overall economic scenario and consumer spending. With a likely normal monsoon as is expected by most experts, which would help cool off inflation, it will result in improvement in margins for all companies. Also, normal monsoons would increase the disposable income for rural consumers, giving them scope for more spending on consumer goods."

An Anand Rathi research report confirms, "With falling food inflation and a normal monsoon expected, we expect consumer companies to maintain the revenue growth tempo. However, we anticipate mounting competition to crop pricing power. With the fall in price of crude and lower raw material prices, margins would hold steady." According to KR Choksey, companies with a more diversified portfolio-both product-wise & geography-wise-would benefit more. This would include Nestle, GCPL, Tata Tea and Colgate.

Here is a brief look at the recent performance of some of the top FMCG companies. ITC reported a strong net profit growth of 27% y-o-y on the back of strong revenue growth in cigarettes, agri-business and FMCG businesses.

Revenues surged 30% while EBITDA increased by 25% y-o-y. The stock has reflected the strong growth momentum, surging 15% since its January opening.
Godrej Consumer Products Limited's (GCPL) revenues soared 48% on the back of robust growth in both domestic and international operations. Net profit jumped a phenomenal 55% while EBITDA also surged 52% y-o-y. GCPL's share price has also taken off, rising by 15% since January 2010.

Dabur is not far behind the growth curve either. Dabur's acquisition of Fem Care and strong volume growth boosted its top-line, which witnessed a 17% rise in the financial year 2009-10. Its EBITDA also expanded by 28% due to lower input costs. Dabur's stock has seen a 20% jump since January.

GSK Healthcare has also reported good numbers for the previous financial year. Strong volume growth in biscuits and nutrition supplements and improved realisations boosted its top-line by 20% while net profit rose by 15% y-o-y. Its stock price has surged 26% since January.

Indian Top 10 FMCG Companies

S. NO.	Companies
1.	Hindustan Unilever Ltd.
2.	ITC (Indian Tobacco Company)
3.	Nestlé India
4.	GCMMF (AMUL)
5.	Dabur India
6.	Asian Paints (India)
7.	Cadbury India
8	Britannia Industries
9.	Procter & Gamble Hygiene and Health Care
10.	Marico Industries

Consumer goods cos on song as urban, rural spends remain strong

Price-cuts, promotional offers and new launches boost volume growth.

Price-cuts, promotional offers and new launches boost volume growth.

Aarati Krishnan

Consumer goods companies have seen their products really move fast off the shelves in the latest June quarter even as other key sectors of India Inc struggled to sell.

Sales of the listed FMCG (fast moving consumer goods) companies have expanded by an average 15 per cent for the June quarter, while CNX 500 companies averaged an 8 per cent sales decline.

Significantly, FMCG sales were driven by robust volumes and not product price increases. Most listed players managed a double-digit expansion in volumes.

According to the companies, urban consumer spending improved even as rural spends on FMCGs remained strong. Price-cuts, new launches and promotional offers also helped drive volumes.

Under-penetrated categories such as hair oils, shampoo, foods and skin-care led the growth as players redoubled efforts to expand distribution reach.

Cheaper brands score

Smaller companies managed superior growth on good demand for mass-market brands and strong overseas sales.

Consider these numbers. Dabur India’s 22 per cent growth in sales in the June quarter was its best in three years.

This was mainly due to a 20 per cent-plus growth such categories as hair-care, toothpaste, foods and skin-care, aided by a 52 per cent growth in international operations.

“The urban economy has seen a revival in terms of demand and availability of cash with the consumer,” said Mr Sunil Duggal, Dabur CEO, in an earnings call with analysts this week. Godrej Consumer, on the other hand, says it owes the 22 per cent expansion in its sales to its thrust into smaller towns and rural areas. The company has managed to grow ahead of the category both in soaps and hair colour, by launching more variants of popular brands such as Godrej No 1 soap.

Industry behemoth Hindustan Unilever may have reported lower growth rates than its smaller rivals this quarter, but the company points to the over 6 per cent “swing” in its volumes as a sign of improvement.

Its volumes grew 2 per cent in the June quarter, after shrinking 4.2 per cent in the preceding period.

The company attributes this to a renewed focus on improving consumer ‘value’ in the past six months; it has revived discount brands, reduced prices and increased grammage in key categories.

No monsoon impact

“Both urban and rural markets remain strong. We haven’t seen any impact from a delayed monsoon,” its CEO, Mr Nitin Paranjpe, observed in the company’s earnings call.

“Some of these players also noted an improvement in sales through modern trade, after the consolidation of stores in the preceding quarters.” Do players see such growth being sustained in the face of the erratic monsoon? At the moment, yes.

Asked about the impact of deficient monsoons on FMCG sales, Mr Duggal said: “It is not likely to be catastrophic. The monsoon is not going to change the dynamics of the market significantly. The government has enough (weapons) in its armoury to mitigate the impact of a poor monsoon — the buffer stock of foodgrains, for instance. The spending on the employment guarantee scheme may also mitigate the impact of a poor monsoon. You should also remember that low (agricultural) yields tend to improve farm product prices.”

The frenetic pace of new launches and the sharp increases in the ad-spends of FMCG companies in June also underscore their optimism on sustaining growth.

Top 10 FMCG stocks that made gains post Budget

In the post budget rally the FMCG index of the BSE has outperformed the Sensex by giving a return of over 4% against a decline of almost 10% by the Sensex. Take alook at the top 10 FMCG stocks.

Tasty Bite Eatables Ltd

Three months return: 338.79 %

Kwality Dairy (India) Ltd.

Three months return: 143.49%

CCL Products (India) Ltd.

Three months return: 74.50 %

McLeod Russel (India) Ltd.

Three months return: 59.70 %

Jay Shree Tea & Industries Ltd.

Three months return: 56.74 %

Mount Everest Mineral Water Ltd.

Three months return: 49.90 %

Colgate-Palmolive (India) Ltd.

Three months return: 49.22%

GlaxoSmithKline Consumer Healthcare Ltd.

Three months return: 41.47%

Dabur India Ltd.- Three months return: 37.15 %
Marico Ltd. - Three months return: 33.22 %

Missing monsoon clouds status of consumer goods shares

The consumer goods stocks may well be at the threshold of a difficult period, if the India Meteorological Department’s prediction of a below-normal monsoon comes true.

hares of companies making personal and home care products have behaved as classic defensives in the past year and a half.

While the BSE 100 index on the Bombay Stock Exchange has fallen by 36% since 1 January 2008, the BSE FMCG index has risen by 1%. In the past one month, too, while the broad market has corrected by about 11%, these shares have risen by 6%. It’s interesting that investors chase these stocks when markets correct, especially keeping in mind that their valuations aren’t cheap. BSE’s FMCG index trades at a past price to earnings multiple of 27 times, compared with 20 times for the BSE 100 index.

Subsidiaries of multinational companies such as Unilever and Nestle have traditionally enjoyed a premium over market valuations owing to their relatively stable earnings growth, high capital efficiency and liberal dividend payouts. In recent years, even valuations of domestic consumer goods firms have risen sharply primarily because of consistent earnings growth.

But these stocks may well be at the threshold of a difficult period, if the India Meteorological Department’s (IMD) prediction of a below-normal monsoon comes true. This year’s south-west monsoon is expected to be 93% of the average. Uttar Pradesh, Punjab, Rajasthan, Haryana, Chandigarh, Delhi, Uttarakhand, Jammu and Kashmir and Himachal Pradesh are likely to receive just 81% of the average, IMD has predicted.


According to Citigroup Research, consumer goods stocks tend to underperform the market over a 12-month period after a weak or deficient monsoon. Also, the last three times monsoons have been deficient, private consumption has dipped sharply. Between fiscal 2001-02 and 2004-05, when the monsoon was deficient for two years, revenues of these companies grew at a compounded annual growth rate of 3% and their earnings growth was flat.


Of course, the contribution of agriculture to the overall economy has reduced considerably since then and the impact of a below-normal monsoon will be lower this time around. Besides, the recent Budget’s rural thrust, which includes the extension of the farm loan waiver till December this year and a liberal rural employment scheme, should help companies weather the storm to some extent in rural markets.


Still, unless the monsoon in July and August makes up for the shortfall, rural consumption will be hit. For companies such as Hindustan Unilever Ltd, rural India contributes to around 50% of revenues. Note that urban consumers had also cut back owing to the economic slowdown and spending hasn’t recovered fully.


With valuations of the major companies at around 30 times earnings, there is room for a sharp correction if the monsoon actually ends up being deficient.

FMCG: Shining, even without rain

Despite concerns about a less-than-normal rainfall, the BSE FMCG Index continues to outperform the market. Over the past month, the index has risen by 8 per cent whereas the BSE Sensex has lost 8 per cent. The monsoon does impact private consumtption, although to a much smaller extent than in the past. Also, it has been seen that in years of deficient rains, revenues of FMCG firms hardly grow.


A fairly large share of the sales of FMCG firms comes from the hinterland and a weak monsoon could hurt their business though the impact could be far less severe than in past years because of the rural stimulus package provided by the government.

The Street is also probably hoping that the monsoon will pick up in the crucial month of July when most of the sowing is done. Also, it seems to be focusing on the June 2009 quarter numbers which are expected to be strong. Indeed, most FMCG firms are expected to see their operating profit margins expand in the June quarter which will be perhaps the first quarter when the full benefit of lower input costs will be felt.

Morgan Stanley estimates that for its universe of companies, the expansion in margins may be in the region of 130 basis points. Of course, a part of this would be due to strong double-digit revenue growth that most companies are expected to post, the possible exceptions being Tata Tea and ITC.

The top line, for most players, is likely to be driven by volumes rather than price increases — in fact companies have dropped prices and introduced products at lower price points in a bid to push sales.

Delayed monsoon could change the weather for FMCG stocks: Analysts

25 Listed FMCG companies have not so far been affected by delayed monsoon. On the contrary, some of the players have seen summer sales of their seasonal products zoom. However, FMCG analysts and the marketers feel that poor rainfall may cause sales slippage in the rural turf going forward.

Analysts and companies themselves have not begun factoring in the weak monsoon in the fundamentals. According to Enam, on the back of recent strong earnings momentum, FMCG stocks’ valuations are attractive from historical perspective, but delayed monsoon is a worry. It noted that the defensive premium has eroded. The FMCG companies were sensitive to monsoons for both input (vegetable oil) costs and rural demand. Compared with last year, when early rains and a hiatus thereafter, caused a burnout of sown seeds in many areas, this year sowing activity has largely been delayed. The brokerage said the current delay was not reason enough to panic.

Summer sales

Mr Aditya Agarwal, Director of Emami, told Business Line that the summer sales of certain typical seasonal products in rural areas have gone up significantly – 30-80 per cent. However, he was mindful of the problems of overall rural sales growth going forward if the deficient rain situation continues for long.

According to research organisation MART, rural sector accounts for 46 per cent of all soft drinks, 59 per cent of cigarettes and 11 per cent lipstick sales. Around 30 per cent of the rural population currently uses shampoos compared with 13 per cent in 2000.

A C Nielsen’s retail sales audit figures for pre-monsoon April-May indicate 16 per cent YoY growth, lower than 19 per cent in FY09 YoY. According to ICICI Securities, sales growth was driven more by volume growth rather than price growth and all did not fare the same way. For HUL, a strong player in the rural market, sales grew 9.6 per cent. HUL lost significant market share in toilet soaps, toothpastes, skin care, detergent cakes and shampoos.

According to Edelweiss, had it not been for previous price hikes and commodity covers by the FMCG players in the recent quarters, rebound in prices of palm oil, HDPE and sugar could have put pressure on their gross margins. Sales momentum “is likely to be better in 1HFY10 on the back of right pricing” by HUL and followed by others.

The price actions in the FMCG counters, which have prominent rural links, still do not suggest a sharp decline. But the weekly growth has slowed down, analysts admit.

The Defensive Picks

With the fourth quarter results out, We reappraise the numbers and review our stock picks from the FMCG sector. Also, our fresh recommendations on them at their current prices


Its defensive nature helped the FMCG sector perform well even in these tough economic times. Here are some basic facts about some of our stock picks in this sector

• Marico Sales for the company crossed Rs 2,000 crore this financial year
• Britannia Inds Higher wheat and sugar prices may pose problems
• Colgate-Palmolive Focus on core business will give company a steady income stream
• Gillette India Strong brand value, but at 26 times earnings it’s a little expensive
• P&G Hygiene & healthcare Recorded 20% growth in net sales
• QSK Consumer Healthcare Improved its operating margin to 25.54% against 18.01% in the previous quarter
• Emami It can draw synergies from Zandu, which it acquired last year
• Hindustan Unilever Net sales during the quarter managed to grow only at 6%
• Dabur India Profit growth was at 31% as operating profits increased

***

The equity markets have bounced back sharply from their lows, but are still down 42 per cent from the peak of January 2008 and 28 per cent from the levels a year back. Typically, in a downturn, the focus shifts from the price of a stock to its earnings. In times when the financial sector and the real economy are in trouble, and the risk appetite is low, investors are willing to pay a premium for predictability of earnings. The last year was a witness to this trend.

Due to their defensive nature, the fast-moving consumer goods (FMCG) and the pharmaceuticals sectors stood out on performance during this difficult period. Anticipating this sectoral shift, we started recommending stocks from these sectors from late 2007. In this issue, we revisit our picks from the FMCG space in the light of the fourth quarter results for financial year 2008-09 (Q4FY09) and give fresh recommendations at their current levels.

***

Britannia Industries

The collapse of Lehman Brothers in mid-September last year intensified the global financial crisis and stockmarkets across the world slipped sharply to lows from which they are still struggling to recover. Even in this scenario, some defensive stocks, such as Britannia Industries bucked the trend. From around Rs 1,080 in October, the stock has moved up to its current level of around Rs 1,550.

We recommended this stock in January 2007 at Rs 1,101. It went up all the way to Rs 1,700 in December 2007, but corrected to Rs 1,316 by September 2008 due to fears of hyperinflation. Though the fear of inflation has eased, higher wheat and sugar prices may continue to pose problems. The company’s March quarter numbers are expected to be out on 30 June 2009; the December quarter numbers did show pressure on margins. The operating margins contracted about 100 basis points.

We recommend a hold on this counter as the company is witnessing good volume growth. Volumes were up 12 per cent in the December quarter, while total sales were up 25 per cent. Also, decline in crude prices will help save on packaging cost.

Our recommendation: Hold

***

Colgate-Palmolive (India)

Colgate has focused solely on its core strength—oral dental care products. Through its marketing efforts, the company has retained the top position in product categories such as toothpastes and toothbrushes.

It also undertakes marketing initiatives at regular intervals to increase consumption of oral care products, which has helped it sustain growth in both rural and urban areas. In the first three quarters of FY09, the company’s sales grew sequentially. On yearly basis, sales growth averaged 15 per cent and the average profit growth was 20 per cent.

One of the company’s strengths is its ability to cut costs at all levels. Even in 2007-08, when rising commodity prices were putting downward pressure on the margins of most FMCG companies, Colgate kept its operating margin intact by improving company-wide efficiency and cutting costs. Given its consistent business performance and returns to shareholders, we re-recommended Colgate-Palmolive (India) in April 2009. We first recommended it in April 2008.

Currently, the company’s scrip is priced at 24 times its trailing 12 months’ (TTM) earnings, which is a bit higher than the April 2008 level. Along with the price rise, the company should be able to maintain high growth in its earnings. From that perspective, the stock does not look expensive even at its current PE. However, at this level, you could also book some profits and re-enter later at a lower price.

Our recommendation: Book Your Profits

***

Dabur India

We recommended Dabur India in November 2008 at 20.91 times its TTM earnings. Although the valuation seemed high as compared to the then depressed market, expectations of steady returns made it a case for investing. The scrip has moved up around 25 per cent since then and is now commanding a PE of 24.

During Q4FY09, the company’s consumer care business, which accounts for the bulk of its revenue, grew at a robust 20 per cent. As a result, the overall revenue, too, went up 20 per cent. The profit growth was higher at 31 per cent as the profitability of operations increased.

Dabur is known for herbal products in the personal care and healthcare categories. Although herbal products account for around 85 per cent of its revenue, the company is also focused on developing non-herbal products such as fairness creams.

The company has not restricted itself to organic growth and continuously looks for acquisitions to mark its presence in new markets and new categories. Its international division has reported a strong growth of around 40 per cent. It had a presence in North Africa and has now entered high-potential markets such as China, Turkey and Lebanon.

The Indian market continues to have huge potential in the form of the under-penetrated rural market. Growth in the rural segment, which forms 32 per cent of the FMCG market, would support the company’s current growth momentum. Considering this, the stock should have a place in your portfolio.

Our recommendation: Hold

***

Emami

A major player in personal and healthcare business, Emami focuses on ayurvedic products backed by modern manufacturing technology. We recommended its scrip in October 2008 at 18 times its TTM earnings when it was in process of acquiring Zandu Pharmaceutical Works.

The acquisition is now complete—Emami paid around Rs 750 crore to buy a 72 per cent stake in Zandu. The amount seems large compared with Emami’s
Rs 650-crore annual revenue in FY09. However, the acquisition will add value to the company in the long run.

It would add to both the topline and bottomline of the company. This is already reflected in the company’s consolidated earnings figures (including Zandu) for FY09. The consolidated net sales increased by 28 per cent year-on-year (y-o-y). Emami’s operating profit was up 37 per cent due to improved business profitability.

Emami’s standalone (excluding Zandu) sales and operating profit also showed a healthy growth of 11 per cent each. In FY09, the company accounted for interest outflow compared with interest inflow in the previous year. The net effect was high interest expenses growth in FY09, which eroded its profits.

Emami continues to maintain the lead position in most of its product categories. Zandu would further add to its portfolio of ayurvedic products. Considering the stability of Emami’s business, at the current PE of 20, its stock is still attractive.

Our recommendation: Hold

***

Gillette India

Gillette’s business seems shielded from the effects of the downturn. The Q4FY09 results are a proof. Its male grooming products, including razor blades, reported a revenue growth of around 14 per cent y-o-y. The oral care segment grew robustly at 59 per cent. The relatively smaller segment, portable power, grew at a healthy 19 per cent. Overall, the company’s net sales and profit grew at 22 per cent and 27 per cent, respectively.

We had recommended Gillette at a PE of 22.79 in February 2008. Since then, the stock has lost 19 per cent of its value. On the other hand, the PE has moved up to 26.34. This means that the EPS has come down. At its current PE, the stock looks expensive.

Our recommendation: Sell

***

Glaxosmithkline Consumer Healthcare (GSK)

We recommended this stock in August 2007 at Rs 588, and maintained a buy on it in our issue dated 9 April 2009. The stock continues to attract buying interest.

Backed by robust numbers for the March 2009 quarter, the stock has moved from Rs 716 in mid-April 2009 to the current levels of Rs 810. In the March quarter, the company registered a sales growth of 31.28 per cent, while net profits were up 48.35 per cent, which was above expectations.

The company also improved its operating margin in the March quarter to 25.54 per cent against 18.01 per cent in the previous quarter. Its net margins reached 14.85 per cent from 9.11 per cent during the same period.

During the March quarter, the company added two products to its portfolio—Horlicks Nutribar, a nutritional snack for health conscious people, and Actigrow, a high-protein baby food. Also, Boost is the official energy drink of Rajasthan Royals in the Indian Premier League (IPL).

We maintain a buy recommendation on the stock. Though prices may go down in the short term as they went up very quickly last month, the stock is expected to touch new highs in the long term due to volume growth and better margins. Also, at the end of 2008, the company had cash in excess of Rs 470 crore, which can be used for expansion or for disbursing higher dividends.

Our recommendation: Buy

***

Hindustan Unilever (HUL)

We recommended HUL in March 2008. The stock has not appreciated much on a year-to-date basis since then, but it has protected shareholders’ capital. It went on to touch Rs 268 in February 2009 from Rs 225 in April 2008 when we had recommended it. The stock corrected after February 2009 and is currently trading at Rs 225.05.

The company is out with its fourth quarter results for FY09 and the numbers are below street expectations. Net sales during the quarter only managed to grow at 6 per cent, largely due to a 45 per cent decline in the value of exports. The management says that the decline in non-core exports is part of a strategy. Profits after tax before exceptional items went up 20 per cent.

However, profits after exceptional items were flat. Operating margins did improve by 200 basis points, largely due to lower input prices. So, the current price of Rs 225.05 is about 21 times its earnings. Maintaining the growth looks difficult in view of disappointing sales numbers. We would recommend you reduce exposures.

Our recommendation: Reduce Holdings

Marico

Riding its strong portfolio of brands such as Parachute, Nihar and Saffola, Marico has posted a topline growth of 25 per cent to cross the Rs 2,000-crore mark in this financial year for the first time; its volume growth was 12 per cent.

Parachute and Nihar, the leading brands of the company, grew 9 per cent during the financial year and maintained their market share of 48 per cent in the Rs 1,500-crore branded coconut hair oil market. Among other businesses, Kaya Skin Clinic, which has 74 branches in India and 11 in the Middle East, registered a turnover growth of 57 per cent in FY09. Though it ended the year with a loss of Rs 1.6 crore (due to opening of new clinics), the company expects Kaya to contribute to the bottomline in FY10.

We recommended Marico at a price of Rs 50.65 on 27 October 2008. The stock is currently trading at Rs 66.25. We maintain a hold on this counter as the company is expected to maintain its growth momentum.

The company took a Rs 15-crore hit in profits due to the divestment of Sundari, its spa products business, which Marico acquired in 2003. But, going forward, The company expects to improve operating margins with raw material prices easing significantly. Marico declared a dividend of 65.5 per cent during FY09.

At the end of FY09, Marico had a gross debt of Rs 375 crore, of which Rs 200 crore is dollar denominated. The management is confident that it has adequate cash flow to maintain healthy debt service coverage.

Our recommendation: Hold

Procter & Gamble Hygiene & Healthcare (PGHH)

We recommended the stock in March 2008 at a PE of 20. A year later, the stock has barely moved up by 3 per cent. However, considering the defensive nature of FMCG stocks and the unclear direction of the market, we reiterated our buy call on the stock.

PGHH’s two-brand portfolio has Vicks and Whisper. These are leaders in their respective categories and have huge untapped market potential. Whisper, a female hygiene product, controls around 50 per market share in urban areas. To further build a large customer base, it is reaching out to schoolgirls. Also, it is increasing the product awareness by offering samples in government schools. These steps would help the company grow its volume in the high-potential female hygiene market—just two out of 10 women in urban areas use branded pads.

PGHH’s other over-the-counter health product, Vicks, has also led the category since its inception.

In Q4FY09, the company’s net sales grew 20 per cent. The costs were under control and operating margins were stable compared to the previous quarter. Net profit growth was particularly robust at 27 per cent.

It is unlikely that PGHH’s business momentum will get hit in a major way because of the economic slowdown. Considering this kind of stability and a relatively low PE of 18, the stock remains a good investment.

FMCG Sector Stock Investment - Best in Times of Slowdown

The FMCG sector in India is one of the biggest in the world and growing at a scorching pace. In times of a global slowdown and recession (in some countries) the FMCG sector provides one of the best investment opportunities in India. This is one of the sectors which will be relatively less hit by the global economic slowdown. So good stock selection in this sector can gibve good returns even in bad times for the overall economy.

The Indian FMCG sector stocks have so far shown a lot of resiliance in the recent stock market meltdown. Most of the FMCG sector stocks have outperformed the Sensex this year and some stocks still have positive one year returns. So its a sector worth looking at and also considering some exposure to in these bad times.

The table below shows ten FMCG companies in India and their one year stock market performance along with their PE ratio and beta. The Indian FMCG sector stocks have a very low beta value which in itself indicates low volatility in these stocks. The study of these 10 stocks would also suggest how some have generate positive returns in this market meltdown. Please click on chart to see enlarged image.



Some stocks in the FMCG sector are trading at relatively high PE and can be avoided for now. They do need to come down somewhat to be in par with the overall market valuations. But downside might not be big as the FMCG stocks have been registering robust growth even in this enviornment.

Also while selecting a stock in the FMCG one need to look into several important factors such as:

• The kind of rural penetration the company products have. The higher the better.

• If most of the products of the company are high end face or bodycare products. These product companies can be avoided for now and companies with more basic day to day use products should be considered. Look at what is a necessity and avoid companies whose products might be more of a luxary.

• Comparison of the intersegment PE and also the PE of the company vs. its growth rate. So if a company has a PE of 20 but is growing at greater then 20% easily then its fine.

Another positive for most of these FMCG sector stocks is that they are debt free companies. This is always good and specially good in these times of volatile interest rate enviornment.

For investors eyeing the FMCG space, large domestic companies offer attractive growth prospects. These companies are outperforming their MNC peers and small Indian companies in the sector. But MNC's generally have a better profit margin then the local players.

Another stock which I have missed in the list of ten companies in the chart above is Nestle India Ltd. This is also a good company but trading at a relatively higher PE of 30. Tis stock is worth looking at if the stock prices do correct in the near future.


While there is no doubt that consumer spending in India will also be hit in the wake of this slowdown it will not be as high as the effect this slowdown will have on some other sectors. So if one really wants to invest in the stocks markets now he/she would be relatively better off investing in these FMCG companies then any other industry.

Best Stock Picks: stocks like ITC, Dabur and Gillette in the FMCG sector.

Caution: While the FMCG sector has not seen much correction in the stock market carnage it does not mean that it might not fall in the near future. A bear market can make good stocks fall to values which have no relation to their fundamentals or growth prospects. So even if one is investing small exposure is advised.

Best FMCG Companies - Stocks to Invest in 2009

FMCG stocks seem to be the dark horse on the bourses. These stocks are now catching the eye of investors. Analysts and market experts are now putting a ‘buy’ recommendations on select FMCG stocks, a move which is not just being considered as a safe ploy but also as a defensive strategy to counter a volatile and uncertain market.

The trend is visible on the bourses where leading FMCG counters have outperformed the overall market during the last few sessions. Take the case of MNC giant Hindustan Unilever (HUL). The company’s stock has made its 52-week high at Rs 267 on December 19, at a time when BSE’s benchmark index, Sensex, was trading under the 10,000-mark (down by over 50 % from its life-time high of 21,000 made in January, 2008).

Similarly, the scrip of another FMCG giant, Godrej Consumer, is currently hovering near its 52-week high of Rs 145. On Wednesday, the stock price closed at Rs 138. Other companies like P&G , Dabur(I) and Colgate Palmolive have also recorded better performance on the bourses. Market analysts who earlier stayed away from FMCG stocks are now taking a fresh look at these rising scrips. Though some reservations about the FMCG sector still persists, the analysts have accepted the “safe” nature of these stocks.

Dabur India - Good Stock From FMCG Sector

“Fall in commodity prices (from crude, vegetable fat and food articles) is the main reason behind the outperforming FMCG sector. Earlier trends indicate that fall in commodity prices will lead to an improvement in profitability of the FMCG companies in the next fiscal. Such a phenomenon will not remain limited to just soaps and detergent companies; even paints, confectionery, food processing and others will get benefit of the fall in commodity prices,” said Ajay Parmar, head, equity, Emkay Global Financial Services. “Those who want to play defensive can invest in such stocks,” he added.

Anand Shah, a research analyst at Angel Broking, is also optimistic about the FMCG sector. Though the markets (at current level) have already discounted the positive impact of the fall in the raw material costs, Shah believes that those who wish to play safe should invest when the prices of the FMCG scrips fall.

“FMCG companies will be able gain cost advantage on raw materials, freight, transport and packaging. The balance sheet of the FMCG companies will definitely gain strength in the coming quarters,” Shah said while cautioning the investors to adopt a stock-specific approach instead of a sector-specific one.

However, not all are convinced. “Now-a-days , smaller players are eating into the business of big MNC players in the FMCG sector. Biggies are therefore losing their market share,” says VVLN Sastry, country head at Firstcall India Equity Advisors. “There is some momentary activity in FMCG stocks, which is a part of the defensive strategy adopted by the traders to restrict the downslide. But this trend will not prevail for a long time,” he added.