1. Patanjali to clock Rs 20,000-cr sales in FY20: IIFL report

Patanjali to clock Rs 20,000-cr sales in FY20: IIFL report

Patanjali, a relatively new FMCG company, is expected to clock sales of Rs 20,000 crore in FY20, resulting in 1-1.5% impact on sales compound annual growth rate (CAGR) for the sector.

By: | Mumbai | Published: January 5, 2016 12:54 AM

Patanjali, a relatively new FMCG company, is expected to clock sales of Rs 20,000 crore in FY20, resulting in 1-1.5% impact on sales compound annual growth rate (CAGR) for the sector. Colgate and Dabur would be impacted the most whereas ITC and GCPL would be impacted the least, an IIFL report said.

The FMCG company with focus on health and wellness categories has reported turnover of Rs 2,000 crore in FY15 and is targeting to report Rs 5,000 crore turnover in FY16 and will become larger than companies like GSK, Colgate, Emami among others.

Patanjali’s focus is on revenue and not profitability. The company is well on course to achieve its targeted revenue of Rs 5,000 crore to Rs 6,000 crore in FY16. Even though the thrust is not on profitability, the company managed to clock 20% EBITDA margin in FY15, aided by better cost management (latest machinery and strong R&D capabilities) and lower A&P spends. To improve its distribution reach, the company is strengthening its online presence. Shortly, a mobile app will also be launched to help locate retail outlets and for online ordering of Patanjali products, said Abneesh Roy, an analyst at Edelweiss Securities.

The highest impact of Patanjali’s revenue growth will be on companies like Colgate as Patanjali is gaining substantial traction in oral care, followed by Dabur due to multiple category overlap. Colgate is likely to be impacted the most with FY20 sales expected to decline 7.8% . ITC, GCPL and Nestle are likely to be least impacted due to few common categories. Dabur is the next to be impacted with overlap in several categories such as ayurvedic medicine, chyawanprash, digestives, hair oils, honey, juices, oral care, shampoo and skin care. Dabur’s FY20 sales is expected to witness a 7.5% decline, according to a IIFL report.

Gr4

“Given the market share that Patanjali can garner in each category, we estimate the reduction in FY20 sales for each category company combination due to Patanjali. Patanjali will reduce FY20 cumulative sales of companies under our coverage by R7,900 crore or 39% of Patanjali’s turnover will come from our coverage universe, 43% from other companies, and 18% from expanding the market,” said Avi Mehta, an analyst at IIFL Institutional Equities.

Patanjali has already garnered more than 5% market share as general/modern trade distribution ramps up, market share would further increase to 13% by FY20. A pricing comparison across various product categories reveals that barring one category, major Patanjali products are available at a discount to listed peers. While the steepest discounts are available in honey, face wash, noodles, and shampoos. Patanjali’s most popular product – “clarified butter” (Cow Ghee) is priced at a premium.

HUL faces a moderate impact of 4.4% on FY20 sales as Patanjali will be less successful in categories that are outside the brand’s core appeal of health and wellness and HUL is more exposed to those categories. Moreover, HUL’s categories are deeply penetrated and therefore dependent on distribution. Having said that, Patanjali could shave off Rs 2,200 crore from HUL’s FY20 turnover, i.e. 11% of Patanjali’s FY20 turnover would come at the cost of HUL alone.

ITC is safest from the threat of Patanjali as it considers cigarettes unhealthy and against its philosophy.

Tags: Patanjali
  1. R
    Ramachandra Reddy
    Jan 5, 2016 at 7:42 am
    BABA YOU GO AHEAD AT FULL STEAM. WE ARE WITH YOU. BUT CAREFUL ABOUT JAICHANDS WHO are AT DERAILING YOU WITH SLANDERUS ATUDE.
    Reply

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