1. GST impact on FMCG shares: stocks soar, see up to 300% rise in 6 months

GST impact on FMCG shares: stocks soar, see up to 300% rise in 6 months

Most FMCG stocks were trading higher on Monday as India the historic GST (Goods and Services Tax) was rolled out at a special joint midnight session of Parliament on 30 June. Right from the beginning of this year, FMCG stocks have surged as much as up to 300%.

By: | Updated: July 3, 2017 1:01 PM
The list includes Venkys India, which has tripled in the last six months, and Avanti Feeds which has doubled during this period 302.18% and 205.1%. (Image: Reuters)

Most FMCG stocks were trading higher on Monday as India the historic GST (Goods and Services Tax) was rolled out at a special joint midnight session of Parliament on 30 June. Right from the beginning of this year, FMCG stocks have surged as much as up to 300% on expectations that the implementation of GST will lower the tax burden on consumer goods and boost the business with ease in the movement of goods, which will be a win-win situation for both, consumers and companies.

The list includes Venkys India, which has tripled in the last six months, and Avanti Feeds which has doubled during this period 305.05% and 208.08%. Other major stocks in the list of FMCG companies have also soared, with some rising as much as about 70%, while the others gaining still decent about 20% in six months.

The FMCG blue-chips have risen in the range of 24%-42%, with four stocks outperformed the benchmark BSE FMCG index, which has returned 34.42% in the first half of the current year 2017. Shares of ITC Ltd are up 42.31% since the beginning of this year, Hindustan Unilever Ltd is up 32.41%, Godrej Consumer Products is up 29.81%, while Britannia is up 28.79%. Another blue-chip, Colgate-Palmolive has risen 24.3% since January.

Other gainers on the BSE FMCG index include Bombay Burmah Trading (up 72.23%), Vadilal Industries (up 68.41%), Eveready Industries (up 58.8%), Kaveri Seed (up 58.58%), Future Consumer (up 56.89%), Dhampur Sugar Mills (up 46.72%), Manpasand Beverages (40.77%), VST Industries (up 53.68%), Gujarat Ambuja Exports (up 43.98%), Kokuyo Camlin (up 30.27%), AVT Natural Prod (up 37.23%), KRBL (up 29.69%), Mcleod Russel (up 25.35%), Heritage Foods (25.64%), Tata Global Beverages (up 25.15%), Marico (up 22.77%), E.I.D Parry (up 23.18%), Balrampur Chini Mill (up 22.73%), Triveni Engineering & Industries (up 23.71%), Godfrey Phillips (up 27.32%), Kwality (up 20.87%), Gillette India (up 18.05%).

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Analysts say that post GST implementation, most FMCG companies will be able to generate substantial savings in logistics and distribution costs as the need for multiple sales depots will be eliminated. At the moment, FMCG companies end up paying nearly 24-25% taxes including excise duty, VAT and entry tax. With a tax rate of 18% under GST, there could be a significant reduction of 6-7% in taxes.

Dabur India CFO Lalit Malik had recently said the new tax rates were marginally favourable. He said that most FMCG products have been placed at 18 per cent or below, and this is on expected lines, except for home care products and shampoos, which now attract 28 per cent tax under GST.

For the past 17 years, the idea of ‘One Nation, One Tax’ witnessed several delays, heated politics and more. But now the GST has been implemented in a splendid ceremony held on the midnight of 30 June in Parliament house. However, the GST could not have been possible without the ideas put on board by several opposition parties and their leaders.

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