After a positive Q3 results, Hindustan Unilever (HUL) CEO and Managing Director Sanjiv Mehta said that while the worst of inflation is ‘perhaps behind’ but there is a long way to go before the sales volume growth in rural markets becomes positive. HUL, on Thursday, posted a 16 per cent jump in sales in the December quarter. While addressing the company’s third quarter earnings virtual conference, he said that the rural market has seen some green shoots in terms of slowing the decline of growth. “When it comes to rural, the numbers have improved. There was a period of time in June-July that the value growth was negative in rural (market). Now that is no longer the case. In the September quarter, the rural growth (value) has been 2.5 per cent and the volume growth was minus 9 per cent,” Sanjiv Mehta said.
He further said that on a month-on-month basis, the volumes are recovering from the fall, and while things are improving, there is a long way to go before the volume in rural markets becomes positive. “Under the present circumstances, inflation has been a big contributor in the decline in rural volume growth because the value growth is still there. So if inflation comes down, we certainly believe the volume growth will come back,” he said. Even as people across the country are spending, he said, they have cut back on volumes due to the looming inflation. “The overall market value growth is at 6-8 per cent. So, if inflation comes down, then we certainly believe volume growth will come back,” he added.
Rising commodity prices & possible price hike
Sanjiv Mehta said that while the net material inflation is down from 21-22 per cent to 18 per cent on a sequential basis, commodity prices have not come down to the pre-increase levels and only the rate of increase has declined. Asked if this will lead to further price hikes, he said that it will depend on commodity prices and the company will also factor in the price-value equation and competitive pricing before a decision is made on increasing prices.
Budget expectations
Talking about the upcoming budget, Mehta said that in order to accelerate growth especially in the rural market, it is important that there is more money in the hands of the poor people and so, stability of taxes is important. For the manufacturing sector, he said “it may be worthwhile” that the tax rate of 15 per cent plus surcharge for the new manufacturing, which requires the companies to start manufacturing in March 2024, be extended by another five years. “I think India has a fabulous opportunity to capitalise on the possibilities that global supply chains are looking at to shift, whether it is China plus one or Europe plus one. So it may be worthwhile whether this concessional rate of tax can be extended by another five years,” he concluded.