Revenue of fast moving consumer goods (FMCG) sector is expected to de-grow 2-3% in the current financial year, said rating agency Crisil. This is a drastic change from its earlier estimate of 8-10% growth made before the pandemic struck.
The demand and supply shock induced by the COVID-19 pandemic, caused by very limited mobility and supply-chain disruptions during the lockdown, and lower income visibility for consumers, have derailed sales, stated a release by Crisil on Tuesday.
It, however, added that softer input prices and pruned advertisement spends will cushion the impact of the sharp revenue drop on operating profitability, which will still remain healthy at 18-19%.
That, along with well capitalised balance sheets, limited need to add capacity, and largely negative working capital nature of the business will ensure credit profiles of FMCG companies remain stable in the current fiscal, stated the release.
The rating agency's latest estimates are based in an analysis of 57 FMCG companies that account for around 50% of the sector’s revenues.
Further, it assumes staggered relaxation of lockdown from June 2020 onwards, gradual recovery in sales thereafter, and normalcy in operations from the second half of the current fiscal.
