This week, we talk about India’s record food production and the steller results top FMCG companies have posted ahead of the festival season. We also talk about the double whammy hitting the Dabur Group and why Adani Group was in the news again.
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What do we typically do in a festive season? We eat, drink and make merry. Now, to eat well, we need food, and for a country with the biggest population on the planet, we need, well, lots of food.
Thankfully, food production in India has been growing in leaps and bounds over the past six decades, thanks mainly to the ‘green revolution’ that the country’s agricultural scientists helped usher back in the 1960s. Gone are the times when the country faced food shortages that necessitated imports of grain that was often considered not fit to be consumed even by cattle.
This week, the government said that India’s foodgrain and horticulture production hit a record high in the July 2022 to June 2023 crop year. Final estimates put foodgrain output in 2022-23 at a record 329.68 million tonnes, up 4% or 14.1 million tonnes higher than the year before.
Official data showed that foodgrain output has consistently grown over the last decade, from 257.1 million tonnes in 2012-13 to 315.6 million tonnes in 2021-22. Foodgrain production in 2022-23 is 30.8 million tonnes higher than the previous five years’ average, the farm ministry said.
Production of all major food commodities–rice, wheat, pulses and oilseeds–was up as was that of fruits, vegetables, plantation crops, flowers and honey.
The good news does not just end here. The fact that Indians are eating (and generally buying) more FMCG products has meant big profits for companies in the sector.
FMCG bigwigs Hindustan Unilever (HUL) and Nestle India reported impressive results this week, exceeding analyst expectations.
HUL, India’s biggest FMCG company, reported a standalone net profit of Rs 2,717 crore for the July-September quarter, up 3.86% from the year-ago period. Its revenue rose 3.53% to Rs 15,027 crore from a year ago. The company’s earnings before interest, tax, depreciation and amortisation (EBITDA) were at Rs 3,694 crore, growing 9.4% from a year ago. The EBITDA margin improved by 130 basis points to 24.5%.
Nestle India did even better as the Maggi and Kitkat maker reported a net profit of Rs 908 crore in the quarter ended September 2023, registering a growth of 37.3% from Rs 661.46 crore a year earlier. Its revenue increased 9.5% to Rs 5,036.8 crore from Rs 4,601.8 crore a year ago. EBITDA rose 21.3% to Rs 1,225 crore even though the EBITDA margin decreased to 24.3% from 22.1%.
One FMCG major–ITC–however, disappointed its shareholders. Its results were a bit of a mixed bag as profit growth came in ahead of analyst estimates but cigarette volume growth of 4% and revenue growth of 3% disappointed a bit.
The Kolkata-based tobacco-to-hotels conglomerate reported a 10% rise in profit to Rs 4,927 crore for the September quarter while revenue increased to Rs 17,705 crore from Rs 17,160 crore a year earlier.
So, as we near Dussehra and then Diwali, the wedding season is upon us, and as India keeps winning at the cricket world cup, these FMCG companies are likely to see their cash registers ringing even louder!
Double trouble for Dabur
ITC was not the only big FMCG company that had a rough week. Dabur India, which is promoted by the Burman family, was in the news for all the wrong reasons, as it faced a double whammy.
On Tuesday, Dabur said it had received a Goods and Service Tax (GST) demand notice of Rs 320.6 crore. The company said it would challenge the demand and that the notice would have no major impact.
The following day, the company said its subsidiaries were among companies that were sued in the US and Canada by customers who alleged that the use of their hair relaxer products caused ovarian cancer, uterine cancer and other health issues. The consumer goods firm said that there are about 5,400 cases against several companies including its subsidiaries Namaste Laboratories, Dermoviva Skin Essentials and Dabur International.
This negative news flow comes even as the Burmans are keen on taking control of financial services firm Religare Enterprises, in which they are already the biggest shareholders. In September, the Burmans had said that they had offered to acquire an additional 5.27% stake in the financial services company for Rs 407 crore, leading to a mandatory open offer to buy an extra 26% stake from the public.
Crude reality
The crisis in West Asia seemed to have deepened this week, as Israel looks set to mount a land invasion into the Gaza Strip.
Within hours of being accused of bombing a hospital that led to dozens of deaths, Israel saw a beeline of world leaders coming to meet its top leadership, with offers of support. Those that visited Tel Aviv included US President Joe Biden, UK prime minister Rishi Sunak and the German Chancellor Olaf Scholtz, who had to hide in a bunker just as he arrived in Israel.
But the bigger worry for us in India could be oil majors like Iran and Saudi Arabia directly getting involved in the conflict. If that happens, the global price of crude oil could shoot up, which could be inflationary and might even have a bearing on India’s forex reserves.
We certainly hope better sense prevails and the conflict is contained without any more collateral damage.
Busy week for Adani
The Adani Group seems to have made it a habit of sorts, to stay in the news week after week. This week, it was reported that industrialist CK Birla had approached the Gautam Adani-led conglomerate to sell his group company Orient Cement.
Separately, Adani Group is closing in on a $3.5 billion loan to refinance existing debt that was taken out to fund the purchase of Ambuja Cements Ltd, in what would be the latest sign of confidence among its creditors. The deal would be among the top 10 biggest loans in Asia this year, a media report said.
The Adani Group also made news as Trinamool Congress Lok Sabha member Mahua Moitra was accused by Bharatiya Janata Party member Nishikant Dubey of accepting bribes to ask questions directed against the conglomerate’s interests.
Moitra has been accused of asking questions in the lower house at the behest of the Hiranandani group, whose promoter Darshan Hiranandani has since turned approver. Moitra has, however, denied these allegations and the case is now likely to be taken up by the parliamentary ethics committee as also by law enforcement agencies, in the coming days.
Market Wrap
The last couple of weeks have been slightly unnerving for the Indian stock markets.
The threat of the Israel-Hamas war turning into a much wider conflict, as well as muted results by some Indian companies, did not augur well both for the Sensex and the Nifty. Both the Nifty and the Sensex ended the week down over 1%.
Nifty stocks that ended the week in the green, despite the overall bearish sentiment, included four auto majors–Bajaj Auto, Tata Motors, Hero MotoCorp and Maruti Suzuki–as well as IndusInd Bank. Other stocks that rallied in the week were Cipla, Coal India, HCL Tech, Ultratech Cement and ONGC.
Nifty stocks that fell the most in the week included three big lenders–State Bank of India, Axis Bank and ICICI Bank–and non-banking finance company Bajaj Finance. Apart from these stocks, others that ended the week in the red were tech majors Wipro, Tech Mahindra and Infosys as well as the likes of ITC, Adani Ports, GAIL India, Hindustan Unilever and Asian Paints.
Other headlines
- Tata Steel to buy 26% stake in Tata Power arm TP Vardhaman Surya
- Tata Group considers topping up another $1 billion for super-app arm
- PVR Inox Q2 profit at Rs 166 crore, revenue rises to Rs 1,999 crore
- Jindal Stainless Q2 net profit more than doubles to Rs 764 crore
- Govt-owned ‘bad bank’ acquires Dharani Sugars and Chemicals, SPML Infra and Parenteral Drugs
- Directorate General of GST Intelligence detects overall GST evasion of Rs 1.36 trillion in FY24
- Govt to issue end-to-end digital authorisation for import of laptops and tablets
- Govt hikes DA/DR for central govt employees, pensioners
- Govt expects coal dispatch to exceed 1 billion tonnes in FY24
- ICC World Cup: First 11 matches saw 268 million viewers tuning for live broadcast
That’s all for this week. Until next week, happy investing!
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