The Financial landscape of Indian FMCG Sector

At a time when the economy and industry sectors such as auto mobiles, aviation and financial services are reeling from slowdown, the fast moving consumer goods (FMCG) sector in India has not witnessed any visible signs of demand destruction, but is growing with healthy pace. Though India's GDP growth slumped down to nine year low of 5.3% in Jan-March quarter 2013, but FMCG companies bucked the trend with 15% plus growth during the same period. Most companies had posted double-digit net profits in the fiscal year 2013 backed by healthy sales. This trend is being replicated in the financial markets as well. Having exited other sectors like realty, infrastructure and capital goods, investors are now turning their attention to FMCG sector which is considered to be defensive. However, analysts feel that stocks in the sector are trading higher than historical valuations and sustaining these will be challenge. Largely unaffected until November 2012, the FMCG industry growth trajectory has dwindled since December 2012. Expansion might be difficult as even the most prestigious FMCG firms today are under pressure when it comes to retaining position and growing in the ever competitive scenario. Volume growth is rapidly becoming a strategic imperative for the FMCG players and sustaining price earning performance is a big challenge they face. This paper is an attempt to analyse the financial landscape of the Indian FMCG sector in the light of its past performance, rising opportunities and emerging challenges in the coming years.