Revenue growth of the fast-moving consumer goods (FMCG) sector will double from 5-6 percent reported for last fiscal to 10-12 percent in 2021-22.
Accordingly, the trend is expected to be driven by price hikes effected across product categories to offset the impact of the raw material price increase and a raft of other favorable factors, said Crisil Ratings.
Besides, the agency said that operating margin, on the other hand, will be restored to the normal level of 19-20 percent with a moderation of 80-100 basis points (bps) this fiscal due to an increase in advertising expense and rise in raw material prices.
Interestingly, it cited that operating margin had improved by 100 bps last fiscal despite lower revenue growth, due to reduction in advertising and promotional expenses.
Furthermore, the agency said that the continuation of strong cash generation and healthy balance sheets, as well as sizeable cash surpluses, will ensure the credit outlook remains ‘stable'.
"Price hikes of 4-5 percent effected by the players across product categories over the past six months to pass on inflation in raw materials, together with volume growth of 5-6 percent and a revival in demand for discretionary products, will support revenue growth of 10-12 percent this fiscal," said Anuj Sethi, Senior Director, CRISIL Ratings.
"Widespread Covid-19 afflictions in the hinterland during the second wave will result in a moderation in rural growth this fiscal. However, recovery in urban demand for FMCG products will offset this and outpace rural revenue growth."