FMCG stocks rise as industry welcomes GST rates

Live mint By Soumya Gupta Fri, May 19 2017. 11 06 AM IST

Impact of the GST rates was seen across the board as the benchmark BSE FMCG index closed 1.86% higher to 9,627.43 points

Marico shares closed 1.08% higher on BSE. Photo: Pradeep Gaur/ Mint

Mumbai: FMCG stocks opened higher on Friday as the government announced goods and services tax (GST) rates for most consumer goods in an ongoing GST Council meeting. Rates for most commonly used consumer goods like soap (bars), toothpaste, hair oil and others were fixed at the 18% slab versus the highest 28% tax slab.

Impact of the GST rates was seen across the board as the benchmark BSE FMCG index rose 1.86% to 9627.43 points, while the BSE Sensex closed up 0.10%, to 30,464.92 points.

“We understand that the GST rate structure is extremely positive, encouraging and augurs well for the industry,” Marico Ltd’s chief executive officer Saugata Gupta said in an email statement on Thursday. “It is anti-inflationary in nature and will help drive consumption as well as long-term economic growth.”

Stocks of Marico Ltd closed up 1.08% at Rs 309.00 on BSE. Hair oil brand Parachute is the company’s largest business segment.

Other large FMCG firms also stand to gain from the rates announced on Thursday. In a press briefing on quarterly results held on Wednesday, Hindustan Unilever Ltd (the largest consumer packaged goods firm) said it was anticipating lower prices. “We are expecting to pass on the benefit of lower tax rates on to the consumers,” chief financial officer P.B. Balaji had said.

One of the biggest business segments for HUL is soaps, classified under the personal wash category. With the new rates, prices of bar soaps are expected to come down with the new 18% tax slab. However, liquid and cream-based soaps and detergents will be taxed at the highest slab of 28%. HUL’s premium products include liquid detergent Surf Excel.

Shares of HUL closed up 2.04% at Rs1007.55 on the news of the GST rates. ITC was the highest gainer on the index, closing 2.82% higher at Rs285.90.

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