MC Graphixstory | FIIs cut stake in frontline FMCG stocks on weak sales growth in Q3

In Q3, FIIs reduced their stake in Hindustan Unilever to 13.65 percent from the previous quarter’s 13.90 percent. Their stake in ITC dropped to 43.26 percent from 43.34 percent, as per the latest shareholding pattern data from exchanges

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Foreign investors reduced their exposure to frontline fast moving consumer goods (FMCG) companies in the December quarter as volume sales growth stayed weak.

In Q3, FIIs reduced their stake in Hindustan Unilever to 13.65 percent from the previous quarter’s 13.90 percent, while the stake in ITC dropped to 43.26 percent from 43.34 percent, show the latest shareholding pattern.

FII stake in Nestle India dropped to 12.09 percent from 12.1 percent, in Varun Beverages to 26.57 percent from 27.54 percent, and in Godrej Consumer Products to 22.94 percent from 23.51 percent in the last quarter. Britannia Industries recorded a decrease in FII stake to 18.99 percent from 19.66 percent in Q2, and Dabur India saw it down 16.49 percent from 18.37 percent in the previous quarter.

HUL, ITC, Nestle India, and Britannia Industries saw second consecutive quarterly decreases in FII holding. Godrej Consumer Products witnessed a fifth consecutive quarter of FII stake reduction, while Dabur India saw a fourth straight quarter of declining FII stake.

Read: Rural demand lag hits FMCG firms in Q3; benign inflation, MSP hike, Budget augur well for recovery

FMCG stocks are underperforming in 2024 following weak Q3 earnings. HUL is down by around 9 percent, ITC by over 12 percent, Nestle India by 4 percent, and Britannia Industries Ltd and Dabur India saw by 8 percent and 2 percent.

Despite falling commodity prices and a robust GDP growth rate, Q3FY24 earnings in the Indian FMCG sector were dampened by sluggish rural demand. Analysts anticipate a rebound in this quarter, driven by economic stimuli for the rural sector, stable macros, and a hike in minimum support price for crops. Despite expectations for rural consumption recovery due to lower commodity prices in 2023, challenges such as erratic rains and pandemic-induced low savings persisted, hindering rural demand.

The FMCG industry grew by 6 percent in volume in the third quarter, with consumption moderating in both urban and rural areas. While lower raw material costs boosted gross margins for FMCG companies, concerns over inflation, an uneven monsoon, and weak rural consumer sentiment contributed to a slowdown in sales.

Mid-sized FMCG firms saw buying by foreign institutional investors. The FII stake in Colgate Palmolive India rose to 24.62 percent from 24.08 percent, Procter & Gamble Hygiene and Health Care saw an increase to 1.48 percent from 1.3 percent, and Jubilant FoodWorks recorded a rise to 27.75 percent from 26.14 percent. Adani Wilmar, Gillette India, Relaxo Footwears, Devyani International Ltd, Jyothy Labs, Godfrey Phillips India, Sheela Foam, and Safari Industries India also saw marginal FII stake increases from the last quarter.

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