GST Council meeting today: Likely FMCG beneficiaries, 3 stocks Nomura is betting on

As the GST Council convenes for a two-day meeting on September 3-4, Nomura India has projected that companies in the FMCG sector, such as Britannia Industries and Colgate-Palmolive, might significantly benefit if GST rates on essential categories drop from 18 per cent to 5 per cent. Nestle India also stands to gain if rates on certain categories are reduced from 12 per cent to 5 per cent.

The GST Council is expected to focus on rate rationalisation across various categories, with final announcements anticipated by late evening on September 4. The potential restructuring of GST slabs is being closely watched, especially for items currently taxed at 18 per cent and 12 per cent, as they may see significant reductions. This shift could meaningfully boost consumption and support the formalisation of the FMCG sector. Britannia Industries could see substantial benefits as approximately 80 per cent of its Indian portfolio, primarily biscuits, would fall under the reduced GST rate. Similarly, Colgate-Palmolive, with around 80 per cent of its sales derived from toothpastes, could experience favourable impacts from the proposed tax cuts. Additionally, companies like Mrs Bectors and Bajaj Consumer, which have significant sales in biscuits and hair oils respectively, are also poised to benefit.

Nestle India might benefit from the GST rate reduction on categories like noodles and dairy spreads, which constitute about 30-33 per cent of its revenue. Other potential beneficiaries include companies like Hindustan Unilever and Marico, which have significant portions of their portfolios in the affected GST slabs. These changes could lead to a broader positive impact across the sector, with increased consumption of formalised goods.

The potential GST rate cut is expected to reduce the price difference between taxpaying and non-taxpaying companies, thereby encouraging consumers to opt for better and more formalised products. This development is seen as a long-term positive for organised companies within the sector. In addition to the direct financial benefits for these companies, the GST rate adjustments might also support increased household savings by lowering prices on everyday essentials. This could further stimulate demand across the sector.

Nomura India's top picks from the FMCG sector include Marico, Tata Consumer Products, and Britannia, anticipating that these companies will be among the primary beneficiaries of the GST rate rationalisation.

The broader implications of the GST Council's decisions are being closely monitored, with industry insiders considering how these changes could influence pricing strategies and competitive dynamics within the FMCG sector. Nomura India's analysis suggests a potential uptick in consumer spending, bolstered by the reduced tax burden on essential goods. The GST rate adjustments are not only expected to benefit companies directly but also to enhance the overall market landscape by fostering a more competitive environment, encouraging innovation, and promoting consumer choice. These factors combined could lead to a more dynamic and resilient FMCG sector in the long run.