Retail Investors In Fmcg


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The presentation highlights the prospects and issues of FMCG sector and bringsout the Do's and Dont's for retail investors in FMCG Stocks.

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Retail Investors In Fmcg

  1. 1. Retail Investors-Opportunities ad Challenges in Indian FMCG Market Nazia Sultana Assistant Professor Osmania Univeristy
  2. 2. <ul><li>Discussion Outline </li></ul><ul><li>India at a glance </li></ul><ul><li>FMCG market in India </li></ul><ul><li>FMCG Sector- Prospects </li></ul><ul><li>FMCG Sector- Issues </li></ul><ul><li>Investing in FMCG Stock- Do’s </li></ul><ul><li>Investing in FMCG Stock- Don'ts </li></ul><ul><li>Conclusion </li></ul>
  3. 3. <ul><li>India at a glance </li></ul><ul><li>Over 867 million below the age of 45 years </li></ul><ul><li>More English speaking people </li></ul><ul><li>300 million middle class “real consumers” </li></ul>(Source: -Budget 2007-08) 170 billion USD Foreign exchange Reserves 4.5% Inflation 9.1% GDP Growth rate 740 billion USD GDP 1.1billion Population
  4. 4. FMCG Market in India “ Today, the disposable incomes of the India’s top-end consumers are no different from the consumers of Europe” - Chander Mohan Sethi, MD, Reckitt Benckiser FMCG is the fourth largest sector in the economy with a total market size of US $ 13.1 billion ( Source: )
  5. 5. What does FMCG mean? FMCG refers to consumer non-durable goods required for daily or frequent use. Products : Detergents, Toilet soaps, toothpaste, shampoos, creams, powders, food products, confectioneries, beverages etc., Players: HLL, P&G, Dabur, Reckitt Benckiser, L’oreal etc.,
  6. 6. <ul><li>FMCG Sector- Prospects </li></ul><ul><li>An Average Indian spends around 40% of his income on groceries and 8% on personal care products </li></ul><ul><li>Growth of MNC in the sector </li></ul><ul><li>Account for no less than 8% in the NIFTY </li></ul><ul><li>Merlion India Fund, managed by Standard Chartered Private Equity, identified Indian FMCG sector as its priority investment area </li></ul><ul><li>Increase in rural households </li></ul>
  7. 7. <ul><li>FMCG Sector- Issues </li></ul><ul><li>Strong presence of unroganised sector </li></ul><ul><li>High entry barriers –intensity of competition </li></ul><ul><li>Limited mass media options available to build brand </li></ul><ul><li>Products lack high usage a compared to international standards </li></ul><ul><li>Counterfeiting </li></ul>
  8. 8. <ul><li>Investing in FMCG Stock-Do’s </li></ul><ul><li>Look at the shaper’s (innovator’s) who are proactive to market needs and have strong, efficient and intelligent distribution channels </li></ul><ul><li>Choose between MNC and Indian company based on growth prospects, target returns and tax incidence </li></ul><ul><li>Look for signs of coordinated price hikes </li></ul>
  9. 9. <ul><li>Investing in FMCG Stock-Do’s (Contd) </li></ul><ul><li>Invest in stocks whose manufacturing facility is set up in excise and tax free zones </li></ul><ul><li>Have an eye regular buyback programmes e.g. those adopted by the Britannia and Godrej which keep prices steady </li></ul><ul><li>Look at the company’s cash flows and working capital efficiencies to have an idea about the company’s bargaining power; Return ratios(like ROCE), P/E ratio etc., </li></ul>
  10. 10. <ul><li>Investing in FMCG Stock-Don’ts </li></ul><ul><li>Don’t bundle all FMCG stocks and treat them as one sector </li></ul><ul><li>Don’t get influenced by the negative surprises such as price wars </li></ul><ul><li>Don’t invest in companies which do not have access to a low-cost manufacturing base </li></ul>
  11. 11. Mixed bag for FMCG stocks HLL, Henkel, dabur India and Procter& Gamble posted modest decline in their share returns. Cadbury India, Nestle India, ITC found themselves in the winners list.( Source: ‘Markets end in red-FMCG stock outperform- CNBC Tv18, July 2007)
  12. 12. Conclusion relevant and practical tools of evaluating the effectiveness of one’s investment. Alertness Analytics Approach Appreciation
  13. 13. Thank you