See revenue growth for FMCG moderate to 4-5% in FY16: CRISIL

Sluggish demand to impact revenue growthSubdued economic growth and tepid demand in rural areas impacted consumer spend in the last fiscal but the aggregate revenue of fast moving consumer goods (FMCG) players increased 10-12% on improved realisation. Companies passed on the rise in raw material costs to consumers because of which their earnings before interest, tax, depreciation and amortisation (Ebidta) margin remained flat at 22-23%.In the current fiscal, we expect revenue growth to moderate to 4-6% due to severe pressure on cigarette industry volumes and the sluggish demand environment in the FMCG industry.  However, the growth will recover in 2016-17 especially if monsoons are normal and well distributed.In 2015-16, CRISIL Research believes the gains from the decline in prices of commodities/raw materials such as Brent crude, PFAD (palm fatty acid distillate) and copra will be partly offset by rising pressure on realisations amidst growing competition. Consequently, we expect operating margins of FMCG companies to improve by 100-150 basis points.