GST cuts power FMCG, durables, and footwear stocks; HUL, Britannia, Bata India, Whirlpool surge

From staples to durables: GST relief boosts outlook for key sectors.

Consumption-oriented stocks, ranging from consumer staples, discretionary and durables saw sharp gains in trade on Thursday, September 4, after the Finance Minister Nirmala Sitharaman, heading the Goods and Services Tax (GST) Council, announced steep cuts in GST rates across several categories. Shares of ITC, HUL, Britannia, Colgate Palmolive, Dabur drove gains from the Nifty FMCG index, rising up to 5 percent in early trade on September 4.

Similarly, Bata India, PG Electroplast, Whirlpool, Amber Enterprises, Dixon Tech led gains from the Nifty Consumer Durables index, rising in the range of 1-5 percent on September 4.

The Goods and Services Tax structure has been rationalised into two major slabs: five percent and 18 percent, with a sin tax rate of 40 percent. The 12 percent and 28 percent slabs have been removed.

Consumer stocks

Food and beverages used to fall under the 5 percent, 12 percent and 18 percent GST slabs. Several items in the 12 percent bracket, such as ghee, butter, cheese, paneer, bottled water, juices, instant noodles, pasta, wafers and Chyawanprash, have shifted to 5 percent.

This would benefit Bikaji (about 80 percent of revenue) and Gopal Snacks (about 85 percent), while Nestlé India may see relief in around 30 percent of its portfolio. All of these counters saw gains ranging from 1-3 percent on September trade.

Dabur India could gain in beverages and Chyawanprash (about 23 percent of India revenue), ITC in its other FMCG segment (about 11 percent of revenue), and Britannia in dairy and wafers (less than 5 percent). Marico and HUL would also benefit, though to a smaller extent, noted Emkay Global.

Consumer durables

Within the large appliances universe, room ACs, TVs (>32 inches) and dishwashers are exceptions, which used to attract a 28 percent GST rate. However, they have been moved to the lower 18 percent slab. "We expect this change to strongly influence demand for air conditioners, particularly after recent signs of weakness," said CLSA. According to Motilal Oswal, Voltas and Havells are key beneficiaries of the move.

ICICI Securities noted that the trade inventory of summer products for consumer durables firms have remained higher than normal due to lower sales. “It is higher by one month for Blue Star and by 2-3 months for Voltas. Durable companies need to increase trade/ consumer spends to reduce their inventory to normal levels,” said the brokerage.

Kotak Institutional Equities concurred. The brokerage believes that for consumer durables firms, especially those dealing in white goods such as Room Air Conditioners, the implementation of the new GST regime could accelerate the liquidation of excess channel inventory. If sales rise 4-6 percent, the brokerage sees an EPS upside of 2-4 percent for Voltas and 1-2 percent for Havells in the current financial year.

Footwear

The GST cut on footwear that priced below Rs 2,500 from 12 percent to 5 percent is set to benefit

Relaxo, Bata, Khadim, Metro, and Campus by boosting affordability, narrowing the gap with unorganized players, and accelerating the shift to organized.

In FY2025, Campus Activewear derived ~22 percent of its sales from footwear priced sub-Rs 1,050 and Metro derived ~4 percent/8 percent of its sales from footwear priced sub-Rs 500/Rs 501-1,500.

Brokerages positive

CLSA estimated that the move could reduce consumer prices by 6 to 11 percent, and provide a strong boost to FMCG demand. Food and home & personal care (HPC) products are expected to benefit the most.

Top beneficiaries include Britannia and Colgate, with nearly full portfolio coverage. Quick-service restaurants (QSRs) and alcoholic beverage makers also stand to gain from input tax reductions, as they typically don’t receive input credits.

According to international brokerage Morgan Stanley, staples are expected to see growth and a stronger shift toward organised players. Within this space, food companies such as Britannia, Nestlé, and Tata Consumer are better placed than HPC players.

Retailers and discretionary players like DMart, Vishal Mega Mart, and Page Industries are also seen offering sustainable growth opportunities. Since August 15, staples have already outperformed, while discretionary stocks have lagged behind.

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