Revenue growth of the fast-moving consumer goods (FMCG) sector will double from 5-6 per cent reported for last fiscal to 10-12 per cent in 2021-22, said Crisil Ratings.
Accordingly, the trend is expected to be driven by price hikes effected across product categories to offset the impact of raw material price increase and a raft of other favourable factors.
Besides, the agency said that operating margin, on the other hand, will be restored to the normal level of 19-20 per cent with a moderation of 80-100 basis points (bps) this fiscal due to increase in advertising expense and rise in raw material prices.
Interestingly, it cited that operating margin had improved by 100 bps last fiscal despite lower revenue growth, due to reduction in advertising and promotional expenses.
Furthermore, the agency said that continuation of strong cash generation and healthy balance sheets, as well as sizeable cash surpluses, will ensure credit outlook remains 'stable'.
"Price hikes of 4-5 per cent effected by the players across product categories over the past six months to pass on inflation in raw materials, together with volume growth of 5-6 per cent and a revival in demand for discretionary products, will support revenue growth of 10-12 per cent this fiscal," said Anuj Sethi, Senior Director, CRISIL Ratings.
"Widespread Covid-19 afflictions in the hinterland during the second wave will result in moderation in rural growth this fiscal. However, recovery in urban demand for FMCG products will offset this and outpace rural revenue growth."
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