Mumbai: Stressed consumer sentiments coupled with growing tendency for conserving cash in hand is likely to impact growth targets for consumer companies in the remaining quarters of the current fiscal.

And as demand environment continues to be sluggish, consumer companies could be looking to revise their growth guidance for the second half (H2) of fiscal 2019-20 (FY’20).

While companies like Hindustan Unilever Ltd (HUL) operating in the fast moving consumer goods (FMCG) sector are optimistic about overall business, the company management had earlier said that near-term demand outlook, especially in the rural markets, remains challenging.

Dabur, one of India's leading Ayurvedic and natural health care companies, said it is working on achieving its annual growth target of mid to high single digits for the full year. On the possibilities of revising the growth guidance for the second half of current fiscal, Mohit Malhotra, chief executive officer, Dabur Ltd, said, there was no need to do it. “We will work to achieve the targeted growth rates for the fiscal 2020,” he said in the earnings call on Tuesday.

Taking a lead in this direction is Tata Group’s jewellery, watches, eyewear and fashion accessories business vertical, Titan Company Ltd (TCL). The company management said in an earnings call on Tuesday evening that it has revised jewellery business growth guidance for the period between October 2019 to March 2020.

Taking a cautious approach Titan Co. management had in August 2019, said that it was targeting over 20% revenue growth keeping the wedding and festive season in mind.

C K Venkataraman, managing director, Titan, said, “The guidance has been revised to between 11% and 13% now from the earlier over 20% growth levels.” The downward revision has been done after taking into account that overall market situation and consumer buying behaviour, said the top company executive.

Analysts tracking Titan are of the view that the premise of over 20% growth talked about earlier was based on company’s execution of business and not necessarily relying on overall macro market conditions.

However, the change in the guidance now is an indication of concerns in this industry as a result of which Titan management has made a significant correction in its growth numbers going forward.

According to Venkataraman, the company had set out a growth table for five years based on positive sentiments in the business environment. Growth may have been sluggish, in single-digits or flat during the fiscals 2018 and 2019 owing to certain migration that started happening as a result of a lot of structural changes, demonetisation, Nirav Modi scam and so on.

”The trust factor started kicking in, in favour of Tanishq and we were able to deliver a 20% plus growth rate with a certain set of initiatives and certain level of excellence in our execution. Our internal research with consumers done earlier in January and February 2019, indicated positive sentiments. However, what’s appearing now after six - seven months, is that the sentiment is actually worse than what we had measured then.

“As a result, the overall industry has witnessed 70% decline in imports, every single jeweller that we are aware of, is talking about a decline, vendors are talking about big drop in supplies.

Regional jewellers are talking about a 12% and 22% decline in business during the festive period as opposed to 10% positive growth that has been achieved by Tanishq.

So, obviously the strategies and standards of excellence in our execution are happening in a circumstance that’s less in our favour than a year ago,” he said.

Taking into account the market conditions, the company had to go back to the drawing board, expand the number of weapons that required (to deal the market conditions) or create fresh ones.

That, as per Venkataraman, will take a little more than a few months and hence the change in guidance for October 2019 to March 2020 period.

“It is our intent to keep gunning for the over 20% growth number for fiscal 2021. For the moment though, it can only be about tweaking of the arsenal that we already have. And we are going by the more recent growth performance over the last three to four months,” he said.

(The writer is an independent business journalist and can be reached at ashishktiwari.1976@gmail.com)

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