India Inc stops sweating over rains

FMCG, cement sectors feel impact of monsoon on sales has gone down.

It seems Indian companies have stopped sweating over the progress of the monsoon. The boom in the economy has resulted in reduced dependence of key industrial sectors on the rains.

Harsh Mariwala, chairman and managing director, Marico, said the impact of the monsoon on FMCG sales had been reduced over the last few years.

An analyst tracking the sector pointed out that rural growth had been outpacing urban FMCG growth for the last three quarters, and was unlikely to slow down even if the monsoon was below normal.

"Till a few years ago, a poor monsoon meant that consumers in rural markets would go back to using unbranded products, which are cheaper than the branded ones. That's no longer the case," he added.

One reason for this upbeat sentiment is that FMCG companies have hit such low price points that further downtrading is unlikely to happen. Besides, the rapidly growing services sector has reduced the dependence of FMCG companies on the agricultural sector.

At present, with the economy doing well, FMCG sales are expected to grow in low double-digits, with a normal monsoon just helping it along.

Even the cement industry seems to have severed its links with the monsoon rains. Gone are the days when cement prices would dip in the monsoon season, with construction activities coming to a grinding halt.

Take for example the cement prices in Mumbai this time, which are steady despite the heavy rains. Cement prices are hovering around an all-time high of Rs 245 per bag in the retail market, with the price at Rs 215 in the wholesale market.

While prices of some smaller brands have gone down marginally, those of big companies like ACC, Gujarat Ambuja and Ultratech may not come down at all this monsoon.

Anil Singhvi, managing director of Gujarat Ambuja, said the reason behind this was the increased mechanisation of construction activities.

Traditionally a labour-intensive sector, construction work is becoming more dependent on machines, and the monsoon's impact on the cement industry is becoming less crucial.

"As there is no let-up in construction activities during the monsoon, the demand is not going down. Naturally, there is no impact on the cement prices," he said.