Godrej Consumer’s recovery hinges on premium shift, international play

Its management is looking to achieve standalone volume growth of mid-to-high single digits in FY26. Consolidated revenue and Ebitda (earnings before interest, taxes, depreciation, and amortisation) growth is seen in the high single digits and double digits, respectively.

In the March quarter (Q4FY25), consolidated organic volumes grew 6% year-on-year, driven by 4% growth in India and 5% in Indonesia. India and international businesses contribute roughly 60% and 40% of GCPL’s consolidated revenues.

Segment-wise performance

The company’s Q4 consolidated revenues increased 6% on-year to ₹3,578 crore. India revenue was up 8% on-year, but the soaps portfolio remained a drag, led by the slowdown in urban demand. Soaps volumes fell by mid-to-high single digits, with the company rolling out high single-digit price hikes. The hit from price-volume rebalancing amid rising palm oil costs points to the scale of challenges in reviving soaps. The management expects soap category volume growth to slow to 2-3% (versus 3-4% earlier) as consumers shift from bars to liquid hand wash.

The home care business was a bright spot, with sales up 14%, helped by double-digit growth in household insecticides (HI). Goodknight incense sticks are faring well, though much of this growth is at the lower end, fuelling consumer downtrading. GCPL is betting on the RNF molecule, introduced in 2024, to drive premiumisation and restore balance in the portfolio.

Fabric care is scaling rapidly. Fab liquid detergent, with an annual run rate of ₹250 crore, has emerged as a standout performer in a category growing at 30-35% CAGR over two years. GCPL expects this business to double annually over the next few years. Meanwhile, air fresheners have posted over 25% CAGR and market share gains, thanks to disruptive launches.

International show

GCPL’s international business, once a source of volatility, is finding steadier ground. Sales in the GAUM region (Africa, US, Middle East) rose 12% in constant currency, with Ebitda margins improving 250 basis points (bps) to 16.6%, marking the fifth straight quarter of expansion. One basis point is one-hundredth of a percentage point.

Indonesia’s top line remained flat in constant currency, but Ebitda climbed 10% on the back of structural fixes and new launches. Having completed its FY25 reorganisation, GCPL is now focussed on scaling ‘hero’ products across select international categories. In Indonesia, upcoming launches include HIT anti-roach and Stella car fresheners.

Challenges persist

Even with these wins, margin pressures persist. Steep palm oil inflation compressed gross margin, which fell 360bps on-year to 52.5%, while Ebitda margin slipped 123bps to 21%. GCPL has leaned on cost controls—employee expenses fell 19% and ad spends ticked up just 1%—to protect profitability.

Motilal Oswal Financial Services cut earnings per share estimates by about 2% for FY26 and FY27, respectively, on account of margin pressure and slow urban demand.

Given high-cost inventory, near-term gross margins are likely to remain under pressure. Management has outlined interventions, including price hikes in incense sticks and supply chain and media efficiencies, to stabilise margins.

“A combination of the above should drive high-single-digit growth on a consolidated basis (with mid-high single-digit volume growth in India) and double-digit Ebitda growth in FY26. The guidance is a tad lower than our expectation of low double-digit sales growth led by lower growth in soaps and some downgradation in HI,” JM Financial Institutional Securities Ltd noted.

“The company’s disruptive innovations, introduction of access packs, expansion into new growth categories, and increased advertising expenditure are anticipated to drive growth,” said Motilal Oswal’s analysts in a report dated 8 May.

Premiumisation, international gains, and cost controls have set the stage for growth, but soaps remain a drag. At 52 times, FY26 estimated earnings, according to Bloomberg data, GCPL’s stock is already pricing in much of the recovery narrative, leaving little room for execution missteps. FY26 will be the test of whether GCPL can not just reset, but truly deliver.