FMCG companies expect a recovery in the second half of FY26, powered by lower inflation, speed reductions and a good monsoon. | Photocredit: Istockphoto
Fast-moving companies for consumer goods (FMCG) reported a muted performance in the fourth quarter of FY25 because of the persistent weakness on the urban market, according to a report from Axis Securities.
The report emphasized that the slow demand, higher competitive pressure and broader economic challenges that have weighed in the quarter in the quarter. It said: “FMCG companies have reported muted performance because of weakness on the urban market, due to increased competition intensity and subject -to -demand environment”.
The report also stated that the urban markets, which contribute approximately 50-60 percent of the total FMCG sales, struggled. Companies granted the delay to various factors, including reduced discretionary expenditures, slow wage growth, high interest rates and rising rent and EMIs.
In addition, the growing competition from brands directly to consumers (D2C) and an increased penetration of platforms with fast commerce (Q-commerce) also influenced the demand of urban consumers.
On the other hand, the report added that the rural markets showed signs of steadily recovery. This was supported by illuminating inflation, higher government spending and an increase in minimum support prices (MSP) for important crops.
According to the report, the question of the countryside started to surpass the urban question and remains more resilient.
Despite the weakness in urban consumption, companies remain optimistic about a recovery in the coming quarters. Most managements expect a pick-up in volume growth within the next 1-2 quarters.
A more meaningful recovery will probably only be seen in the second half of FY26, driven by factors such as lower inflation, expected interest rate cuts, a favorable monsoon prediction and a good harvest and seed season.
On the financial side, the report emphasized that the top line growth remained filled in most Basic FMCG companies, with a low volume growth with one digit. Gross margins were under pressure because of the rising prices of important raw materials such as palm oil and other agricultural products.
As a result, companies saw subject margin performance. With the input costs that still have to be collected high and volume growth, the EBITDA -margin improvement is expected to be limited in the short term, because companies follow a cautious ‘Wait and Watch’ approach.
Published on June 7, 2025
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