FMCG goods are consumed within a short span of time and are priced low. This sector accounts for a significant part of consumer spending. Additionally, they also attract investors as they make for a relatively reliable investment option with largely non-volatile margins and regular dividends.
If you are also looking to diversify your investment portfolio, check out this list of the top 10 FMCG stocks in India, how to identify the best FMCG stocks, their benefits and things to know before investing in FMCG stocks. Read on!
In recent years, the FMCG market has witnessed tremendous competition. While some FMCG brands have become household names, others have shifted their focus to manufacture more products across different segments.
Listed below are the best FMCG stocks for long-term investment:
Established in 1933, HUL is a leading consumer goods company in India. HUL boasts a portfolio of over 400 brands, and the products are available in over 150 countries and a market capitalisation of Rs.5.88 lakh crore.
HUL operates in three sectors: personal care, refreshment and home care.
Currently, HUL ranks among the top consumer products companies in the world with $60 billion in annual global sales, making it one of the best FMCG stocks for investment.
The FMCG share list is incomplete without ITC.
With its incorporation in 1910, the Indian Tobacco Company (ITC) is a leading consumer goods company in India. The FMCG company boasts a market capitalisation of Rs. 4.39 lakh crores. Though cigarettes are the primary product line offered by the company, it also offers products under other brand names. These include Fiama, Savlon, Bingo, Vivel, Sunfeast, Classmate Stationery, and more. ITC also has a presence across diversified industries, including hotels, agribusiness, packaging, and more.
When it comes to 5-year returns, Nestle takes the spot. Nestle India has seen exponential growth over the last few years, boasting a market capitalisation of Rs. 1.95 lakh crores. Its wide range of product offerings makes it a leading FMCG company in India. Nestle’s business is divided into four primary categories. These categories are listed below:
Nestle also owns brands, including Maggi, Nescafe, Milkybar, Kit Kat, Milo, Bar-One, Nestea, and Milkmaid.
Dabur started as a manufacturer of healthcare products in Kolkata. The company currently manufactures ayurvedic pharmaceuticals, food, and personal care products. Dabur holds a 5.5% share in the FMCG sector, making it one of India’s best consumer goods companies.
Mumbai-based Godrej Consumer Products has a market capitalisation of over Rs. 83,000 crores.
The company offers a wide range of consumer products, including food products, detergents, soaps, home appliances, personal care products, and healthcare products. The company’s brands include Cinthol, Godrej No. 1, Godrej Fair Glow, Godrej Shikakai, Renew, Godrej Powder Hair Dye, ColourSoft, and Ezee.
Other FMCG companies in India include Jubilant FoodWorks, Marico, Procter & Gamble Hygiene and Healthcare, Tata Consumer Products, Britannia Industries, Emami, Colgate Palmolive, and more.
Britannia Industries Limited is one of the leading FMCG companies in India. The product portfolio of the company is extensive, including bread, cakes, biscuits, rusks, and dairy products. Dairy products further include yoghurt, cheese, milk, and beverages. The brand portfolio includes Marie Gold, Tiger, 50:50, Good Day, NutriChoice, Treat, and Milk Bikis. After 130 years of its inception, the shares of Britannia reached an all-time high, resulting in the company entering the Rs. 1 trillion market valuation club.
Marico Limited is India’s leading consumer goods company, offering products in the area of healthcare, beauty, and wellness. Other areas across which the company offers products include skin care, edible oils, hair care, skin care, healthy foods, fabric care, male grooming, and immunity boosting. The company recorded sales of Rs.80.5 billion (USD 1.1 billion) during the financial year 2020-21. The market capitalisation of Marico Limited stands at Rs. 66,962 crores.
The company entered the Indian market in the 19th century with manufacturing operations for toothpaste and candles. Now, Colgate Palmolive is one of the leading companies in personal healthcare products. Other popular products offered by the company include mouthwashes. Moreover, 95% of its sales turnovers come from oral care products. Recently, the company entered the face cleansing category. Colgate Palmolive has a market cap of Rs.42,665.03 Cr.
It’s one of the most well-known FMCG companies in India. The primary subsidiaries of the company include Procter & Gamble Hygiene and Health Care Limited and Gillette India Limited. The market capitalisation of Procter & Gamble in India stands at Rs.45,752.11 crores.
The company has established itself as a major FMCG company in dairy products. The product portfolio of the company includes milk, butter, cheese, ice cream, and more. It reported a sales turnover of Rs.610 billion in the financial year 2021-22.
Here are some ways to help you identify good FMCG stocks:
Below are some valuation ratios you can use before investing in FMCG stocks.
The debt-to-equity ratio depicts the amount of debt a company has in comparison to equity. A thorough analysis of the debt-equity ratio is important since it gives you an idea of a company’s net worth and how it is financed.
It is the price you pay for 1 rupee of earnings. Companies with high PE ratios also have higher ROCE. Companies with a high PE ratio could indicate that a company is overvalued. On the other hand, a low PE ratio can indicate the company is undervalued. Understand this ratio thoroughly to find the best FMCG stock.
This ratio is used to determine the market worth of a company. It is also the ratio that gives investors the cost to acquire a company. You can compare different FMCG companies based on the EV/EBITDA ratio to see which company has a higher worth.
Other ratios you can check include –
ROI is derived by dividing the profits of an investment by its cost. This is an important metric as it measures a company’s profitability. By checking out the ROI of various FMCG companies, you can determine if the company is a good investment option.
The inventory turnover ratio helps you determine how fast a company sells its inventory compared to the standard industry average. A high inventory turnover ratio can either mean strong sales or huge discounts. On the other hand, a low inventory turnover ratio indicates weak sales and excess inventory. In light of FMCG companies, this can be treated as an important metric.
These ratios are crucial for the initial screening of your FMCG share list and play a significant role in analysing FMCG companies. However, these ratios shouldn’t be the only determining factor. It would help if you closely looked at some qualitative indicators, including Government policies, corporate governance, company disclosures, and more, to fully gauge a stock’s potential.
The demand for consumer goods will always be there. With industrialisation and Government policies, it is expected only to grow further.
Eventually, FMCG companies are expected to grow both in numbers and sales with a rising population and demand for goods. Thus, in turn, it can make it advantageous to invest in FMCG stocks.
Furthermore, FMCG stocks are observed to be steadier in a bear market than other stocks. Investors with FMCG stocks in their investment portfolio are less likely to bear the brunt of adverse market fluctuations.
Listed below are some factors you should keep in mind before buying an FMCG stock –
Naturally, one of the most crucial factors to consider while buying FMCG stocks is the future growth prospects of the stock in concern and the industry as a whole.
You should analyse a company’s past performance and look to invest in companies with high growth potential. Such companies are more likely to generate higher profits in the future and increase their share prices.
You should also analyse a company’s current performance, including profit margins, revenue, ROA, ROCE, ROE etc. You can watch out for the quarterly results and also any industry-related news/policies to stay abreast with the latest happenings.
Pick a company with a diversified product portfolio. Ensure the FMCG company you choose to invest in has a high brand equity and products that are differentiated from each other.
Market share and brand equity are two important factors that can help you determine whether the company will maintain its growth in the future. Thus, you should carefully analyse the market share and other such factors of an FMCG company before buying its shares.
The FMCG sector in India is growing at a rapid pace. With consumers demanding high-quality products, the demand for branded products has increased, eventually leading to the growth of the FMCG market. FMCG stocks create great prospects for investors, particularly with the Government of India taking initiatives to transform the sector.
Ans: The FMCG sector in India has grown considerably in recent years, owing to the urbanisation of rural areas, reforming Government policies, growing demand for consumer goods, and competition. In the long run, investing in FMCG stocks can benefit investors.
Ans: HUL, Dabur, ITC, Nestle and more are some of the best-performing companies in the FMCG sector. You can look to invest in these stocks after thorough research and analysis
Ans: The NIFTY FMCG Index analyses fast-moving consumer goods, which largely include mass-consumption and non-durable products. A total of 15 stocks from the FMCG sector form part of the NIFTY FMCG Index and are listed on the National Stock Exchange (NSE).
Ans: Demand, urbanisation and reforming Government policies could be major reasons for investing in this sector. Also, the FMCG stocks are steadier than other sector stocks.
Ans: Listed FMCG companies with a market capitalisation of under Rs.5,000 crores classify as small-cap FMCG stocks.
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