Shares of fast-moving consumer goods (FMCG) organizations like Colgate-Palmolive, Marico and ITC surged on Friday, a day after the Goods and Services Taxes or GST Council finalised a lower rate for goods including hair oil, toothpaste, edilble oil, tea and coffee. Shares of toothpaste maker Colgate-Palmolive gained as much as 7% to hit an intraday high of Rs. 1,044.95, as toothpastes will be taxed at a rate of 5% under GST compared to current rate of 22-26% including different state and central levies. Colgate-Palmolive is the greatest toothpaste manufacturer in India with a volume market share of 55.1 per cent in FY17.
Mayuresh Joshi, finance manager at Angel Broking, revealed to media: “Colgate by chance has a significant market share at this point of time. If they can expand that even by a couple of premise points…the numbers will play out very meaningfully… The positives are there for Colgate over the long term.”
Meanwhile shares of Marico, which manufactures famous hair oil brands like Parachute and Hair & Care, jumped over 4% to Rs. 320.25. The GST Council has agreed upon a rate of 5% on hair oil. Hair oils are at present taxed at 22-26%.
Domestic brokerage Edelweiss said that “since input tax credit is at present available, a lower GST rate will result in lower blocking of funds in working capital”, which is positive for FMCG organizations.
Mayuresh Joshi, fund manager at Angel Broking, told media: “The advantage that these organizations (FMCG) have will be on volumes and operating leverage… As tax-compliance increases and as estimating comes down in terms of toothpastes and toothbrushes, volume growth can be substantial.”