HINDUNILVR

May 8 (Reuters) - India's consumer goods sector reported an 11% growth in value in the March quarter, as rural growth outpaced that in urban areas for the fifth straight quarter, market research firm NielsenIQ said on Thursday.

Rural areas - which account for just over a third of overall consumer goods sales - have become a bright spot for an industry that is struggling with higher living costs and slow wage growth in large cities.

"Rural markets continue to drive growth, whereas urban metros continue to see a shift toward E-commerce," Roosevelt Dsouza, head of customer success for consumer goods at NielsenIQ, said.

Although rural consumption growth slowed in the March quarter, with volumes rising 8.4% compared to 9.2% in the previous three months, it still outpaced urban demand, where growth decelerated to 2.6% from 4.2%.

Price increases also contributed to the overall value growth, with the cost of staples such as edible oil rising 5.6% during the quarter, compared with just 0.3% in the same period a year ago.

Low base, rural growth, and easing inflation are helping smaller players, which saw 17.8% growth in value, outpacing the broader FMCG market, the report said.

Indian consumer goods maker Marico MRCO.NS reported fourth-quarter profit above analysts' expectations, boosted by improving rural demand and price increases for its key packaged oil brands—underscoring the strength of non-urban markets.

The company also said it plans to expand its presence in villages across India.

Smaller manufacturers are driving consumption compared to larger players, whose volume growth has halved compared to the December quarter, NielsenIQ said.

Hindustan Unilever HLL.NS and Nestle India NEST.NS reported weaker fourth-quarter profits, with Hindustan Unilever cutting its margin forecast amid high commodity costs and sluggish urban demand.

Going ahead, NielsenIQ said revised tax slabs and a favorable monsoon forecast could further lift consumption in the coming quarters.

(Reporting by Ashish Chandra in Bengaluru; Editing by Sonia Cheema)

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By Shivani Tanna, Ananta Agarwal and Praveen Paramasivam

April 24 (Reuters) - India's top consumer goods makers Hindustan Unilever (HUL) HLL.NS and Nestle India NEST.NS reported weaker fourth-quarter profits on Thursday, with HUL cutting its margin forecast amid high input costs and sluggish urban demand.

A surge in the cost of living and slow wage raises in India have eroded urban consumers' purchasing power, forcing them to cut back on buying packaged goods and pressuring earnings of consumer goods makers already reeling from high input costs.

Both companies reported shrinking profit margins. Maggi instant noodles-maker Nestle India's margin dropped to 16% from 18% in the previous year, according to a back-of-the-envelope calculation by Reuters, while Hindustan Unilever reported a 30-basis-point dip to 23.1%.

The Indian unit of UK's Unilever ULVR.L will post core margins in a 22% to 23% range in the near- to mid-term, while boosting sales gradually on volume growth in the year beginning April 1, CFO Ritesh Tiwari told a press conference.

The projection is below its previously forecast range of 23% to 24%.

HUL appears to be prioritising volume growth and market share over margin expansion, indicating that consumer goods demand remains weak, Elara Capital analyst Amit Purohit said.

The stock was last trading down 3.8% at 2,331.4 rupees, wiping out nearly all its gains this year. On the day, it has lost the most in terms of percentage on the benchmark Nifty 50 .NSEI.

Nestle India, which lost 0.4% on the day, reported its quarterly profit fell 5.2% to 8.85 billion rupees, hit by higher prices of major commodities, including coffee and cocoa.

Its revenue growth slowed to 4% from a 9% growth a year earlier.

Meanwhile, HUL's profit of 24.93 billion rupees ($291.15 million) narrowly missed market expectations of 24.98 billion rupees, according to data compiled by LSEG.

Its expenses rose 3% while revenue in its nutrition drinks and beauty products segments declined.

Looking ahead, HUL's Tiwari said India's tax relief measures and an easing of inflation set up Indian households to spend more both on essentials and discretionary goods.

In contrast, parent companies Nestle SA NEST.N and Unilever beat sales estimates, led by price increases.

($1 = 85.6250 Indian rupees)

(Reporting by Praveen Paramasivam in Chennai and Shivani Tanna in Bengaluru; Editing by Janane Venkatraman)

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** UBS upgrades Colgate Palmolive (India) COLG.NS to "buy" from "sell", raises PT by 38% to 3,100 rupees

** Brokerage upgrades Hindustan Unilever HLL.NS, ITC ITC.NS and Trent TREN.NS to "buy" from "neutral"

** Says Indian consumer stocks set to rebound on the back of 13% estimated earnings growth in FY2026, lower valuations, and defensive play in a turbulent market

** COLG rises 3.3% on the day, while HLL adds 1.1%

** UBS downgrades Asian Paints ASPN.NS and Jubilant Foodworks JUBI.NS to "sell" from "buy", Dabur India DABU.NS to "sell" from "neutral"

** Says even though the decorative paints industry is lucrative, it faces competition from new entrant Grasim Industries GRAS.NS, which may weigh on margins

** On JUBI, UBS says stock price factors in same-store sales growth turning positive

(Reporting by Vivek Kumar M)

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April 21 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• HINDUSTAN UNILEVER LTD - COMPLETES ACQUISITION OF UPRISING SCIENCE

Source text: ID:nBSEbXJZYp

Further company coverage: HLL.NS

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** Consumer stocks Hindustan Unilever HLL.NS and Nestle India NEST.NS drop 1.5% and 2.5%, respectively, after BofA downgrade

** BofA says, "Growth recovery for HLL seems to be far slower than we had imagined earlier"; downgrades to "neutral" from "buy"

** Cuts HLL's Q4 FY25 earnings estimate by 2% and FY26-FY27 earnings estimate by 4%-5%, citing macro and inflationary volatility

** Also downgrades NEST to "underperform" from "neutral", citing subdued growth, soft demand and cost pressures

** Says general softness in consumption continues with urban India slowdown, while rural recovery has been gradual

** YTD, HLL loses 4%, while NEST gains 3% vs a 6.3% drop in consumer index .NIFTYFMCG

(Reporting by Bharath Rajeswaran in Bengaluru)

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March 17 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• INDIA COMPETITION REGULATOR: APPROVES ACQUISITION OF UPRISING SCIENCE BY HINDUSTAN UNILEVER

Source text: [ID:]

Further company coverage: HLL.NS

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By Aditya Kalra

NEW DELHI, March 6 (Reuters) - Indian consumer products distributors have filed an antitrust case against big fast-delivery businesses of Zomato, Swiggy and Zepto, calling for an investigation into alleged deep discounting practices, legal papers show.

India's e-commerce sector has faced intense scrutiny over how products are priced online. An antitrust investigation last year found Amazon and Walmart's Flipkart favour select sellers and resorted to "predatory pricing", which hurts smaller retailers. The companies have denied the allegations.

Quick commerce, in which companies deliver consumer products within 10 minutes from neighbourhood warehouses, is popular with customers but has upset smaller retailers as shoppers use apps to order everything from milk to pulses. Bernstein estimates India's quick commerce sector will reach $35 billion in 2030, from $200 million in 2021.

The All India Consumer Products Distributors Federation (AICPDF), in a case filing with the Competition Commission of India, has asked for an investigation into many business practices of Zomato's ZOMT.NS Blinkit, Swiggy's SWIG.NS instamart, and Zepto, including how discounts are doled out.

"An alarming trend of predatory pricing and deep discounting practices by Q-commerce platforms resulted in unfair pricing models," said the group's filing, which is not public but was reviewed by Reuters.

Zomato and Swiggy did not respond to Reuters' requests for comment. Zepto declined comment. The CCI did not respond.

The filing could increase headaches for Zomato and Swiggy. A separate CCI investigation last year found their food delivery businesses breached competition laws. The case is ongoing.

Zepto is preparing for an IPO after raising funds at a valuation of $5 billion last year.

The watchdog will review the case filing and can order its investigation unit to look at the matter closely. This can take several months and may require companies to explain their businesses. It can dismiss the case if it finds no merit in it.

AICPDF has 400,000 distributors as members, who supply products of brands such as Nestle NEST.NS, Unilever ULVR.L and Tata to 13 million retail shops across India.

A recent Datum Intelligence survey of 3,000 Indian quick commerce shoppers showed 36% had reduced shopping at supermarkets and 46% cut back purchases from small independent stores.

In its filing, AICPDF said local brick-and-mortar stores "cannot match" the quick commerce giants' discounts. It compared online and offline pricing of 25 products, including of Nestle and Hindustan Unilever HLL.NS.

A variant of a Nescafe coffee jar which a small independent Indian retailer receives from companies for about 622 rupees ($7.14) is offered for 514 rupees on Zepto, 577 rupees on Swiggy Instamart and 625 rupees on Blinkit, according to the filing.

Asia's richest man, Mukesh Ambani, is mimicking the strategy to offer fast deliveries, as are Amazon and Flipkart in limited areas.

Datum estimates Blinkit has a 40% market share in India's quick commerce market, with 1,007 small warehouses, while Zepto has more than 900 stores and a 29% market share. Swiggy's Instamart service holds a 26% share.

(Reporting by Aditya Kalra, Editing by Timothy Heritage)

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Feb 6 (Reuters) - Solid demand in rural areas, as well as higher prices of staples including edible oil and wheat flour, helped the consumer goods sector report a 10.6% sales growth in the December quarter, market researcher NielsenIQ said on Thursday.

India's rural areas - which account for just over a third of consumer goods sales - have proven a bright spot for an industry struggling with an inflation-led spending slowdown in large cities.

"Rural markets (continued) to lead the charge, outpacing urban consumption (during the December quarter)," Roosevelt Dsouza, head of customer success for consumer goods at NielsenIQ, said in a statement.

Sales volume jumped 9.9% in rural areas in the December quarter, up from 5.7% in the previous quarter - double the 5% increase in urban centers, NielsenIQ said. But it added urban pockets also improved from the September quarter's 2.6% growth.

Rural areas have outperformed urban locations for the last four quarters, benefiting from income support schemes rolled out by several Indian states, while slowing salary increases in cities have squeezed consumer spending.

In the October-December quarter, overall volume rose by 7.1% - the highest in over a year - driven by demand for laundry products and edible oil, even as prices rose by 3.3%, according to NielsenIQ.

Dabur India DABU.NS and Hindustan Unilever HLL.NS reported a higher December-quarter profit on recovering rural demand.

However, large consumer goods makers, with topline exceeding 50 billion rupees ($571.2 million) are also facing stiff competition from smaller rivals, whose sales increased roughly twice as fast during the festive quarter, NielsenIQ said.

Consumer goods makers have also raised product prices to counter price increases in commodities such as copra and cocoa, with cooking oil maker Adani Wilmar ADAW.NS and Hindustan Unilever warning of further hikes.

Indians also preferred smaller product packs during the quarter, NielsenIQ said, echoing comments from Hindustan Unilever.

($1 = 87.5400 Indian rupees)

(Reporting by Praveen Paramasivam in Chennai; Editing by Eileen Soreng)

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Adds consumer, trade body and company reaction; updates shares

By Praveen Paramasivam and Sai Ishwarbharath B

CHENNAI/BENGALURU, Feb 1 (Reuters) - India's plans to cut personal income tax rates will put more disposable income in the hands of the people and eventually boost consumption in the world's fifth-largest economy, top executives said on Saturday.

The comments came after the government in its annual budget said that people earning up to 1.28 million rupees ($14,800) per year will not have to pay any taxes, raising its threshold from 700,000 rupees. It also cut tax rates for people earning above the new threshold.

Private consumption accounts for about 60% of India's gross domestic product.

Consumption in India has been under stress in the last few quarters as shoppers tightened their purse strings amid stubborn inflation and modest wage growth.

"Tax reforms benefiting the middle class will increase disposable income, further fuelling demand across essential and aspirational categories," Godrej Consumer Products' GOCP.NS CFO Aasif Malbari said.

The news boosted the shares of consumer goods .NIFTYFMCG, autos .NIFTYAUTO and realty .NIFTYREAL firms by 4.1%, 2.1% and 3%, respectively. It also pushed the shares of food delivery firms Zomato ZOMT.NS and Swiggy SWIG.NS 7.8% and 8.7% higher, respectively.

The government's plan is estimated to help around 25-30 million personal tax payers save about 100,000 rupees annually, according to Kamal Bali, managing director of Volvo Group India.

"It will boost discretionary capital spends like buying a vehicle. (People) will have better repaying capacity for EMIs," Bali told Reuters.

Others echoed the sentiment.

"The tax cut is going to be a helpful factor in accelerating demand for various kinds of consumer products," RC Bhargava, chairman of Maruti Suzuki India MRTI.NS, India's top carmaker, told TV channel ET Now.

The Federation of Automobile Dealers Associations (FADA), a trade body, expects the government's plan to make car upgrades affordable to more middle-class families, leading to higher demand for SUVs, sedans, and premium two-wheelers.

Some consumers welcomed the news.

"I would have one less stressful obligation since I would no longer have to pay taxes," Chennai-based software engineer S. Surya said, adding he planned to use the money he saved "on higher-quality essentials and restaurant visits".

Some others were less thrilled.

"They haven't reduced goods and services tax or petrol prices," Pranav Charan, another engineer, lamented.

($1 = 86.5360 Indian rupees)

(Reporting by Praveen Paramasivam, Sai Ishwarbharath B and Nishit Navin; Editing by Dhanya Skariachan and Sonia Cheema)

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Adds share prices in paragraph 7 and analyst comment in paragraph 8

Jan 31 (Reuters) - Nestle India NEST.NS reported a quarterly profit below market expectations on Friday, as a slowdown in consumer spending in major cities and higher product prices dampened its sales.

Consumer goods makers are struggling to sustain profits due to inflation in palm oil, coffee and cocoa, while slow wage growth and higher prices of essentials like vegetables and pulses have forced city dwellers to tighten their belts.

"It was a quarter that was marked with food inflation, moderation in urban consumption, with gradual recovery in rural consumption," Nestle India Chairman and Managing Director Suresh Narayanan said in a statement.

The Indian arm of Swiss food giant Nestle NESN.S reported a profit of 6.96 billion rupees ($80.34 million) for the third quarter, up 6.2% from a year earlier, but below market estimates of 7.31 billion rupees, according to data from LSEG.

Revenue for Nestle India, home to brands such as Nescafe instant coffee and KitKat chocolate, rose 3.9% to 47.8 billion rupees for the three-month period ended Dec. 31, primarily driven by price hikes.

Revenue jumped 8.1% in the comparable quarter last year.

Shares in Nestle India, which also declared a dividend of 14.25 rupees apiece, climbed as much as 7.7% following the results. At its current levels, up 5.5%, the stock is on course for its best day in more than four years.

The "worst is behind" for consumer goods, with the fourth quarter set to improve sequentially on past price hikes, Nuvama analyst Abneesh Roy said, citing stock gains in Tata Consumer TACN.NS and Colgate-Palmolive India after "weak results".

($1 = 86.6370 Indian rupees)

(Reporting by Praveen Paramasivam in Chennai and Kashish Tandon in Bengaluru; Editing by Sherry Jacob-Phillips)

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** Shares of consumer giant Hindustan Unilever HLL.NS down 3.1%, hit lowest since May 2024

** HLL top loser in Nifty 50 index .NSEI, dragging consumer stocks down 1% .NIFTYFMCG

** Co on Tuesday projected near-term margins at the lower end of its forecast range, as it grapples with slowing urban demand, after reporting subdued results

** At least 21 analysts cut target price on stock after results, median PT at 2,715 rupees vs 2,860 rupees, a month back - LSEG data

** Management appeared to be more cautious on demand trends than in Nov-24 analyst meet, which is a worry - Jefferies analysts said

** Tepid demand trends impact near-tem growth outlook - Citi

** HLL fell 12.3% in 2024, while Nifty gained 9%

(Reporting by Sethuraman NR and Anantha Agarwal in Bengaluru)

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** Shares of consumer goods maker Hindustan Unilever Ltd (HUL) HLL.NS flat at 2,347 rupees ahead of Q3 report

** Analysts expect a 2.2% rise in net profit, per LSEG data, although revenue is expected to be flat YoY

** Centrum Broking notes that despite a gradual recovery in rural market, urban consumption remains tepid

** Adds that rising competition from D2C brands and quick commerce platforms likely hit sales

** Jefferies says while FMCG firms have resorted to price hikes to offset rising input commodity costs, they have not been able to fully pass on the impact to consumers

** This, brokerage adds, will keep margins rangebound

** HUL rated 'buy' on avg by 37 analysts -LSEG data

** HLL the first major FMCG company to report full Q3 results

** Stock has shed 5% in the last 12 months, as has Britannia BRIT.NS, while Nestle India NEST.NS has dropped 11.4%

(Reporting by Ananta Agarwal in Bengaluru)

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Jan 10 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• HINDUSTAN UNILEVER LTD - INCORPORATES WHOLLY OWNED SUBSIDIARY KWALITY WALL'S (INDIA) LIMITED

Source text: ID:nNSE8r62QC

Further company coverage: HLL.NS

(([email protected];))

** Shares of Hindustan Unilever HLL.NS rise 2.3% to 2,456 rupees, on track for best day in over a month

** Stock top pct gainer on Nifty 50 Index .NSEI, which is down 0.46%

** The consumer goods major is in talks to acquire skincare brand Minimalist at a valuation of 30 bln rupees ($349.4 mln), Business Standard had reported

** With 100% own capacity and differentiated approach to address skin and hair care needs, Minimalist targets revenue of 10 bln rupees in coming 3 years - Emkay Research

** If deal materialises, HLL will have opportunity to enhance its play in beauty care and gain higher consumer base - brokerage

** Emkay reiterates "buy" rating and TP of 2,675 rupees on HLL

** HLL rated "buy" on avg, same as rivals Dabur India DABU.NS and Marico MRCO.NS; Nestle India NEST.NS and Britannia Industries BRIT.NS rated "hold"- LSEG data

** Stock fell 12.3% in 2024 vs a 0.33% fall in Nifty FMCG Index .NIFTYFMCG

($1 = 85.8690 Indian rupees)

(Reporting by Ashna Teresa Britto in Bengaluru)

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Dec 31 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• JAGATJIT INDUSTRIES LTD - TERMINATES AGREEMENT WITH HINDUSTAN UNILEVER

Source text: ID:nBSE8HrDR4

Further company coverage: HLL.NS

(([email protected];))

Corrects media packaging code; no changes to text

By Sethuraman N R

Dec 9 (Reuters) - Shares of India's Godrej Consumer Products GOCP.NS slumped 9% on Monday, set for their worst day since March 2020 and dragging down its peers in the fast moving consumer goods sector after the firm warned of stress on demand and profit margins in the third quarter.

The stock fell to its lowest since Jan. 18, its biggest one-day percentage drop since the onset of the pandemic. The decline dragged down the consumer goods index .NIFTYFMCG by 2.2%. The benchmark Nifty 50 .NSEI was down about 0.1% on the day.

Including Monday's decline, the consumer index has shed about 14% so far this quarter and is set for its worst ever quarterly performance as Indian consumer companies continue to feel the pinch of still-high inflation and a consequent fall in demand.

Godrej Consumer said on Friday that two-thirds of its India business is under demand and margin stress due to higher raw material costs and unfavourable weather.

The company's update will "likely add to investor concerns" on the consumer industry as a whole, which has been facing a slowdown, Jefferies said in a note.

To partly offset higher costs in palm oil, a key ingredient for Godrej's soap business that contributes one-third to its standalone revenue, the company undertook measures including price increases during the quarter.

"Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantry," Godrej said.

The warning by Godrej will also impact peers, Jefferies said, adding that recent analyst meetings with Hindustan Unilever HLL.NS and Colgate-Palmolive India COLG.NS have not provided confidence about a recovery in consumption.

(Reporting by Sethuraman NR; Editing by Sonia Cheema)

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** Hindustan Unilever HLL.NS shares fall about 1%, among top losers in Nifty 50 index .NSEI, which is mostly flat

** Brokerages highlight near-term concerns after HUL's investor day presentation

NEAR-TERM CHALLENGES

** Morgan Stanley ("underweight", PT: 2,110 rupees) calls HUL's future growth presentation "blurred short-term" vision

** Ambit Capital ("sell", PT: 2,496 rupees) says concerned with HUL's beauty, personal care portfolio and competitive intensity, low growth in food and refreshments

** Antique Broking ("hold", PT: 2,666 rupees) highlights management concerns over "soft" near-term performance on weak demand environment

** Prabhudas Lilladher (upgrades to "accumulate" from "hold", PT: 2,807 rupees) says co should return to positive profit growth from Q3

(Reporting by Sethuraman NR)

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Nov 25 (Reuters) - India's Hindustan Unilever (HUL) HLL.NS said on Monday that its board has approved the demerger of its ice-cream business into an independently listed entity.

(Reporting by Ananta Agarwal in Bengaluru)

(([email protected];))

By Dhwani Pandya

MUMBAI, Nov 14 (Reuters) - Indian consumer goods maker Marico MRCO.NS expects urban consumption will take at least six months to revive, its managing director told Reuters, signaling more pain for the sector from food inflation which has hit a 15-month high.

With a market cap of $9.12 billion, Marico is best known for its iconic coconut oil brand "Parachute" and edible oil brand "Saffola", and competes with the likes of Hindustan Unilever HLL.NS and Nestle NEST.NS.

India's annual inflation for food items, which account for nearly half of the consumption basket, hit a 15-month high of 10.87% in October, and retail inflation surged to a 14-month high in the same month, driven by a jump in vegetable prices and dashing hopes of an interest rate cut by the central bank next month.

"It will take a couple of quarters for urban consumption to revive. But I think once the food inflation is sorted out to a large extent, urban consumption is expected to recover," Marico Chief Executive Officer and Managing Director Saugata Gupta said in an interview in Mumbai.

"Whenever there is a food inflation, there is an impact on FMCG (fast moving consumer goods)...consumers either downgrade or titrate consumption," he added.

India's middle class, estimated to be a third of its 1.4 billion people, has been cutting spending due to higher food inflation, impacting the earnings of largest consumer goods firms.

Though consumption is mainly affected among the middle- and lower-income classes, there is not much impact on those with high incomes, Gupta said.

India has seen high luxury spending in recent months - German luxury car manufacturer Mercedes-Benz' car sales in India grew 13% in first nine months of this year, its best-everperformance, while sales of luxury apartments in country's top seven cities surged nearly 38% during that period.

Marico's international business contributes around 27% of consolidated revenue and it has a strong presence in Bangladesh, Vietnam and the Middle East, and is looking to expand operations in the United States and East Africa, as well as entering the Indonesian market, Gupta said.

In Bangladesh, where Marico has a distribution network of more than 770,000 outlets, the company's operations were briefly disrupted after violent student-led protests that led to the resignation of Prime Minister Sheikh Hasina in August.

Gupta said Bangladesh's share of Marico's international revenues dropped from 44% in the year ended March 2024 to under 40% now, and could fall further as its grows more in other geographies.

(Reporting by Dhwani Pandya; Editing by Aditya Kalra and Ros Russell)

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By Praveen Paramasivam, Shivangi Acharya

CHENNAI/NEW DELHI, Nov 13 - India's city dwellers are cutting spending on everything from cookies to fast food as persistently high inflation squeezes middle class budgets, threatening the country's brisk economic growth.

Slowing urban spending over the past three to four months has not only hurt the earnings of largest consumer goods firms, it has raised questions about the structural nature of India's long-term economic success.

Since the end of the pandemic, India's economic growth has been driven in large part by urban consumption, however, that now seems to be changing.

"There is a top end – the people with money are spending like that is going out of style," Nestle India Chairman Suresh Narayanan said.

"There used to be a middle segment, which used to be the segment that most of us fast moving consumer goods (FMCG) firms used to operate in, which is the middle class of the country, that seems to be shrinking."

Nestle India, which makes Kit Kats and other well-known goods, reported its first quarterly revenue drop since the COVID-hit June quarter in 2020.

While there is no officially defined income bracket for Indian middle class households, they are broadly estimated to account for a third of India's 1.4 billion people.

They are considered a key demographic both economically and politically, with middle class frustration seen as a significant factor behind Prime Minister Narendra Modi's weaker election performance this year.

Asia's third-largest economy is expected to expand 7.2% in the financial year ending March 2025, the fastest among its major peers.

Belying those rosy projections, however, are signs of a sharp slowdown in the household sector.

Indian urban consumption hit a two-year low this month, according to an index published by Citibank that captures indicators such as airline bookings, fuel sales and wages.

"While some of the fall could be temporary, the key macro drivers remain unfavourable," Citi's chief India economist Samiran Chakraborty said.

Growth in inflation-adjusted wage costs for listed Indian firms - a proxy for earnings of urban Indians - has remained below 2% for all the three quarters of 2024, well below the 10-year average of 4.4%, data from Citi showed.

Chakraborty cites this as a key factor impacting urban consumption, along with declining savings and tighter rules for personal loans.

Headline inflation has averaged 5% over the past 12 months, but food inflation has held above 8% as weather shocks elevated prices of vegetables, cereals and other essential foods. In October, retail inflation hit a 14-month high of 6.2% while food prices jumped to 10.9%.

Anecdotal data suggests retail sales rose close to 15% year-on-year during the 2024 festive season, which runs from August to November, Nomura said in a note last week, about half last year's pace.

"During this festival season, we have not spent at all," said Rajwanti Dahiya, 60, who survives on her husband's monthly pension of 30,000 Indian rupees ($356.76).

"Savings are low, barely there."

A 'SHRINKING' MIDDLE

India's central bank expects 7.2% GDP growth for the fiscal year ending March 2025 on the back of improved rural demand and a strong services sector.

Higher government investment could also support demand, said Rahul Bajoria, head of India and ASEAN economic research at Bank of America.

"If government spending kicks in, that probably does have some multiplier effects on private consumption spending as well," said Bajoria, who expects GDP growth at 6.8% in the current financial year.

Some are less optimistic with Citi and IDFC First Bank economists expecting GDP growth in the July-September quarter to miss the central bank's projected 7%, weighed by slower urban consumption.

That pessimism has hit consumer stocks with the Nifty FMCG index .NIFTYFMCG declining 13% since Oct. 1, compared with a 7.4% drop in the benchmark Nifty 50 .NSEI.

Of the FMCG index's 15 constituent firms, only one reported a pickup in sales volume growth in the September quarter.

Consumers in large cities are swapping branded items from hair oil to tea for cheaper unbranded alternatives, reflected in the first sales volume decline in 11 quarters for the foods and refreshment group at Hindustan Unilever.

"We see the growth in big city standing down, although in smaller cities and in rural the growth continues to be good," Hindustan Unilever chief executive Rohit Jawa said last month, after reporting lower than expected earnings.

Consumers are also cutting back on dining out.

Fast-food chains such as McDonald's, Burger King, Pizza Hut and KFC posted same-store sales declines, earnings showed.

While people are still coming, they are choosing cheaper meals, Rajeev Varman, CEO at Burger King operator Restaurant Brands Asia RESR.NS said after posting a 3% drop in quarterly same-store sales.

"We prefer budget-friendly stores that give good deals and discounts to manage our monthly expenditure," said 37-year old Avinash Crasto, a Mumbai marketing and sales executive who has a family of four and identifies as middle class.

($1 = 84.0640 Indian rupees)

(Reporting by Praveen Paramasivam in Chennai and Shivangi Acharya in New Delhi; Editing by Sam Holmes)

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India File is published every Tuesday. Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here.

Nov 12 - By Ira Dugal, Editor Financial News, with global Reuters staff.

Hello, I'm Ira Dugal and I head financial news for Reuters in India. Join me each Tuesday as I lead you through the biggest stories out of India, and Asia.

Indian corporations have reported weaker-than-expected earnings for the July-September quarter. Are corporate report cards signalling a slowdown in the world's fastest growing major economy? That's our focus this week.

What does Donald Trump's return to the White House mean for emerging markets? Scroll down for "Market matters".

THIS WEEK IN ASIA

** China unveils $1.4 trillion local debt package but no direct stimulus

** Putin signs into law mutual defence treaty with North Korea

** Toyota aims to ramp up China production

** Pakistan limits outdoor activities, market hours to curb air pollution-related illness

A GROWTH SPEED BUMP

Big names in Indian consumer goods, including Hindustan Unilever and Nestle India, were arguably the top disappointments during the past month's quarterly earnings season, when negative surprises and foreign investor selling drove the benchmark Nifty 50 down 6.2% for October - its steepest monthly drop in four-and-a-half years.

That wasn't just bad news for the companies' share prices. It rattled investors with a warning that India's burgeoning urban middle class - a key force driving the world's fastest growing major economy - were reining in spending on goods from soap to shampoo to biscuits and tea.

That could be a harbinger of unwelcome change for an economy accustomed to rapid growth, which reached 8.2% in the last financial year and is forecast to remain above 7% this year.

So far, analysts are seeing the slowdown at least partly as cyclical, a normal reaction after a period of strong growth, rather than as a sign of flagging demand. But they also point to inflation, seen hitting a 14-month high in October on higher food prices, as a more stubborn problem that is eroding urban spending power.

Whether the slowdown worsens or stabilises depends on the strength of rural demand, after a strong monsoon and recent easing of farm policies, as well as the pace of government spending and a possible easing of interest rates by the central bank, which has also loosened its grip on liquidity.

The starkest earnings underperformance was among consumer goods firms, especially those that sell daily-use products to the urban middle class.

Urban Indians, who account for more than one-third of the world's most populous nation, spend 71% more than their rural counterparts, according to monthly consumption data. Consumption comprises 60% of India's GDP.

Nestle India Chairman Suresh Narayan said the market was clearly facing muted demand, as well as pressure from inflation. "Food inflation has been a cause of concern due to sharp uptick in prices of fruits and vegetables and (edible) oil," he told reporters after the company's earnings release.

He noted that growth in the food and beverage sector, in double-digits just a couple quarters ago, is now down to 1.5-2%.

Analysts linked the slower spending growth to a decline in disposable incomes.

India economists at Citi note that growth in inflation-adjusted wage costs for listed Indian firms - a proxy for urban dwellers' earnings - has held below 2% for all three quarters of calendar 2024, and well below the 10-year average of 4.4%.

Not all the earnings news was bad. Colgate Palmolive reported stronger demand from rural areas, while Marico, which sells cooking oil brands popular with rural consumers, said it expects double-digit revenue growth in the second half of the financial year.

Sales of high-end goods also proved resilient. In the auto sector, Mahindra & Mahindra, which sells popular sports utility vehicles, outperformed earnings expectations, although Maruti, with a wider portfolio that includes entry-level cars, was more vulnerable to sluggish demand.

All in all, analysts and economists see the latest quarterly earnings as more bad news than good.

Jefferies India downgraded full-year earnings estimates for 63% of the 121 large companies it covers, the highest downgrade ratio since 2020, when the COVID-19 crisis hit. It attributed that to a cyclical slowdown in the economy.

For the full year, Barclays has lowered its forecast for GDP growth to 6.8% from 7%.

Will growth continue to slip in the second half of the financial year, or will it stabilise? Write to me with your views at [email protected].

QUOTE OF THE WEEK

"I look forward to renewing our collaboration to further strengthen the India-U.S. Comprehensive Global and Strategic Partnership. Together, let's work for the betterment of our people and to promote global peace, stability and prosperity."

Indian Prime Minister Narendra Modi congratulated Republican Donald Trump on Wednesday after he won the U.S. presidential election.

With Trump's win, India is open to freeing up market access for U.S. firms, sources told Reuters.

MARKET MATTERS

Investors hoping for a "Goldilocks" moment for emerging markets in 2025 are facing significant uncertainty after the U.S. presidential elections.

The dollar's rigorous rally, higher bond yields and the prospect of the Federal Reserve slowing the pace of interest rate cuts weighed on emerging market currencies.

Asia could be surprisingly resilient in the face of this increased uncertainty. Investors may also look for safety in Indian assets, given its domestically focused economy.

(By Ira Dugal; Editing by Edmund Klamann)

By Bharath Rajeswaran, Hritam Mukherjee and Shubham Batra

Nov 11 (Reuters) - Top Indian companies registered their worst quarterly showing in more than four years for the July-September period, raising concerns that a lurking economic slowdown had begun to affect corporate earnings.

More than 50% of the 44 firms in the blue-chip Nifty 50 index .NSEI that have reported earnings so far have either missed analysts' estimates or reported results in line with expectations, according to data compiled by LSEG.

This is their worst performance since the March 2020 quarter at the start of the COVID-19 pandemic, when only about 20% of the Nifty 50 companies beat estimates.

Curbed government spending in April-June, due to the national elections, that spilled over into the September quarter and above-normal rains impacted earnings outcomes, analysts at Jefferies and Bernstein said.

Indian equities have dropped about 8% from their record closing high notched on Sept. 26, with October marking the worst monthly performance for the stock market since March 2020.

The selloff was also exacerbated by foreign investors moving out their investments in the wake of China's recent stimulus.

"It appears the waters may get a bit turbulent for Indian equities in the near term," said Motilal Oswal.

According to Jefferies, the current season has had the highest earnings downgrades since April-June 2020 among the 121 companies under its coverage that have reported results so far.

Motilal Oswal, meanwhile, flagged an 8% decline in earnings growth for the 166 companies it covers - the worst in 17 quarters - compared to a pre-season estimated drop of 4%.

Bernstein, however, added that investors were still considering the weakness over the past several months as an anomaly due to an elongated period of strong growth.

"Once reality hits, we expect a further but limited moderation in the Nifty from current levels."

BLIP OR APPROACHING STORM?

The monsoon or election impact may only be a part of the problem, according to Bernstein, "with a broader economic slowdown seen across IIP, eight core industries, automobile demand or diesel consumption."

Construction firms UltraTech Cement ULTC.NS and Larsen & Toubro LART.NS flagged weak demand, while banks reeled under their inability to recover unsecured loans. FMCG giants Nestle India NEST.NS and Hindustan Unilever HLL.NS also noted dull urban consumption.

Factory growth slowed to an eight-month low in September, while economic growth slowed to 6.7% in April-June. Data for July-September will be released on Nov. 30.

Bernstein moderated its year-on-year growth expectations for September earnings to 0.6% for the top 100 stocks, from its previous 9% forecast, while retaining its full-year consensus earnings growth of 10.2%.

Venkatesh Balasubramaniam, managing director and co-head of research at JM Financial, said one quarter of earnings weakness was not enough to indicate an economic slowdown, saying it was "too soon" to make that call.

"There is a possibility that government capex picks up in the second half."

Jefferies, which also noted the earnings moderation as a reflection of a cyclical slowdown, said that things could pick up in the second half of fiscal 2025.

Government spending on capex has fallen 15% in the first half, it said. With weather disruptions behind, execution and spending will rise by 25% in the second half, supporting an earnings rebound and a bounce-back in markets, it said.

(Reporting by Shubham Batra, Bharath Rajeswaran and Hritam Mukherjee in Bengaluru; Editing by Janane Venkatraman)

(([email protected];))

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Shritama Bose

MUMBAI, Nov 5 (Reuters Breakingviews) - India's biggest companies no longer offer a rose-tinted window onto the world's fifth-largest economy. Shoppers have been tightening their purse strings for years. Now the austerity is spreading from the rural poor to the urban rich. That is the opposite of the recovery story that was supposed to play out.

GDP is growing at 6.7% but the reality is that consumption has been weak in India since at least 2020. Income growth is anaemic: casual and regular workers in 2023 earned a monthly wage 1% lower than in the previous year, per an International Labour Organization report based on government data. For a while, big companies that dominate the country's stock benchmarks like the Nifty 50 Index .NSEI seemed well insulated.

The latest set of company earnings suggest otherwise. Hindustan Unilever's HLL.NS net profit fell 2% year-on-year for the three months ended September. Reliance Retail - a unit of $215 billion Reliance Industries RELI.NS - reported a 1% drop in revenue in the same quarter and shrank store space by 2% from its June level; boss Mukesh Ambani's execution on strategy looks as much of a problem as a softening economy. Shoppers Stop SHOP.NS, an upscale department store, logged its second straight quarter in the red. The list goes on.

The hope was always that the incomes of the poor who were buying fewer biscuits would improve. Instead, urban demand is showing weakness too - sales of fast-moving consumer goods groups in cities are growing at nearly one-fifth of last year's rate - just as rural sales inch up from a prolonged slump.

India's festival season is usually a time people spend but carmakers struggled to clear inventory in the run up to the Diwali holiday last week: Revenue growth at Maruti Suzuki MRTI.NS, the country's top carmaker by sales, crawled at its slowest pace in three years during the September quarter. Even luxury marque BMW BMWG.DE is slashing prices; discounts could get bigger going forward, the Times of India reported on Oct. 28, citing unnamed industry analysts.

Nearly half of the top 100 listed firms that have reported earnings for the September quarter missed estimates by more than 4%, the highest since March 2020, according to Venugopal Garre and his colleagues at Bernstein. Garre says companies are not acknowledging "the elephant in the room" and are hoping the slowdown is a one-off anomaly. For the country's eye-wateringly expensive equities - MSCI India is valued at more than 23 times earnings - that sets up a lot of potential pain.

Follow @ShritamaBose on X

CONTEXT NEWS

Diwali, a major holiday, was celebrated in India on Oct. 31 and Nov. 1.

(Editing by Una Galani and Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on BOSE/
[email protected]))

Nov 1 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• HINDUSTAN UNILEVER - COMPLETED SALE, DIVESTMENT OF WATER PURIFICATION BUSINESS UNDER BRAND 'PUREIT'

Further company coverage: HLL.NS

(([email protected];))

Adds analyst comment in paragraphs 4 and 6, background in paragraphs 5 and 9

Oct 24 (Reuters) - Shares in Hindustan Unilever HLL.NS fell 7% on Thursday, tracking their worst day in nine months, after reporting quarterly earnings below estimates due to an urban slowdown, with analysts expecting the pain to continue in the near term.

For the consumer goods industry, growth in urban pockets - which accounts for two-thirds of Hindustan Unilever's revenue - has lagged that in rural areas over the last three quarters.

Analysts do not expect a swift change in fortunes for large consumer goods makers such as Nestle India NEST.NS and Hindustan Unilever.

Axis Securities expects "short term pain" for Hindustan Unilever, analyst Preeyam Tolia said, adding that the brokerage anticipates 5%-6% revenue growth for the rest of this fiscal, versus a historical average of 10%.

Consumer goods majors also face stiff competition from smaller brands stepping up their product launches and expanding deeper into rural India.

"Competition has increased ... The regional players have become bigger," Tolia said.

For the second quarter, the Dove soap-maker reported a near-4% fall in profit to 26.12 billion rupees ($310.8 million), missing estimates of 26.88 billion rupees, according to data compiled by LSEG.

"A visible recovery remains elusive ... We are disappointed," Antique Stock Broking said in a note.

Among peers, Nestle India reported a drop in profit, while soft drink makers Dabur India DABU.NS and Varun Beverages VARB.NS posted downbeat India numbers

Hindustan Unilever's shares, which have been largely flat this year and are rated "buy", on average, were down 7.1% at 2,470 rupees. The stock is the second-biggest loser on the benchmark Nifty 50 .NSEI index.

Other consumer stocks including Nestle India, Britannia Industries BRIT.NS and Dabur India DABU.NS were down 1.5%-3%.

(Reporting by Praveen Paramasivam and Ashna Teresa Britto; Editing by Janane Venkatraman and Sonia Cheema)

(([email protected]; +91 867-525-3569;))

Oct 23 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• HINDUSTAN UNILEVER - SEES NEAR TERM DEMAND TRENDS TO REMAIN STABLE

• HINDUSTAN UNILEVER - SEES NEAR TERM LOW-SINGLE DIGIT PRICE GROWTH, IF COMMODITY PRICES REMAIN SAME

• HINDUSTAN UNILEVER - SEES NEAR TERM EBITDA TO BE MAINTAINED AT CURRENT HEALTHY LEVELS

Source text for Eikon: ID:nNSE1FMQWg

Further company coverage: HLL.NS

(([email protected];))

Corrects to drop incorrect reference to "retired" in paragraph 1

Oct 7 (Reuters) - Nestle SA NESN.S, on Monday, nominated former Amazon India head and Unilever executive as its candidate to head the food giant's Indian operation in a year's time.

Nestle India NEST.NS said its Swiss parent had recommended that Manish Tiwary replace Suresh Narayanan when he retires as managing director next year.

Nestle India, Hindustan Unilever HLL.NS and other consumer products companies have been struggling to invigorate sales for a while now due to high inflation and competition from cheaper rivals in the world's most populous country.

Narayanan has been the Indian company's chairman and managing director -- executive positions that rank higher than a CEO in India -- since 2015 and will retire on July 30 next year.

If Nestle India approves the nomination, Tiwary, who resigned as Amazon.com's AMZN.O India head two months back, will become the company's managing director.

Narayanan, who has previously headed Nestle's operations in the Philippines, Egypt and Singapore, is also retiring as chairman of Nestle India, but the company did not say who would take over that position. It did not immediately reply to an email seeking comment.

Amazon India had said Tiwary would leave in October after an eight-year stint as its India head to pursue an opportunity outside of the company.

Tiwary has held various posts at Nestle's rival Unilever's ULVR.L Indian and Gulf units, according to his LinkedIn profile. He did not immediately respond to requests for comment.

(Reporting by Hritam Mukherjee in Bengaluru; Editing by Sonia Cheema and Savio D'Souza)

(([email protected]; X: @MukherjeeHritam;))

Sept 6 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• HINDUSTAN UNILEVER- EVALUATED AND DISCUSSED PROSPECTS FOR COMPANY'S ICE CREAM BUSINESS

• HINDUSTAN UNILEVER- BOARD HAS DECIDED TO CONSTITUTE A COMMITTEE OF INDEPENDENT DIRECTORS OF COMPANY

• HINDUSTAN UNILEVER- TO EVALUATE IN DETAIL PROSPECTS OF COMPANY'S ICE CREAM BUSINESS

• HINDUSTAN UNILEVER - ALSO ACCORDED ITS APPROVAL TO EXPLORE POTENTIAL STRUCTURES AND ALTERNATIVES FOR SAME

• HINDUSTAN UNILEVER- TO EXPLORE POTENTIAL STRUCTURES AND ALTERNATIVES FOR ICE CREAM BUSINESS

• HINDUSTAN UNILEVER - INDEPENDENT COMMITTEE TO EVALUATE WAY FORWARD FOR ITS ICE CREAM BUSINESS

Source text for Eikon: ID:nBSEM2tWd

Further company coverage: HLL.NS

(([email protected];))

Sept 3 (Reuters) - Hindustan Unilever Ltd HLL.NS:

• HINDUSTAN UNILEVER- GETS TAX ORDER OF 210.6 MILLION RUPEES, PENALTY 21.1 MILLION RUPEES

Source text for Eikon: ID:nBSE7tSlRX

Further company coverage: HLL.NS

(([email protected];;))

** Shares of Hindustan Unilever HLL.NS drop about 2% to 2,772.40 rupees apiece

** Company among top losers in consumer index .NIFTYFMCG, which is down 0.9%

** HLL also among top five losers in Nifty 50 .NSEI, which is up 0.15%

** Drop after HLL receives tax demand of 9.63 billion rupees (about $115 million) from the country' income tax department, company says in an exchange filing post market hours on Monday

** The mean rating of 37 analysts tracking HLL is equivalent to "buy"; median price target at 2,950 rupees, 6.4% above current levels - LSEG data

** HLL shares up 4.3% YTD, underperforming consumer index .NIFTYFMCG and Nifty 50 .NSEI, which are up 11% and 15.3%, respectively - exchange data

($1 = 83.9110 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru)

(([email protected]; +91 9769003463;))