EUR 120.00 For Business Accounts Only

MOSL: CONSUMER-Rural India – Green shoots visible, but pace of growth uncertain

Consumer: Rural India – Green shoots visible, but pace of growth uncertain

 

 

• Once a key volume driver for Consumer companies, rural growth has been on a continuous slide for the past five quarters. Nielsen's data released on 21st Jan'20 too suggests continued slowdown in rural growth for the Dec'19 quarter. In fact, rural growth has slipped below urban growth for two successive quarters now.
• However, the worst now seems to be over based on the recent data on WPI food inflation, lower agri input costs and improved government spending post elections. Also, high reservoir levels post the monsoon season augur well for Rabi crop cash flows.
• Questions though remain on the pace of the recovery as corporate commentary over the past two months has turned incrementally negative, leading us to expect delayed recovery/overall growth in the rural sector.
• To play the rural recovery story - although the pace of revival may be slower than anticipated - we prefer HUVR for its nimbleness and CLGT for its newfound aggressiveness. On the other hand, we are cautious on DABUR due to high wholesale dependence and international business contributing over 25% to overall sales. We are also cautious on BRIT owing to rising commodity costs and the fact that biscuits' demand usually recovers with a lag.