GST transition, heavy rains impact FMCG sector in Q2

Most companies have fully passed on GST benefits to consumers
| Photo Credit:
SIVAKUMAR PV

The transition to revised GST rates could lead to adverse impact on volumes to the tune of 2-3 per cent, a report by Nuvama Institutional Equities noted. It added that this was due to delayed consumer purchases and reluctance of trade to stock up on higher-priced inventory. It further added that this impact is likely to reverse from November onwards. The report also noted that heavy rains in Q2 FY26 have also adversely impacted categories such as soft drinks, beverages, beer and ice-creams.

“Most companies have fully passed on GST benefits to consumers. Q2FY26 will see adverse transition impact on volumes, margins, working capital days, which will reverse November onwards,” the Nuvama Institutional Equities report stated.

Undergoing transition

Distributors and retailers of FMCG products have been undergoing a transition through September as they focused on clearing existing inventories with old prices. This also resulted in them postponing new orders of stocks before the implementation of GST norms.

On impact of recent unrest in Nepal on the industry in Q2, the report noted, “ We see the Nepal issue to be a slight negative for most consumer names. However, the fact that normalcy is returning is good.”

In terms of summer-centric categories, it noted, “Summer Portfolio has seen two back-to-back tough quarters. Heavy rains have led to material impact in summer category demand.”

“While all FMCG categories face inverted duty structure challenges post-GST cuts, oral care and personal care are disproportionately worse off than food FMCG, because their input structure leans heavily on services (non refundable), whereas food FMCG is more goods-driven(refundable),” the Nuvama Institutional Equities report added.

Published on September 30, 2025