Analysts said execution issues are largely responsible for GCPL’s muted show in international markets, excluding Indonesia. In FY13, overseas revenue was a little over Rs 3,000 crore. But, over the past three years, the international business, which has accounted for about 45 per cent of consolidated revenue in recent years, has shrunk from Rs 4,636 crore in FY17 to Rs 4,568 crore in FY20. While part of the lacklustre show can be attributed to currency related issues, the business as such has not done well. In fact, Africa has remained a spoilsport for GCPL. The company's consumer products were not as successful in markets such as Africa and Latin America, as compared to India, point out analysts. Some also believe that GCPL’s capital allocation strategy in the foreign markets has negatively impacted return ratios.
Dhananjay Sinha, director and head of institutional research, Systematix Group, says, with different business structure in terms of limited product offerings and geographic expansion, GCPL has lagged peers.
Disruptive macro events in the past four to five years have aggravated issues, pulling down growth rates. During Gambhir's tenure, the country saw challenges arising on account of demonetisation (2016), goods and services tax (GST; 2017) and now Covid-19 outbreak. While these were not restricted only to GCPL, the latter was also faced with stiff competition from illegal incense stick, in its key household insecticides (HI) segment (around 38 per cent of the domestic business) where GCPL leads the mosquito repellent market.
Shirish Pardeshi, analyst at Centrum Broking, says: “Macro headwinds were faced by most companies.
For GCPL, focus on limited segments, like HI (affected by weather conditions) and soaps (limited pricing power), and inability to grow revenues in hair colour, are key issues.” Growing the relatively mature soap segment at a faster pace, amidst competition from the likes of market leader Hindustan Unilever (HUL) wasn't easy either.
However, sharp cost control during Gambhir’s tenure helped GCPL improve its operating performance. After witnessing margin pressure during FY13 to FY16, GCPL has seen improvement in its operating profit margin in the past 3-4 years, and the same has remained above 20 per cent levels. And, this has helped clocked higher CAGR of 9.4 per cent in net profit between FY13 and FY20, as compared to top line, thereby improving the return on equity ratio, a key valuation parameter.
Yet, the bottom line performance lags that of comparable FMCG peers. Domestic companies
such as Marico and Dabur
have reported a CAGR of 7 per cent and 5 per cent in top line, and 14 per cent and 11 per cent in net profit, respectively, between FY13 and FY20. The CAGR figures for Britannia were 9 per cent and 27 per cent, respectively, during this period.
Even in terms of share price performance, GCPL has lagged (with 140 per cent returns) as compared to Marico (227 per cent), Dabur
(199 per cent), and Britannia (900 per cent), since July 1, 2013, till date.
Now all eyes are on how the new CEO and existing chairperson, Nisaba Godrej (younger daughter of billionaire industrialist Adi Godrej), shapes up GCPL.
The market has not voted positively to the decision to appoint a family member as CEO, given the stock has shed 7 per cent in two days, after the announcement, as compared to 1.5 per cent decline in the Nifty FMCG during the same period.