Godrej Consumer Products to source products from Assam unit

Mumbai: Godrej Consumer Products (GCP) is seeking to improve its margins by sourcing its products from its unit in Assam, a tax haven.

The company at present sources nearly 40 per cent of its personal care portfolio from Assam, where GCP enjoys tax and excise exemptions. According to analysts, Godrej's ability to protect margins depend to a large extent in its ability to raise off-take from its Assam unit and also start procuring from other tax-free havens.

They also feel that within soaps GCP will need to raise its margins significantly and draw out growth from other brands such as Fairglow and Cinthol. It is expected that growth in hair colour is likely to be stronger in coming quarters. The Godrej stock is currently quoting at Rs 150.

GCP provides a dividend yield of 6.9 per cent, lower than the historic yields of 8-9 per cent. Over the past couple of years, GCP delivered superior shareholder returns and the stock has seen a substantive re-rating, the analysts say. But given the strong re-rating that the stock has had in recent times, they expect the stock to track the markets in the near term.

Early this year, ICRA has assigned SVG2 rating to stakeholders' value creation and governance practices of the company. This is on a rating scale of SVG1 to SVG6 where SVG1 denotes the highest rating. The SVG2 rating implies that in ICRA's opinion, the rated company belongs to the high category on the composite parameters of the stakeholder value creation and management as also corporate governance practices.

The CGR2 rating to the corporate governance practices of the company is on a rating scale of CGR1 to CGR6 where CGR1 denotes the highest rating. The CGR2 rating implies that in ICRA's opinion, the rated company follows practices that provide its financial stakeholders a high level of assurance on the quality of corporate governance.