P&G India: Growth focus took a toll on FY19 margins

Healthy revenue growth across segments except personal care: P&G India’s consolidated combined revenues grew 15% y-o-y in FY2019 to Rs 108 bn.

P&G India, as a combined entity (two listed P&G entities, P&G Hygiene and Healthcare, Gillette India, and the unlisted P&G Home Products) grew its revenues ahead of HUVR for the first time since FY2015, albeit at the expense of margins. Ebitda margins declined y-o-y for the first time in many years. In our FY2018 round-up of P&G India’s performance, we had noted signs of the company pivoting to a growth focus after staying sharply focused on margin improvement from FY2014-18. We expect P&G to stay focused on growth as the company is yet to get all its segments firing again.

Healthy revenue growth across segments except personal care: P&G India’s consolidated combined revenues grew 15% y-o-y in FY2019 to Rs 108 bn. This compares to a modest 5% revenue growth in FY2018 and a 4.5% revenue decline in FY2017. This was also the first time since FY2015 that P&G India’s revenue grew ahead of HUVR. P&G’s total revenues for FY2019 stood at 28.3% of HUVR’s, a 110 bps uptick over FY2018. Revenue growth was healthy across segments.

Margins dip across the three entities: P&G’s combined Ebitda grew only 4.8% y-o-y to `17.9 bn. We note that the company had grown its combined India Ebitda at a 26.3% CAGR over FY2014-18. Pivot from profitability focus to growth focus comes out quite clearly in the numbers. P&G’s Ebitda as percentage of HUVR’s stood at 20.7% for FY2019, a 280 bps dip from the 23.5% level hit in FY2018. We note that P&G’s Ebitda as percentage of HUVR’s had grown from 15% in FY2014 to 23.5% in FY2018.