The operating margins of the country’s fast-moving consumer goods (FMCG) companies are likely to come under pressure in the September quarter due to rise in prices of raw materials and other key commodities. However, due to steady demand and growth in key product categories, many companies are expected to grow revenues by double digits or more than 10 percent. A sharp increase in the price of crude oil used in packaging and its derivatives, along with inflation in other commodities, has increased costs for companies. Apart from this, low rainfall in many areas is likely to affect agricultural production and rural demand. It can affect the business and profit of the companies.

ICICI Direct Report

According to a report by brokerage firm ICICI Direct, a rise in prices of crude oil and its related products along with other key raw materials could affect the profit before interest, tax, depreciation and amortization (EBITDA) margin of most companies manufacturing home consumption and personal care products.

The report said that the performance of most FMCG companies is likely to be mixed in the second quarter of FY 2026-27. Many companies may see double-digit sales growth, but operating profit growth may be less than revenue growth due to rising commodity prices.

According to the report, low rainfall may affect agricultural production in most parts of the country, which is likely to dampen rural demand. At the same time, urban demand may also be affected if food inflation picks up further. The report also estimates that rising costs may put pressure on companies’ margins in the second half of fiscal 2026-27.

Estimates of companies

FMCG majors such as Dabur India and Merico have projected double-digit growth in their revenue for the September quarter. These companies are expected to be supported by improvement in demand in their core businesses and preferred product categories. In its quarterly business forecast, Dabur India said inflationary pressure remains in the over-the-counter and traditional medicinal products categories along with household and personal care products (HPC).

According to the company, operating margins were impacted during the quarter due to inflation. However, a phased increase in prices and cost-saving efforts helped mitigate this impact to some extent. Marico, on the other hand, has hoped for a better performance in margins. The company, which makes brands such as Parachute Coconut Oil and Sefola, said prices of crude oil-related products rose further during the quarter, while copra prices remained about 35 percent below their peak. Marico expects a strong improvement in gross margin YoY due to favorable product mix and relatively low copra prices. This can help the company mitigate the impact of rising costs.

GCPL expects strong performance

Godrej Consumer Products Limited (GCPL) also acknowledged an increase in raw material costs during the quarter. According to the company, some commodity prices showed signs of softening at the end of the first quarter of FY 2026-27, but prices of several major raw materials rebounded in the second quarter. It includes crude oil related products, palm oil and other commodities. The company’s major brands include Hit, Goodnight, Godrej No. 1 and Synthol.

However, the company expects a strong performance in the second quarter as well. He said uneven monsoon conditions, fear of strengthening El Nino and rising prices of various commodities are affecting consumption. Despite this, the performance may be supported by favorable conditions compared to the same period last year.

Nomura Report

According to Nomura’s report, many raw material prices in September remained above the level of the same period last year. Despite the recent softening of some commodity prices, pressure on companies’ margins is likely to remain in the September quarter. Overall, revenues of FMCG companies are likely to increase in the September quarter, but their profit growth may remain under pressure due to rising costs, food inflation and a possible slowdown in rural demand. The actual performance of companies will depend on the extent to which they are able to control cost increases and how strong consumer demand remains.