FMCG Company Hindustan Unilever (HUL) stated that it will be soon to say that due to the implementation of Goods and Services Tax, the unorganized sector is at the risk of losing all the business. Hindustan Unilever Managing Director Sanjeev Mehta said that only after passing few quarters, the actual market share of the unorganized sector can be anticipated. While talking about the performance of the business of December quarter, Mehta said in an Investor meeting that it is a big business. So nobody will stop this business in haste. He will do everything to save his business.
HUL surprisingly recorded the highest sales volume growth over the last six years in the December quarter. During this time, the company had pointed towards recovery in the market. Mehta said, “We will take a year to see what kind of trend is taking place in the market.” He said that before the GST, the unorganized sector was not paying taxes, so the benefit was coming in continuity but after the GST implementation, there is now a lot of challenges which they have to face in order to save his business.
Earlier, many of the local brands in the country had hit the market and also made some difficulties for the big foreign consumer products companies through their products. In the category of soaps, detergents, hair oils and many other FMCG products, in particular, more than 500 unorganized players had taken the entry, which had created problematic situations for the large consumer product companies. However, with the introduction of GST across the country, such companies may not find a stable place in the reign of GST.
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HUL Chief Financial Officer Srinivasa Pathak stated that many of those unorganized players will find difficult to stay in the market due to the GST which will further give the opportunity to the large companies for making them again stable in the market.
Analysts say that the market share of branded products can not slide to upper market share instantly. One of the analysts of UBS said that many companies may have to increase their working capital due to the restriction of GST related deadlines on the transaction. Reason being the claim of input credit can only be availed later once after the sales have been done and not before that. Before that, they may have to pay the vendors, for which they will need additional capital.
