FMCG stock crashes 10% after reporting muted Q3 results

Synopsis: Godrej Consumer Products stock fell 10% after Q3 profits stayed flat despite 9% revenue growth, hurt by Rs 91 crore in exceptional costs from labour code impact, litigation, restructuring, and a Rs 36.9 crore tax adjustment.

The shares of this company, which is engaged in the fast-moving consumer goods segment and which manufactures and markets household and personal care products, had its shares in the news following the muted Q3 results. A few reasons for this flat financial performance are mentioned in the article.

With the market cap of Rs 1,19,561 crore, the shares of Godrej Consumer Products Ltd crashed about 10% and made a low at Rs 1,122 , compared to its previous day closing price of Rs 1,240.25, and are trading at a PE of 61.6, whereas its industry PE is at 49.3. 

Q3 FY26 Result highlights 

The revenue from operations for the company stood at Rs 4,099 crore when compared to Rs  3,768 crore in Q3 FY25, up by about 9 per cent on a YoY basis and on a QoQ basis up by 7 per cent from Rs 3,825 crore in Q2 FY26.

When it comes to profitability, the company has gone from an Rs 498 crore profit in Q3 FY25 to an Rs 498 crore profit in Q3 FY26, being the same YoY, and from Rs 459 crore in Q2 FY26, up about 8.5% QoQ. 

Reason for the flat profit

Godrej Consumer Products registered a healthy 9% YoY growth in revenues, thanks to sustained demand in India, Africa, and Indonesia. However, this growth in the top line did not get reflected in the bottom line, as the company’s consolidated PAT remained flat YoY. The main reason for this was the sharp increase in exceptional and one-off expenses, which dented the bottom line.

The major drag on the bottom line came from the Rs 44 crore effect of the new Labour Codes, which resulted in increased provisions for gratuity and leave encashment, thanks to the new definition of wages. This is a one-time, statutory cost that has directly affected employee benefit expenses and dented the operating profit, even though the underlying business performance remained stable.

In addition, GCPL also incurred Rs 23 crore in litigation expenses pertaining to product cases in its US subsidiary, Strength of Nature, and Rs 24 crore in restructuring and acquisition costs. These included severance costs, manufacturing footprint adjustments, and stamp duty on the Muuchstac acquisition. All these factors combined to push the total exceptional losses to about Rs 91 crore, which heavily compressed the bottom line.

Finally, the profits were also affected by a tax adjustment of Rs 36.9 crores in the prior period, which added to the tax outgo despite stable operating performance. The tax burden, along with special charges, ensured that despite an increase in revenues and operational margins, the net profit remained stagnant, which resulted in investor discontent and a negative response in the stock.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post FMCG stock crashes 10% after reporting muted Q3 results appeared first on Trade Brains.