Dabur India flags short-term sales disruption in Q2 amid GST reforms

Consumer goods maker Dabur India said on Tuesday that it saw a short-term moderation in sales during the second quarter ended September, as consumers deferred purchases and retailers rushed to liquidate higher priced inventory ahead of the government's sweeping goods and services tax cuts.

The tax cuts went into effect on September 22.

The company said in a statement that it expects second quarter revenue to grow in mid-single digits, with operating profit to grow at a similar pace.

However, Dabur expects revenue growth to "regain momentum in the coming quarters," benefitting from tax cuts and improving urban demand.

The tepid second quarter revenue and profit growth compares to a 5 per cent decline in Dabur's revenue and 18 per cent drop in net profit in the same quarter last year, as it took a one-time hit from inventory reduction in mom-and-pop stores to account for consumers who were increasingly shopping at supermarkets and online platforms.

Following the goods and services tax cuts, key categories for Dabur such as oral care products, juices, hair oils and shampoos, which make up about 60 per cent of its portfolio and previously saw tax rates of 12 per cent or 18 per cent, now face a 5 per cent levy.

About 85 per cent of Dabur's portfolio will have a goods and services tax rate of 5 per cent, the company said.

Dabur's shares were up 1.5 per cent after the quarterly update.