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Godrej Consumer shares surge over 20%; what's got investors excited?

The stock hit a 52-week high of Rs 894 on Wednesday


Shares of Godrej Consumer Products jumped more than 20 per cent on Wednesday, even as the broader equity market traded firmly in the red. The reason for the euphoria among Godrej Consumer investors was strong earnings performance in the January-March quarter, but perhaps more importantly, the appointment of new managing director and CEO Sudhir Sitapati.

It was in June last year that Vivek Gambhir resigned as the MD and CEO of Godrej Consumer (GCPL). During his 11-year tenure with the Godrej Group, Gambhir had overseen several international acquisitions as well as the integration of the erstwhile Godrej Sara Lee business with GCPL. After Gambhir’s exit, Nisaba Godrej the chairperson of GCPL had then been given the additional charge of MD.

Sitapati will now take charge as the MD and CEO of GCPL effective October 18, 2021. Nisaba Godrej will then continue to serve as the executive chairperson.

Sitapati was until recently executive director of Hindustan Unilever’s food and refreshment business. He spent 22 years at the Anglo-Dutch FMCG giant, where he lead teams across categories and functions in India, Europe, South East Asia and Africa to create significant value for the business.

As executive director of foods and refreshment, Sitapati led the transformation of tea into a purpose-led category that regained market leadership and gained shares for the last three years, said HUL.

“During his tenure, he led the merger of Adityaa Milk and more recently, of GSK ConsumerHealthcare business into HUL, bringing iconic brands like Horlicks and Boost into the Unilever family. The Unilever Food Solutions business, under his leadership, was rewired and transformed into a growth engine for the company,” the maker of Surf detergent and Red Label tea further said.

The $5 billion merger of GSK’s Consumer business with HUL was the largest deal of its kind in the FMCG sector in India.

This rich experience Sitapati had with HUL has got GCPL investors upbeat. While GCPL is among the top players in the soaps, hair colours and household insecticides market in India, its operations expand from Indonesia to Africa and Latin America. The appointment of Sitapati as the MD and CEO could, particularly, augur well for GCPL, for a bigger and profitable push in these overseas markets, particularly Africa, say analysts.

“The stock’s recent underperformance and the hiring of Sitapati as CEO may increase optimism and drive near-term upsides,” said Ashit Desai, analyst at Emkay Global Financial Services.

Sitapati’s significant experience and passion for building sustainable and profitable brands and businesses aligns very strongly with their purpose at GCPL, said Nisaba Godrej.

“I look forward to his partnership in unlocking the amazing potential of our company and leading its next phase of growth,” she added.

GCPL’s fourth quarter consolidated net profit surged 59 per cent from a year ago to Rs 366 crore, while net sales gained 27 per cent to Rs 2,706 crore.

GCPL’s fourth quarter performance was “impressive” and the stock remains a top pick, said brokerage ICICI Securities, which upgraded its rating on the company to “buy” from “add.”

“We believe strong growth momentum is likely to continue driven by acceleration in India household insecticides, improvement in Indonesia and profitable turnaround in Africa under the new leadership. Further, appointment of Sitapati as MD and CEO is a likely re-rating event,” said analysts Manoj Menon and Karan Bhuwania.

The stock hit a 52-week high of Rs 894 on Wednesday and was trading at Rs 865.15, up 21 per cent in afternoon trade.


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