Nisaba's task cut out at GCPL: Mission turnaround

ET Intelligence Group: It is rare for a professional CEO to step aside for an executive chairperson of a family-owned business to take up the top executive role.Incidentally, this has happened at the FMCG arm of one of the country’s oldest family-run business houses: the Godrej Group. The Street didn’t take the development positively with the stock of Godrej Consumer Products (GCPL) closing nearly 4 per cent lower on Wednesday.Nisaba Godrej becomes one of the only two female CEOs of an Indian FMCG company. The other is MR Jyothy of Jyothy Laboratories, a close rival of GCPL in the local household insecticides market.76312669GCPL has been underperforming in recent years both on the ground as well as on the bourses, as its household insecticides business has shrunk amid competition from illegal insecticide-laced incense sticks.Can GCPL’s investors expect a turnaround in the company’s fortunes with the exit of Vivek Gambhir, the outgoing chief executive? FMCG companies have traditionally changed their CEOs (often appointing an outsider) during volatile times to improve shareholder returns.The change at the helm at GCPL comes amid the Covid-19 crisis and within a month of the company reporting a disappointing fourth quarter performance. The company with a predominantly discretionary product portfolio reported a 15-percentage-point drop in domestic volume growth — one of the worst declines posted in the sector during the quarter. The GCPL stock has nevertheless rallied nearly 50 per cent since the lockdown, as the Street turned to the FMCG sector as a safe haven.As its executive chairperson, Godrej has been active in the company’s management. It will therefore not be difficult for her to step into a more hands-on role. As an insider CEO, she has her task cut out in terms of tackling the company’s underperformance. GCPL managed to achieve half of the 10×10 (10 times in 10 years) growth vision that it had set in 2010.Despite being the market leader in the mosquito repellent category in India, the company has not been able to push growth of the category in recent years — being late in countering the threat from the illegal incense sticks.The underperformance of its African business remains a cause for concern. Growing its hair products business after the setback to salons due to Covid also remains a challenge.Unlike other FMCG companies, GCPL has debt on its books, which has had an adverse impact on its valuations. Little wonder that GCPL is among the cheapest FMCG stocks currently.

from Economic Times https://ift.tt/3dRjL7P