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Informist, Thursday, Sept. 25, 2025

MUMBAI – Global brokerage HSBC Global Investment Research upgraded its ratings on Britannia Industries Ltd. and Nestle India Ltd. as it sees these companies as top beneficiaries of a weighted average reduction in goods and service tax rates. The brokerage upgraded Britannia Industries to 'hold' from 'reduce' and raised its target price by 20% to INR 6,140. It also upgraded Nestle to 'hold' from 'reduce' and raised the target price by 17% to INR 1,270.

The brokerage also raised its target prices on Godrej Consumer Products Ltd. and Marico Ltd. by 3% and 2% to INR 1,470 and 870, respectively and maintained a 'buy' rating. It also raised target price on Hindustan Unilever Ltd. by 14% to INR 2,710 and maintained a 'hold' rating. It also kept a 'hold' rating on Colgate Palmolive Ltd. but slashed the target price by 8% to INR 2,400 as it sees market share loss outweighing any GST benefits. Among others, the brokerage raised its target price on Honasa Consumer Ltd. but kept a 'reduce' rating due to minimal impact from the GST cuts.

The combination of income tax cut, GST cut, and a repo rate cut has the potential to trigger an improvement in demand, especially urban, despite structural issues remaining in the sector, HSBC said in its report. The brokerage said rural demand remains robust, visible in the real rural wage growth trends on a low base. "We see incremental benefits of INR 2.0 trillion-INR 2.5 trillion for customers via the three initiatives mentioned above, which make up 2%/3%/8% of India's overall private final consumption/retail/organized discretionary expenditures," the brokerage added.

The structural issues the brokerage talked about includes weak job creation and challenges to rural income, with the average real rural wage growth being largely flat over 2015-16 (Apr-Mar) and FY24. It expects these structural issues to improve gradually but measures by the government to bottom out pain related to consumption. 

The brokerage sees categories with a high low-unit-packs share and discretionary and impulsive buying trends will see the highest benefit from GST cuts. "We expect impulse categories like biscuits, salty snacks, and chocolates to see an increase in immediate consumption as these items are consumed via packs rather than absolute quantity," it added. The brokerage sees a one-time spurt in volumes of low-unit packs and the home and personal care segment instead of a significant step-up in consumption. 

HSBC maintained a 'hold' rating on Dabur India Ltd. with a target price of INR 500 as the company's portfolio issues would limit any benefit from GST cut. It also retained a 'buy' rating on ITC Ltd. with a target price of INR 510 as the brokerage awaits clarity on taxation for cigarettes.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Akash Mandal

Edited by Akul Nishant Akhoury

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