Godrej Consumer stops putting a number on its India margin as costs climb

For a year Godrej Consumer Products, which sells soaps, liquid detergents, household insecticides and hair colour, has told shareholders when its India margin would recover. It has now stopped setting a date or a range. In the September 2026 quarter the India business turned 21.2% of its sales into operating profit, down from 22.1% a year earlier. Asked about margins, managing director and chief executive Aasif Malbari said that in a commodity spike this sharp the company would "price for profit growth rather than to price for margin", and would judge itself on growth in EBITDA rather than on EBITDA as a share of sales.

The measure here is operating profit over sales in the India results, which is not the same measure as the company's own India EBITDA margin. Both move the same way when costs outrun prices, and costs have done that. Management described the quarter's input inflation as among the worst in many years, said it was running slightly higher still in the current quarter, and plans further price rises in soaps and liquid detergents, where it said margins remain below normal levels.

The change matters because of what shareholders were told before. A year ago, after a weak quarter, management called it the last weak quarter for India margins and expected a return to normal levels within months; the margin duly rose to 25.3% in the following quarter. In May it warned of a few months of lower percentage margins. In August Sudhir Sitapati, who led that call, said the aim was to stay within a range of 22% to 26% even in a weak quarter and to be back at normal margins in the second half. The quarter he spoke after came in at 21.8%; last quarter was lower again.

Profit is still rising; it is rising more slowly than sales. India sales grew 12.7% on a year earlier and operating profit 8.1%, calculated from the filed results. Across the group, including Indonesia and Africa, the company reported revenue up 19% and EBITDA up 12%. Part of the sales growth came from price rises rather than extra volume, with underlying volume up 7%, and the year-earlier quarter was itself a weak one, so the growth rates flatter the underlying trend.

The guidance for the current financial year survives intact. Malbari kept the targets of high single-digit volume growth in India and double-digit revenue and EBITDA growth for the group, with revenue ahead of plan and the confidence to "exceed it in certain areas", and said double-digit group EBITDA growth was the commitment he wanted to deliver. In August Sitapati had gone further, saying EBITDA growth might beat that double-digit target by a little. The new wording keeps the floor without the extra.

Some of the profit growth comes from spending less on advertising. An analyst put India ad spend down by 17% last quarter after a smaller cut in the quarter before; Malbari did not dispute the figures and split the cause evenly between category-wide cuts in soaps and detergents and cheaper reach elsewhere. In August the company had said media spending would have to rise in its new categories once costs cooled, and costs have not cooled. Working the other way, the company estimated that cutting back the stock held by its trade partners took about 150 basis points, or 1.5 percentage points, off India growth last quarter, and Malbari said the company was still working some of that inventory down.

None of this makes the new approach wrong. When raw materials jump, a company that raises prices only enough to protect profit in rupees keeps more of its customers than one that defends a percentage, and the year-ago quarter shows that India margins have recovered from a dip before. But a holder now has a growth target in place of a margin date, at a time when costs are still climbing and advertising is already lower. Whether profit grows in double digits this year depends on the price rises in soaps and liquid detergents holding without the volume falling away.