Patanjali Ayurved H1 Results: Profit Up, Downsizes Packs To Cut Costs

Patanjali Ayurved Ltd.'s net profit and revenue rose in the first half of the current fiscal, aided by a low base.

Net profit of the maker of Dant Kanti toothpaste rose 8% over a year earlier to Rs 231.8 crore in the six months ended September, according to its exchange filing.

Other Highlights:

• Revenue rose 8% to Rs 4,575.7 crore in the first half.

• Operating margin narrowed to 10.6% from 11.6%.

• Its largest food and dairy products segment saw revenue rise to Rs 2,736.3 crore, a growth of 16.1%.

• Sale of its ayurvedic products rose 32.7% to Rs 630.9 crore.

• Home and personal care products sales fell 15.2% to Rs 1,113.2 crore as discretionary spends took a hit amid the second wave of Covid-19.

• Other goods sales rose 5.34% to Rs 89.1 crore.

• Exports rose 30% to Rs 29.1 crore.

The Baba Ramdev-backed company raised Rs 175 crore through private placement of listed 9.25% non-convertible debentures on May 19, due for repayment in 2024. And it didn't invest more in Ruchi Soya Ltd.

Like other consumer goods peers, the company saw an increase in raw material costs. Cost of chemicals, food grains, fatty acids and palm oil have risen in the range of 30-40%, Ram Bharat, director at Patanjali Ayurved, told BloombergQuint. Transportation costs also rose 40%, hurting margins, he said.

The company has also resorted to shrinkflation or offering less in a pack at the same price to protect margins. “We have already reduced grammage in some of our products such as biscuits and other food products," Bharat said. "For now, we are watching the inflation trend and if prices rise upwards further, we will have no choice but to raise MRP as well."

Hindustan Unilever Ltd., Dabur India Ltd., Marico Ltd. and Colgate Palmolive Ltd. have also expressed concerns over the rising cost of raw materials, transportation and congestion in shipping lines leading to supply-side constraints and impacting margins. That prompted these companies to reduce package sizes of everyday items. Many have also raised the maximum retail price, passing on the burden of higher input costs to consumers as they look to protect margins.