Godrej Consumer Products shares tank 10% after CEO’s sudden exit; HSBC downgrades to Hold

Shares of FMCG major Godrej Consumer Products Ltd. (GCPL) crashed as much as 10% to an intra-day low of Rs 916 on the BSE on Wednesday, following the company's announcement of Managing Director and Chief Executive Officer (MD & CEO) Sudhir Sitapati's sudden resignation with immediate effect.

In his resignation letter, Sudhir Sitapati said that GCPL's total shareholder return averaged around 10% from May 7, 2021, when his appointment was announced, through August 9, compared with around 8% for the NIFTY FMCG index.

He noted that 97% of analysts currently rate the stock either Buy or Hold, among the highest levels in the sector. Sitapati also highlighted that as India's FMCG sector emerges from a difficult period, GCPL's growth has been accelerating, with Q1 FY27 revenue growth at 19% and underlying volume growth at 9%, both multi-quarter highs.


He said he felt the task he had set for himself at GCPL was complete and that it was the right time for him to move on.

Following the development, HSBC has downgraded GCPL to Hold and cut its target price to Rs 1,120 (10% upside). The brokerage cited the sudden departure of MD and CEO Sudhir Sitapati despite his term having been extended until 2031. Aasif Malbari, the current Group CFO and CEO of the Africa business, will now take over as CEO. HSBC has reduced its target P/E multiple to 40x from 45x, citing uncertainty around execution.

CLSA has an Underperform rating on GCPL and has cut its target price to Rs 772 (24% downside). The brokerage noted that CEO Sudhir Sitapati has resigned with immediate effect and Aasif Malbari, the previous CFO, has been appointed as CEO. CLSA said the key challenge is to drive better outcomes in GCPL's two largest categories, personal wash, where the company has negligible share in growth categories, and household insecticides, where the new formulation has not delivered the expected results. The brokerage has lowered its target multiple to 32x from 37x.

Citi has retained its Buy rating on GCPL with a target price of Rs 1,350 per share. The brokerage expects the stock could see a negative reaction in the near term following Sitapati's unexpected exit.

Read more: FMCG makers plan more price hikes as input costs stay elevated; demand holds strong

However, Citi noted that management has reiterated its FY27 guidance and has given no indication of a change in the company's existing strategy. The brokerage expects the focus to move towards greater transparency, accountability and faster execution.

Citi also said promoter expectations appeared to have been higher in areas such as liquid vaporisers in India. While the leadership change could remain a near-term sentiment overhang, the brokerage sees no evidence of a strategic reset.

Godrej Consumer Q1 snapshot

The development comes days after GCPL reported a 12% year-on-year (YoY) rise in consolidated net profit to Rs 505 crore for the June quarter, compared with Rs 453 crore in the year-ago period.

Revenue from operations increased 18% YoY to Rs 4,225 crore from Rs 3,571 crore in the corresponding quarter of the previous financial year, the company said in a regulatory filing on August 7.

EBITDA rose 15.5% YoY to Rs 802 crore in the June quarter, compared with Rs 694.6 crore a year earlier. EBITDA margin, however, declined to 19% from 19.4% in the same quarter last year.

Also read: Godrej Consumer Products appoints Aasif Malbari as CEO, replacing Sudhir Sitapati

Following the results, the company said revenue growth was ahead of its original expectations and input costs had started to ease. It added that it remained on track to deliver its full-year FY27 guidance, with confidence of exceeding it in select areas.

GCPL also said it remained confident in the resilience of its portfolio, the strength of its brands and its ability to deliver sustained, profitable growth going forward.

Alongside the earnings print, the company's board declared an interim dividend of Rs 5 per equity share, equivalent to 500% on the face value of Rs 1 per share, for FY27. The record date for the same has been fixed to determine shareholders eligible for the dividend. The payout will be made on or before September 5, 2026 (Saturday).

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