Prefer Indian FMCG companies to HUL: Dipan Mehta

In a chat with ET Now, Dipan Mehta, Member, BSE and NSE, shares his views on the FMCG sector's prospects.

ET Now: Talking of FMCG sector earnings, HUL is down 3% and we just had Dabur which came in with numbers largely in line with estimates. There was not much room for disappointment because they have maintained their volume growth of 9%. How do you look at the numbers and what is your call on the stocks individually?

Dipan Mehta: Broadly the Indian FMCG companies – Dabur, Godrej Consumer, Emami, and even Marico — are growing at a pace faster than HUL. Valuations in HUL certainly are on the higher side compared to its peers in the Indian FMCG space. Also, a lot of Indian FMCG companies do benefit from overseas subsidiaries or exports, but the same cannot be said for HUL. Also, the entire spin which was around the stock as far as increase in stake by the parent company seems to have dissipated. So, my sense is that FMCG has got its own set of challenges in terms of keeping up volume growth. Then there is this El Nino factor. My sense is that the best way to play it would be through the Indian FMCG companies, the likes of Godrej, Emami or for that matter Dabur India or even Marico. The growth rates over there will certainly be higher than HUL and still they are available at pretty decent price, earning multiples. If there is a mild uptick in the economy, then certainly these companies will benefit.

So I would say that one should have a decent allocation or exposure to FMCG but it should be more to the Indian FMCG companies rather than HUL.