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The budget has always excited 25-year-old Ram Kumar. More so this time. The mention of zero per cent customs duty on imported inputs for toilet soaps has brought cheer not only to him but the entire family. Earlier, customs duty on inputs for soaps was about 7.5 per cent, which made products more expensive for consumers.
“Now that the prices are likely to come down, I can go for a Dove (a premium soap brand from Hindustan Unilever) instead of the regular Margo,” he said. Like Ram Kumar, many other consumers can well upgrade to premium products. Meanwhile, soap manufacturers have given the move a thumbs up.
“This will lead to 200 bps (2 percentage points) savings on margins of soaps. We need to see how much they pass on to the end consumer. The soap industry, in our view, is relatively more disciplined so we expect them to retain part of this margin expansion for a few quarters. This is positive for soap companies like HUL, GCPL and ITC, the latter a small player),” said Abneesh Roy, Associate Director, Edelweiss.
While the prices have cooled off from their highs, they have started to move up again due to a spike in crude oil prices, and palm oil production could be impacted in Malaysia and Indonesia, say analysts.
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