Snack Makers See Stock Surge After GST Rate Cut on Namkeen: Analyzing the Impact on Prataap, Gopal, and Bikaji Foods

In the aftermath of a key decision by the 54th GST Council meeting, snack manufacturers saw a positive surge in stock prices. The meeting, chaired by Finance Minister Nirmala Sitharaman, resulted in a reduction of the GST rate on namkeen from 18% to 12%, spurring investor optimism in the snack food sector. Leading companies like Prataap Snacks, Gopal Snacks, and Bikaji Foods International Ltd benefitted from the announcement, with their shares witnessing significant gains.

GST Rate Reduction on Namkeen Fuels Market Sentiment

The GST rate cut on popular snack items such as namkeen and other savory products was a much-anticipated move that has boosted sentiment within the snack food industry. Shares of these snack makers rallied as investors responded positively to the news, anticipating an increase in demand for the products and a potential improvement in profitability.

Prataap Snacks, known for its widely popular Yellow Diamond chips, experienced a stock price increase of 3.4%, reaching ₹842 apiece on the National Stock Exchange (NSE). During intraday trading, the stock even saw a jump of up to 7.7%. Similarly, Gopal Snacks saw its shares rise by 5.3%, trading at ₹343.8 per unit, while Bikaji Foods stock gained 3.7%, reflecting increased investor confidence in these companies following the tax relief.

Financial Performance of Snack Makers Post-GST Cut

Prataap Snacks' Financial Performance

Prataap Snacks has been performing steadily, with the company reporting an 8.67% rise in revenue, reaching ₹421 crore for the quarter ending in June 2024, compared to ₹387 crore in Q1 FY24. However, despite the revenue boost, the company's net profit narrowed to ₹9.4 crore in the current quarter, compared to ₹13.4 crore in the same period last year. The GST rate cut is expected to further strengthen Prataap Snacks' position, as reduced tax rates could lead to increased consumer demand and profitability.

Gopal Snacks' Revenue Growth

Similarly, Gopal Snacks has seen notable growth, reporting an 11.25% increase in revenue for the quarter ending June 2024, climbing to ₹354 crore from ₹318 crore in the same period the previous year. However, despite the revenue increase, the company’s net profit declined from ₹28.3 crore in Q1 FY24 to ₹24.3 crore in the latest quarter. The GST reduction may alleviate some cost pressures and potentially improve the company's bottom line in the upcoming quarters.

Bikaji Foods' Strong Performance

Out of the three companies, Bikaji Foods has delivered the most impressive results, achieving a 17% year-on-year increase in revenue for the quarter ending June 2024. Revenue surged to ₹561 crore, up from ₹477 crore in Q1 FY24. Additionally, Bikaji's net profit jumped by 40%, rising to ₹60 crore from ₹43.2 crore in the same period last year. With the recent GST rate cut, Bikaji Foods is well-positioned to further enhance its market performance and expand its customer base.

Insights From the 54th GST Council Meeting

The GST Council's decision to reduce taxes on namkeen and similar snack products is expected to bring significant relief to both manufacturers and consumers. According to the Ministry of Finance, GST rate on extruded or expanded products, such as salted and savory snacks (excluding unfried or uncooked snack pellets), will be reduced from 18% to 12%. These products fall under the HS 1905 90 30 classification and include namkeen, bhujia, mixture, and other similar pre-packaged and ready-to-eat snacks.

The Ministry also clarified that the reduced tax rate will apply prospectively, meaning it will be effective for future transactions. Rate cut aims to align the tax treatment of savory snack foods with other processed foods, making them more affordable for consumers and encouraging higher sales volumes.

Industry Outlook: What Does the GST Rate Cut Mean for Snack Makers?

GST rate cut on namkeen and other snack products is a significant development for the Indian snack food industry. Snack makers like Prataap Snacks, Gopal Snacks, and Bikaji Foods are expected to benefit from the lower tax burden, which could enhance their competitiveness and allow them to capture a larger share of the market.

With the reduced GST rate, snack companies may be able to pass on cost savings to consumers in the form of lower prices, potentially driving higher sales volumes. Additionally, the tax relief is likely to improve the overall profitability of these companies, as they will have more room to manage costs and invest in expanding their product offerings.

Investors have already responded positively to the tax cut, as evidenced by the rise in stock prices of these leading snack makers. The reduction in GST rates comes at a time when the industry is seeing consistent growth in demand for savory snacks, driven by changing consumer preferences and rising disposable incomes.

In conclusion, Recent GST rate reduction on namkeen and other snack foods from 18% to 12% is a welcome move that has boosted investor confidence in snack manufacturers such as Prataap Snacks, Gopal Snacks, and Bikaji Foods. The financial performance of these companies, combined with the tax relief, points toward a positive outlook for the Indian snack food industry. As these companies continue to capitalize on growing consumer demand and favorable government policies, they are expected to achieve further growth in the near future.