Colgate-Palmolive India ruled firm on Tuesday on sustained buying support following rumours that rival Hindustan Lever has decided to sell its two toothpaste brands.

By 15:00 IST, the scrip of the oral care major rose by 2.12% at Rs 127.75 on the BSE, recording a volume of 16,995 shares. The scrip has risen by 6.45% from its 52-week low of Rs 120 touched on 26 March 2003.

The interest on the Colgate-Palmolive India counter was purely on rumours that fast moving consumer goods major Hindustan Lever will sell toothpaste brands Pepsodent and Close-up from its portfolio. This is likely to reduce competition to some extent for Colgate-Palmolive India, players feel.

Meanwhile, analysts said that Pepsodent and Close-up are HLL's power brands and are doing extremely well. In fact, Pepsodent recorded a strong growth of 39% for the first quarter ended 31 March 2003.

On the other hand, they said that Colgate-Palmolive India's top line is still feeling the pressure of a poor monsoon last year. Besides, unorganised players and new entrants have been eating into the company's market share.

Analysts said the slowdown in the FMCG sector in general, and the toothpaste category in particular, continues to pose a major challenge to Colgate-Palmolive India. Overall, analysts are pessimistic about the company's prospects, considering the factors like the slowdown in the overall oral care segment, stiff competition and a poor macro environment. However, they said the company could continue to show a moderate rise in bottom line due to its sustained efforts towards improving operating efficiency and lowering materials costs.

The slowdown in sales of the FMCG sector is due to lower spending by consumers, especially in rural areas. The rural segment accounts for almost 60-65% of the revenues of the sector.

For the third quarter ended 31 December 2002, Colgate-Palmolive India showed a 32.7% rise in net profit to Rs 21.1 crore, compared to Rs 15.9 crore in the corresponding period of the previous year. Total income decreased by 8.04% to Rs 274.5 crore (Rs 2.74 billion) from Rs 298.5 crore (Rs 2.98 billion) in DQ 2001.

Colgate-Palmolive India, a 51% subsidiary of Colgate-Palmolive, USA, is India's largest toothpaste maker by market share. In the Rs 1,000-crore (Rs 10 billion) toothpaste market, it commands around 50% share. Its product range includes tooth pastes, tooth powders and tooth brushes under the 'Colgate' brand. The company is also a leading producer of personal care products under the 'Palmolive' brand.

BSE code: 500830

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