Godrej, HUL's Slippery Slope Ahead

GCPL, HUL Brace For Margin Pressure As Palm Oil Crunch Looms

By Pritha Pahari

What?

India’s FMCG sector is under pressure because palm oil prices have remained elevated since 2025 and are expected to stay high into FY2027.

Palm oil is used in products like soaps, shampoos, biscuits, and cooking oils, so any price movement directly affects company costs. India depends heavily on imports, with about 80–85% of palm oil coming from Indonesia and Malaysia.

According to the Solvent Extractors’ Association of India (SEA), palm oil imports fell about 19% in March to 689,462 metric tonnes, while total edible oil imports dropped over 9% to around 1.17 million tonnes.

Among companies, Godrej Consumer Products Limited (GCPL) is more exposed because palm oil forms a large part of its raw material cost, especially in soaps, where it can account for 40–45% of total production cost. Hindustan Unilever (HUL) is also impacted but is better protected due to its diversified product and raw material base.

Why?

Palm oil prices are high mainly because of global supply constraints. A growing share of palm oil is being diverted to biodiesel production, reducing availability for FMCG use. At the same time, geopolitical tensions in West Asia and weather disruptions in Indonesia and Malaysia have affected supply stability.

India’s heavy dependence on these two countries makes the situation more sensitive. Any disruption in supply quickly pushes prices higher in the domestic market. Since palm oil is used in mass-market products, FMCG companies find it difficult to absorb cost increases without affecting profits or consumer demand.

As Sandeep Abhange, Research Analyst at LKP Securities, told The Core, “Palm oil and derivatives account for ~40–45% of cost of goods sold (COGS) for Godrej Consumer Products Limited, with the highest exposure in soaps. This makes margins quite sensitive to commodity moves.”

What Next?

FMCG companies are responding through selective price hikes, cost control, and operational efficiency improvements. However, passing on full costs is difficult because consumer demand, especially in rural areas, remains weak. Price increases are usually gradual and can temporarily affect sales volumes.

Companies are also adjusting pack sizes, improving sourcing efficiency, and shifting toward premium products, but premiumisation only offers limited relief against sharp cost spikes. Analysts believe margin pressure from palm oil is cyclical and typically lasts several quarters before easing.

In the near term, GCPL is expected to remain more affected due to higher exposure, while HUL may manage better due to diversification and stronger pricing power.

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What?

$98.4 billion

That’s how much revenue global capability centres or GCCs generated in India in FY26, according to a new report by Nasscom and Zinnov. The figure is already approaching the $105 billion level Nasscom had earlier projected for 2030, highlighting the rapid growth of India’s GCC ecosystem.

“The new GCCs have been positioned as AI-first GCCs,” Nasscom President Rajesh Nambiar said in an interview with The Core Report. “They didn’t start with saying they need to save a lot of cost. They started with saying that they need to create the right set of capabilities around artificial intelligence.”

By the Numbers: India hosts 2,117 GCCs operating across 3,728 units and employing around 2.36 million people. Bengaluru remains the country’s largest GCC hub, accounting for over 29% of all GCC units and more than one-third of installed GCC talent.

Hyderabad has emerged as the preferred destination for new banking, financial services and insurance (BFSI) GCCs, attracting nearly half of all new entrants in the past year. Around 5% of new GCC units came up in emerging cities, signalling a gradual expansion beyond traditional tech hubs.

Nambiar said that many centres are now handling “far more meaningful work” and taking ownership of broader enterprise problems.

Pivot: Companies are transforming GCCs from back-office support centres into “enterprise nerve centres” that handle AI, product ownership, cybersecurity, and business transformation.

More than 1,200 GCCs in India now have AI and machine learning capabilities, supported by over 250 dedicated Centres of Excellence and a talent base of 250,000 AI professionals. Nearly half the GCCs established since FY21 launched with AI as a core focus.

Private equity firms now back around 504 GCCs in India. US companies still account for 63% of India’s GCC ecosystem, while Europe and the UK contribute another 21%. Newer entrants are also emerging from countries like the UAE, Denmark, and Belgium, alongside sectors such as health tech, luxury cruise operators, global sports brands, hospitality chains, and speciality footwear companies.

Clean Chit For HDFC

Law firms reviewing governance at HDFC Bank are set to report this month that no major lapses were found, clearing the way for the reappointment of CEO Sashidhar Jagdishan, Reuters reported. The review was commissioned after part-time chairman Atanu Chakraborty resigned in March, citing "incongruence" between his personal values and bank practices.

In an earlier interview with CNBC-TV18, Chakraborty cautioned that the law firm review was a compliance exercise, and that the larger governance concerns he flagged in his resignation letter were for the board to reckon with.

Catch Up Quick: The resignation triggered a 13.81% drop in HDFC Bank's share price, wiping out $16 billion in market value, and prompted a rare statement from the Reserve Bank of India seeking to reassure investors and depositors about the systemically critical lender.

The Core had earlier reported that bringing in independent law firms, while a step in the right direction, may not be enough to fully restore investor confidence.

Setup: HDFC Bank will propose Jagdishan's reappointment once the law firms submit their report to the board. The RBI is understood to have no objections, having previously stated there are no material governance concerns on record.

War De-escalation Move

The United States and Iran are reportedly moving closer to a one-page memorandum of understanding that could lay the foundation for ending the ongoing war and restarting structured nuclear negotiations, according to a Reuters report citing international media inputs and Pakistani diplomatic sources. Pakistan has said both sides are “closing in” on a draft, though officials stress that no final agreement has been reached yet.

Context: The development comes against the backdrop of a prolonged and high-intensity conflict between Washington and Tehran, which has seen military escalation, regional instability, and repeated breakdowns in earlier diplomatic efforts. The current war has been marked by strikes, counter-strikes, and wider tensions across the Middle East, with global concerns over energy routes and nuclear escalation adding urgency to renewed talks.

What’s Next: According to the report, the proposed one-page framework is intended as a preliminary political understanding rather than a detailed treaty. It is expected to outline a possible pause in Iran’s nuclear enrichment activities in exchange for sanctions relief and other de-escalation steps, while also setting the stage for formal negotiations on a comprehensive nuclear deal. The Strait of Hormuz and related maritime security issues are also understood to be part of the broader discussion.

Iran is expected to respond on key points within a short timeframe, with mediators, particularly Pakistan, playing a facilitating role in keeping dialogue active.

PMI Signals Recovery

India’s services sector picked up pace in April, as strong domestic demand helped offset weaker export orders amid ongoing geopolitical tensions in West Asia. The HSBC India Services PMI, compiled by S&P Global, rose to 58.8 in April from 57.5 in March, marking the sector’s fastest expansion in five months.

How We Got Here: New business inflows and business activity both accelerated, led by consumer services, transport, logistics, and communication. However, export demand weakened as the conflict disrupted tourism and overseas business flows.

The Lead: “Demand is rotating from overseas markets to domestic consumers,” said Pranjul Bhandari, Chief India Economist at HSBC. Despite stronger activity, business confidence fell to a near two-year low as firms worried about rising fuel and logistics costs linked to the conflict.

India's Exports Hit Record

India's goods and services exports rose 4.6% to an all-time high of $863.11 billion in FY2025-26, up from $825.26 billion the previous year.

The Lead: Merchandise exports grew modestly at 0.93%, reaching $441.78 billion against $437.70 billion in FY2024-25. "Despite global uncertainties and challenges in goods trade, India's merchandise exports maintained their upward trajectory," a commerce ministry official said.

Flashpoint: The standout performer was services exports, which surged 8.71% to an all-time high of $421.32 billion, driven by strong global demand for IT, business solutions, and professional services, reinforcing India's position as a leading services economy.

India’s GCC Map Expands into New Industries

On Episode 866 of The Core Report, financial journalist Govindraj Ethiraj talks to Rajesh Nambiar, President at Nasscom as well as Pranav Haldea, Managing Director at PRIME Database Group.

• Markets rise on fresh hopes of a deal between Iran and the US

• Indian midcap stocks hit highs, small caps on the cusp of a bull market

• Law firms appear to give clean chit to HDFC Board on Chairman’s resignation

• How India’s GCC map has expanded to near 2,700 companies and growing, in newer industries