Yoga Guru Baba Ramdev’s Patanjali Ayurved Ltd has faced a major setback for the first time in five years. The reason: Goods and Services Tax and its weak distribution network. Patanjali’s consumer goods business, which is the backbone of Patanjali’s overall empire, saw a decline of over 10 per cent in revenue at Rs 8,148 crore in FY18 as compared to FY17. Its profit saw over 50 per cent decline in FY18 at Rs 528.9 crore compared to the preceding year.
Patanjali’s fast-moving consumer goods sales accounted for Rs 9,019.3 crore in FY17, which is more than double of FY16 (Rs 4,383 crore). The company’s profit after tax was Rs 1,190.4 crore in FY17, and Rs 772.6 crore a year earlier.
Patanjali’s growth trajectory took a hit after the central government rolled out the GST in July 2017. Its fiercest competitors, global FMCG companies like HUL Ltd and ITC Ltd, overcame the GST shock sooner due to their use of cutting-edge technology. But Patanjali lagged behind. It failed to set up a compatible GST-related inventory and invoicing management system in a timely manner. That caused big problems in the supply-demand system, which led to a big revenue fall.
Patanjali has blamed distributors for being slow in adapting to the new tax regime. It said distributors’ failure to adapt to the new tax regime caused disruption in the supply system. Experts also believe the company has failed to expand its base of exclusive partners like its competitors, though it is trying hard to add new partners now.
The GST shock caused big inventory mismatch, which forced its distributors from stocking Patanjali products. Apart from its network of 5 lakh franchise stores, Patanjali products are sold across all online platforms, including Amazon, and big offline retail platforms like Big Bazaar. The company is now fixing its supply-demand mismatch by improving its technology-based solutions. Nearly 90 per cent of small outlets that sell Patanjali items have a scarcity of its products, the report claimed. It also quoted Patanjali spokesperson SK Tijarawala saying it is integrating technology to ensure stock matches demand.
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