Godrej Consumer shares plunge after CEO Sudhir Sitapati resigns immediately

Mumbai: Godrej Consumer Products Limited (GCPL) shares fell sharply on Wednesday after the company announced the immediate resignation of Managing Director and Chief Executive Officer Sudhir Sitapati.The stock dropped 10 percent to hit its lower circuit and a fresh 52-week low of Rs 916.20 during morning trade. The sudden leadership change caused heavy selling by investors.Heavy TradingAt around 10.30 am, GCPL shares were trading at Rs 929.55 on the BSE, down 8.69 percent.Nearly 2.9 million shares changed hands on the NSE and BSE in the first three minutes of trading. The high volume showed strong investor concern following the announcement.The company’s shares have now fallen nearly 30 percent from their 52-week high of Rs 1,308.40.CEO ResignsGCPL announced Sitapati’s resignation after the stock market closed on Tuesday. He stepped down as MD and CEO with immediate effect.The company did not provide detailed reasons for his sudden exit. Sitapati had been leading the FMCG company and was responsible for its growth plans and overall business strategy.The immediate nature of the resignation appears to have worried investors, leading to a sharp fall in the share price.New LeaderThe board appointed Aasif Malbari as the new Managing Director and Chief Executive Officer with immediate effect.Malbari is currently GCPL’s Global Chief Financial Officer and President of Godrej Africa. He has around three decades of professional experience in the FMCG and automobile sectors.He has previously worked with GCPL, Tata Motors and Hindustan Unilever. As Global CFO, Malbari handled business strategy and worked closely with leadership teams across different countries. Godrej Capital Acquires Kanakadurga Finance's Gold Loan Business To Expand Consumer Finance PortfolioStock WeaknessGCPL shares were already facing pressure before the leadership announcement.The stock has fallen around 22 percent over the last year and 15 percent in one month. It has declined nearly 23 percent during the past three months.Over longer periods, the stock has dropped about 9 percent in three years and 6 percent in five years. Investors will now closely watch Malbari’s plans for improving growth and restoring confidence.

Shares of FMCG major Godrej Consumer Products Ltd. (GCPL) crashed as much as 10% to an intra-day low of Rs 916 on the BSE on Wednesday, following the company's announcement of Managing Director and Chief Executive Officer (MD & CEO) Sudhir Sitapati's sudden resignation with immediate effect.In his resignation letter, Sudhir Sitapati said that GCPL's total shareholder return averaged around 10% from May 7, 2021, when his appointment was announced, through August 9, compared with around 8% for the NIFTY FMCG index.He noted that 97% of analysts currently rate the stock either Buy or Hold, among the highest levels in the sector. Sitapati also highlighted that as India's FMCG sector emerges from a difficult period, GCPL's growth has been accelerating, with Q1 FY27 revenue growth at 19% and underlying volume growth at 9%, both multi-quarter highs.He said he felt the task he had set for himself at GCPL was complete and that it was the right time for him to move on.Following the development, HSBC has downgraded GCPL to Hold and cut its target price to Rs 1,120 (10% upside). The brokerage cited the sudden departure of MD and CEO Sudhir Sitapati despite his term having been extended until 2031. Aasif Malbari, the current Group CFO and CEO of the Africa business, will now take over as CEO. HSBC has reduced its target P/E multiple to 40x from 45x, citing uncertainty around execution.CLSA has an Underperform rating on GCPL and has cut its target price to Rs 772 (24% downside). The brokerage noted that CEO Sudhir Sitapati has resigned with immediate effect and Aasif Malbari, the previous CFO, has been appointed as CEO. CLSA said the key challenge is to drive better outcomes in GCPL's two largest categories, personal wash, where the company has negligible share in growth categories, and household insecticides, where the new formulation has not delivered the expected results. The brokerage has lowered its target multiple to 32x from 37x.Citi has retained its Buy rating on GCPL with a target price of Rs 1,350 per share. The brokerage expects the stock could see a negative reaction in the near term following Sitapati's unexpected exit.Read more: FMCG makers plan more price hikes as input costs stay elevated; demand holds strongHowever, Citi noted that management has reiterated its FY27 guidance and has given no indication of a change in the company's existing strategy. The brokerage expects the focus to move towards greater transparency, accountability and faster execution.Citi also said promoter expectations appeared to have been higher in areas such as liquid vaporisers in India. While the leadership change could remain a near-term sentiment overhang, the brokerage sees no evidence of a strategic reset.Godrej Consumer Q1 snapshotThe development comes days after GCPL reported a 12% year-on-year (YoY) rise in consolidated net profit to Rs 505 crore for the June quarter, compared with Rs 453 crore in the year-ago period.Revenue from operations increased 18% YoY to Rs 4,225 crore from Rs 3,571 crore in the corresponding quarter of the previous financial year, the company said in a regulatory filing on August 7.EBITDA rose 15.5% YoY to Rs 802 crore in the June quarter, compared with Rs 694.6 crore a year earlier. EBITDA margin, however, declined to 19% from 19.4% in the same quarter last year.Also read: Godrej Consumer Products appoints Aasif Malbari as CEO, replacing Sudhir SitapatiFollowing the results, the company said revenue growth was ahead of its original expectations and input costs had started to ease. It added that it remained on track to deliver its full-year FY27 guidance, with confidence of exceeding it in select areas.GCPL also said it remained confident in the resilience of its portfolio, the strength of its brands and its ability to deliver sustained, profitable growth going forward.Alongside the earnings print, the company's board declared an interim dividend of Rs 5 per equity share, equivalent to 500% on the face value of Rs 1 per share, for FY27. The record date for the same has been fixed to determine shareholders eligible for the dividend. The payout will be made on or before September 5, 2026 (Saturday).(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)