MNCs with listed Indian subsidiaries are doing better than their units in India when it comes to opearting margins.
In the case of GlaxoSmithKline, while the margin of its Indian FMCG subsidiary has gone down from 23% in the September '01 quarter to 21% in the September '05 quarter, the operating margin of its global FMCG business has grown from 18% to 30%. And though Colgate-Palmolive India's operating margin has grown, it still lags behind that of the parent company.
While India has traditionally been a high margin market for FMCG companies, the situation has changed in the last few years. A prolonged downturn in the sector (now over), the introduction of 'two-for-one' schemes, the onset of price wars in some key segments, and the rising input costs have all combined to put pressure on the margins.
At the same time, analysts also point to some company-specific reasons. For instance, according to an analyst, PGHH's margins were suffering because of a large, low-margin contract manufacturing business, which has now been hived off. In the case of GSKCH, analysts say that its operating margin in '01-02 was high because the company was “under-invested”. They point out that the company's operating margin has actually improved from the '03 levels.