GST cuts to unlock Rs 96,000 crore in consumer spending
Taurani explained that the government’s estimated Rs 48,000 crore GST revenue loss translates into consumer savings. With 40% of consumer wallets tied to obligatory spends and 25% to necessities, nearly half of the incremental savings are expected to flow into discretionary categories. These include fashion, food, OTT, travel, and alcohol, with food services and fashion alone projected to capture Rs 6,000–7,000 crore and Rs 5,000–6,000 crore respectively.
QSRs best placed to gain
Within discretionary consumption, Taurani highlighted QSRs as the standout beneficiaries. “QSR chains enjoy premium gross margins of 70–75%. Even a 1–2% revenue upgrade could lead to a 4–5% EBITDA upgrade,” he said. In contrast, food delivery companies like Zomato and Swiggy operate on thinner contribution margins of 8–10%, limiting their leverage.
The sector is also set to benefit from GST cuts on raw materials such as cheese and ghee, which could improve gross margins by 60–80 basis points. “Jubilant FoodWorks is best placed here, given that cheese accounts for nearly 30% of its costs and its stronger exposure to delivery, a structural growth driver,” Taurani added.
Food delivery faces GST headwinds
While dine-in and delivery both stand to benefit from higher discretionary spending, food aggregators could face margin pressure if a proposed 18% GST on delivery charges is enforced. Taurani noted that delivery companies would likely pass the additional Rs 12–13 per order to consumers, potentially hurting low-value orders under Rs 200. However, he expects metro markets with higher average order values to absorb the impact more easily.
Nykaa to gain from BPC and hair care GST cuts
The online BPC segment is another clear winner, with Taurani projecting revenue upgrades of 0.7–0.8% for listed leader Nykaa. “The GST cut on hair care is especially significant as it’s one of the fastest-growing online categories, expanding 35–40% annually. Factoring this in, Nykaa’s FY27 revenues could see a 2–2.5% uplift, with EBITDA upgrades of 4–5%,” he said.However, he cautioned that Nykaa’s valuations remain steep, trading at nearly 90 times FY27 BPC earnings. “Growth is priced in, and competition from quick commerce remains a risk,” he added.
Fashion and retail: Mixed outlook
Fashion, which accounts for nearly half of discretionary spends, is another beneficiary, though Taurani flagged rising competition. Trent’s Zudio, once a market leader, is facing margin pressure from aggressive new entrants like Style Union. While Trent remains attractive in the long term, sustaining margins in the next few quarters will be key.
Alcohol and staples: Smaller impact
The alcohol sector could see EBITDA upgrades of 1–1.5% for companies like Radico Khaitan, United Spirits, and UBL, though external challenges such as state duty hikes weigh on volumes. Staples and white goods, meanwhile, are likely to see only mild premiumisation-driven growth of 3–5%.
Cinemas dependent on content, not GST
Cinemas are unlikely to benefit directly from GST cuts, as multiplex ticket tax remains at 18%. However, Taurani sees potential near-term upside from a stronger film pipeline, including Avatar 3, Kantara 2, and big-ticket Bollywood releases. “Cinema is a high operating leverage business—good content could revive occupancies and boost margins,” he said.
Discretionary the key driver
Summarising the outlook, Taurani stressed that discretionary sectors—particularly QSRs, fashion, and BPC platforms like Nykaa—are best positioned to benefit from the GST-led consumption boost. With raw material cost relief and rising consumer spending, these segments may see revenue and EBITDA upgrades over the next two to three quarters, offering investors a clearer growth story amid a slowing global economy.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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