The maker of Glucon-D energy drink and Complan health drink, posted a net profit of 59 million rupees ($709,134.62) for the quarter ended Sept. 30, as it flagged a deferred tax of 27 million rupees.

However, it reported a 4.9% rise in profit excluding tax expenses at 86 million rupees.

Analysts had expected gross margins for most consumer good companies to expand year-on-year during the July-September quarter due to a moderation in prices of some raw materials.

The Ahmedabad-based company said its raw materials cost, which includes commodities such as milk, refined palm oil and aspartame, dropped 13.2% to 1.82 billion rupees.

"Commodity rates continues to moderate sequentially during the quarter," said the company, in which generic drugmaker Zydus Lifesciences holds a 58% stake.

Sales marginally rose 2.6% to 4.38 billion rupees due to slow demand recovery in rural markets, which was disrupted by the delayed and erratic monsoon this year.

Zydus added that it made calibrated price hikes across its portfolio to improve gross margins. Gross margin on net sales for the quarter was at 44.9%, 198 basis points higher than a year ago.

Bigger rivals Nestle India and Dabur India beat September quarter profit estimates on higher demand, while ITC missed profit view as it grappled with stiff competition.

Zydus' shares dropped immediately after the results but recovered losses and were trading 2% higher at 1576.7 rupees as of 13:05 p.m. IST.

($1 = 83.2000 Indian rupees)

(Reporting by Anuran Sadhu in Bengaluru; Editing by Rashmi Aich)