(Reuters) -Consumer goods maker Hindustan Unilever reported a nearly 8% increase in quarterly profit on Thursday, driven by an ongoing recovery in rural sales and higher demand for its revamped brands including Ponds.

The Indian unit of UK's Unilever, home to the Dove and Surf Excel brands, said its profit rose to 27.32 billion rupees ($311.8 million) for the first quarter ended June 30, from 25.38 billion rupees a year earlier.

Rural areas, which account for just over a third of overall consumer goods sales, have helped offset weak urban demand for the last two years as higher costs of living and slow wage growth weigh on city dwellers.

Hindustan Unilever has also been investing heavily to launch premium variants of its packaged goods, expand into new categories under existing brands — such as a floor cleaner at Vim, known for dishwash — and reach more online consumers.

Revenue climbed 4% to 157.47 billion rupees, with sales volumes growing 3%, led by brands including Ponds, Surf Excel and Vaseline.

"Going forward, I expect this gradual recovery to be sustained," CEO Rohit Jawa said. Priya Nair will take over as new CEO on August 1.

Shares rose 3.6% after the results as lower tax expenses partly helped support profit despite margin pressures.

Consolidated gross margin shrank by 190 basis points year-on-year to 49.5%. Hindustan Unilever said it would improve sequentially, with growth in the first half of fiscal 2026 outpacing the previous half.

The profit rise comes despite elevated prices of raw materials, including palm oil and coffee, factors that have prompted consumer goods makers to hike product prices.

Last week, Nestle India reported a 12% profit drop on higher input costs and manufacturing expansion expenses.

($1 = 87.6300 Indian rupees)

(Reporting by Ananta Agarwal in Bengaluru and Praveen Paramasivam in Chennai; Editing by Sonia Cheema and Nivedita Bhattacharjee)