Fast moving consumer goods (FMCG) major Emami has cleared the deck for acquisitions up to Rs 5000 crore. As per an announcement made on the Bombay Stock Exchange (BSE) website, the board has approved the Kolkata-based company to raise long-term resources up to Rs 2000 crore through issue of securities.
Additionally, the announcement stated, the present borrowing limit of Rs 1500 crore has been enhanced to Rs 3000 crore. Incidentally, the company's market capitalisation exceeded the Rs 5000 crore figure only earlier this year, according to its latest annual report, and turnover crossed the Rs 1000 crore mark in 2009-10.
The board's green signal acquires significance as the FMCG firm is on the look-out for potential mergers and acquisitions. Aditya Agarwal, wholetime director of Emami, confirmed the purpose of these approvals. “If something happens, funds can be made available at the earliest. Otherwise, we have to send out notices, call a meeting and then go about it, which takes times,” he said.
At the company's annual general meeting in August, Emami's joint chairman RS Agarwal had said that acquisitions, both domestic and overseas, worth about Rs 2,500 crore in the personal and health care consumer products segments were being actively explored.
“We have been looking at a domestic firm for the last month and a half, and Ernst & Young has been given the mandate. It could be a company that has more than one brand, but it is a big company with big potential,” Agarwal had said, adding that a domestic purchase worth between Rs 800-1000 crore, in addition to international buys for up to Rs 1500 crore were being looked it. Regions including the Middle East, South Asia, Africa and the CIS (Commonwealth of Independent States) area are understood to be on the company's radar for overseas buys.
But domestically, Emami has been intermittently linked to the race for Ahmedabad-based Paras Pharmaceuticals Ltd, which has been put on the block after two private equity firms with a majority stake in the company have shown the intention to pull out.
Top company officials had told Business Standardlast month that Paras Pharmaceuticals was “important” for Emami, although multinational players have been billed as the front runners in the ongoing race.
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“Many things are happening, but nothing has been firmed up yet. But are still looking at Paras,” Aditya Agarwal added.
Emami's last acquisition was in 2008 when it acquired Mumbai-based Zandu for about Rs 750 crore.