Singapore-headquartered private equity player Temasek will acquire 4.9 per cent stake in Godrej Consumer (GCPL) for Rs 685 crore. Temasek will make the investment through its wholly owned subsidiary Baytree, which will buy 16.7 million shares in GCPL at Rs 410 a share. While GCPL’s share price closed at Rs 401.7 on the Bombay Stock Exchange yesterday, Baytree is paying only a slight premium on that.
Notably, Temasak through Baytree will get no board rights with the investment.
For GCPL, this is the first time a private equity player is investing in it and only the second time in two years that it is raising equity. In July 2010, the company had raised Rs 530 crore through a qualified institutional placement. At that time, it had diluted five-six per cent stake by offloading about 18 million shares at Rs 345 apiece.
According to Adi Godrej, Chairman, Godrej Group, the money from the Temasek transaction will be utilised to fund its latest acquisition of Chile-based Cosmetica Nacional and to pay off its loans.
GCPL currently has debt of Rs 2,000 crore on its books. This debt is mostly on account of the 10 acquisitions the company has done so far.
According to A Mahendran, managing director, GCPL, the Temasek transaction will also help the firm bring down its debt-equity ratio to below one.
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Cosmetica Nacional is the third acquisition by the company in South America after Argencos and Issue in 2010. The company will acquire 60 per cent in the Chilean firm, in the business of hair care and colour cosmetics, for Rs 200 crore.
The balance 40 per cent will be acquired in the next three-five years, according to Godrej.
The current acquisition comes eight months after GCPL bought the Darling Group in Africa. Much of GCPL’s acquisitions are part of its three by three strategy under which it has said it will grow in three categories — hair care, home care and personal care — targeting three geographies: Asia, Africa and South America.
With the 10 acquisitions, the international business of GCPL now contributes 40 per cent to the company’s top line, while the domestic business contributes 60 per cent.
Mahendran says that the 60:40 revenue mix from the firm’s domestic and international businesses will be maintained for the next few years.
GCPL also announced a 36 per cent surge in its revenues to Rs 1,344 crore and a 41 per cent jump in its net profit to Rs 167 crore for the quarter ended December 31, 2011. Home care is the largest segment for the company, contributing 44 per cent to total sales.