Fertiliser major Tata Chemicals has decided to exit its detergents business, which has a single brand Shudh, and is in talks with potential buyers to sell it. The company had launched the brand four years back.
According to a senior company executive, "The detergents business contributes to less than 2 per cent, at Rs 22 crore, of the company's turnover. We have been thinking of hiving off the business for quite some time now. The product needed a lot of investment for promotional purposes, which did not make sense to us. It just did not take off in spite of being in the market for three to four years."
Tata Chemicals expects to exit from detergents business during December quarter, stated a company release.
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"Detergents for Tata is a non-core area. They are not a major player in the detergents sector, with only one brand. The group philosophy is to be among the top five in any sector This was not the case in the detergents sector. Earlier, group companies such as Tata Steel had exited from non-core areas such as cement. Besides, marketing Shudh would have called for a degree of sophistication not possessed by the company," said K Ramachandran, head of research, Birla Sunlife Securities.
Analysts are, however, divided over the impact of the move on Tata Chemicals scrip. The share price will not be impacted as the sale of Shudh is expected to fetch only a small amount, says Ramachandran.
Another analyst says, "They have been focusing on separating the branded and non-branded businesses. There have been talks of hiving off the company's salt division too and so, the exit from the detergents business must be a precursor of this. If they do hive off both these loss-making businesses, it will impact their share price in a favorable manner."