Emami, which made headlines by acquiring Zandu Pharma for Rs 800 crore, reported a sequential 42 per cent drop in profit during the quarter ended March 2009. Aditya Agarwal, director of the Emami group of companies, tells Pradipta Mukherjee how the company proposes to reach its projected 15-20 per cent topline growth in FY10. Edited excerpts:
Your profits for the March-ended quarter declined by 42 per cent.
The cost of borrowing has gone up and the Rs 800 crore we invested for the Zandu acquisition is what led to a 42 per cent decline in profit this year. However, with consolidation plans on the anvil, we expect the operating profit to grow in the next quarter (April-June). We are restructuring the brand in terms of product positioning, so that competing brands with Emami can co-exist. Also, we are using our existing resources and sales force for Zandu, which is also why operating costs for Zandu have come down.
What does that lead to in FY10?
We expect a 15-20 per cent topline growth in FY10. We will launch new products, reposition brands, plan brand extensions and roll out products nationally to grow the business. For instance, we have launched brand extensions for ‘Navratna’ in talc and oils and summer and winter lotions as product extensions of Boroplus.
Any distinct change in strategy?
We have formed a five-member committee to realign resources of our subsidiary companies, Zandu Pharmaceuticals and Emami Realty, to save costs. So far, our subsidiary companies were operating independently. The committee will look at ways to align their activities in such a way that resources are shared, thereby bringing down costs in the short- and long-term.
As the first step, Zandu Pharmaceuticals’ registered office has been shifted from Mumbai to Kolkata. The committee will examine restructuring and reorganising of the FMCG and real estate business through merger, demerger or any other arrangement. It will be free to appoint legal advisors, valuers, merchant bankers and any other experts.
We have also divided our sales into two teams to separately look into personal care and healthcare. This will help us focus better. Moreover, we will introduce new stock-keeping-units (SKUs) and variants in Fast Relief and Chyawanprash. Also, we will reposition brands like ‘Sardi Ja’ and others which are not doing so well. These will be repositioned and repackaged for a national launch.
We intend to launch babycare range and more over-the-counter drugs this year. We are still working out the pricing strategies but these will be priced in the value segment, clubbed with freebies and other cross-promotions. How are the other businesses performing?
We have signed a memorandum of agreement (MoA) with the West Bengal Industrial Development Corporation (WBIDC) for a Rs 2,200 crore wood-based paper plant at West Medinipur in West Bengal. The plant will have a capacity of 600 tonnes per day (tpd), generating employment for 5,000 people. The project is likely to be completed within four years.
We have also invested close to Rs 250 crore in a bio-diesel plant at Haldia in West Bengal. Another Rs 100 crore has been invested at the same facility for producing edible oil. The production residue of edible oil will be used for preparing bio-diesel.
What about advertising and marketing spends?
We have increased our advertising spend by 15-20 per cent, as new products are being launched. We are investing close to Rs 70 crore on advertising and promotions for brands this summer season. And targeting Rs 300 crore of sales during the summer season this year, on the back of new product launches and product innovation. We will soon launch a new television commercial (TVC) of Navratna Cool Talc, featuring Shah Rukh Khan. For Navratna Oil’s new TVC, Amitabh Bachchan has not only acted and lent his voice, but also contributed to its composition. The Boroplus range will carry on its campaign with Kareena Kapoor.
