Consumer products maker Jyothy Laboratories has chalked up a road map to grow its business after the acquisition of a 50.97 per cent stake in Chennai-based Henkel India. The maker of Ujala fabric whitener and Maxo mosquito coils will reposition the Henkel brands, bring down its Rs 600-crore debt taken to clear the latter’s loans, and look to take up the turnover of the combined entity with aggressive marketing, distribution and sales.
The target is to achieve a turnover of Rs 3,000 crore in five years, Jyothy’s Deputy Managing Director Ulhas Kamath said. At the moment, the combined entity has a turnover close to Rs 1,300 crore. Jyothy will merge Henkel with itself following the mandatory open offer, to be triggered next week.
The Mumbai-based firm will invest close to Rs 80 crore to reposition Henkel’s brands. “There is a need to look at both the pricing and packaging of the brands,” Kamath said. “Each one of them will be relaunched.”
The focus would remain on fabric care, surface cleaners, personal care and oral care, Kamath said. “Household insecticides is not on top of mind for us at the moment,” he says.
Of the Rs 1,300-crore turnover, Rs 500 crore comes from fabric care, followed by Rs 300 crore from household insecticides, Rs 250 crore from surface cleaners, Rs 150 crore from personal care and Rs 20 crore from oral care.
Jyothy would begin manufacturing Henkel products at its 28 factories across the country to push up sales. It will also utilise the distribution reach of the combined entity to increase penetration, Kamath said. Jyothy’s distributor network is 3,500, while Henkel’s is 750. One-third of the latter’s sales comes from the modern trade and canteen stores department (CSD), which will be leveraged aggressively, he said.
To help fuel its growth, Jyothy was also looking at private equity participation, Kamath said. “We have worked with PE players in the past, and we are open to that option.”
Business Standard had reported on April 21 that Jyothy was likely to partner with PE player APAX, which would invest $100 million for a 10-12 per cent stake. “The PE placement will happen at Jyothy, not Henkel India. But it will happen later, once the deal is all stitched up. In my view, Apax should come on board in the next 4-6 months time, after the Henkel open offer,” a person familiar with the development had told this paper then.
The PE player is expected to bring “strategic value” to Jyothy, besides helping it lower its debt burden. Kamath says Jyothy’s cash profit of Rs 100 crore and sale of real estate should help clear half of the debt — a level it is comfortable with. But the balance debt could be cleared with the help of the money coming from private equity players, persons in the know say.
The Mumbai-based firm, meanwhile, will not look at any other major acquisitions in the near term. “Our hands are full at the moment,” he says. Among other things, the Henkel acquisition will help the firm lower its tax burden by Rs 110 crore after March 2013, when its tax breaks come to an end.
The firm was also expected to gain access to new product launches of Henkel AG, Kamath said. “We now own Margo, Neem and Chek, which are the Indian brands, while Henkel AG’s Henko and Mr White have been assigned to us, that is, we are free to do whatever we want with them, and Pril and Fa have been licensed to us in the markets of India, Bangladesh and Sri Lanka,” he said.
Henkel AG will also have the option to buy up to 26 per cent stake in Jyothy after five years.
