Marico restructures business, Kaya to be demerged

MaKE to be listed on BSE & NSE will have seperate board of directors

Mumbai-headquartered Marico Ltd has initiated a restructuring exercise, which will see the demerger of its skin solutions division Kaya into a separate listed company called Marico Kaya Enterprises (MaKE). The restructuring is effective April 1 and the new company, MaKe, will be listed on the bourses by June-July this year, said Milind Sarwate, chief of finance, human resources and strategy, Marico.

Kaya’s incumbent Chief Executive Officer Ajay Pahwa will make way for Vijay Subramaniam, the international business head at Marico, who will be the new CEO of MaKe. Saugata Gupta, currently CEO of the domestic consumer products division at Marico, will be the CEO of the consolidated fast-moving consumer goods (FMCG) business, which will include both local and international operations. He will continue to report to Marico’s Chairman and Managing Director Harsh Mariwala. “The skin solutions division is a separate business from the consumer products division and it was time it got focused attention,” said Sarwate. “The consolidation of the domestic and international consumer products divisions will help in driving synergies,” he added.

 

Kaya contributes seven per cent to Marico’s Rs 4,000-crore top line, but has been a drain on the company’s bottom line, incurring a loss of Rs 29.10 crore at profit before interest and tax (PBIT) level in the last financial year. Marico’s core FMCG business, on the other hand, has faced some pressure in recent quarters on account of a slowdown in discretionary spends. This has been visible in brands such as Saffola, one of Marico’s key products besides hair oil Parachute. Company executives have said they see this pressure on discretionary spends continuing for some time.

KAYA GOES FOR MAKEOVER

• Kaya’s incumbent CEO Ajay Pahwa will make way for Vijay Subramaniam, the international business head at Marico, who will be the new CEO of Marico Kaya Enterprises (MaKe)
• Kaya contributes 7% to Marico’s Rs 4,000-crore topline
• In FY12, Kaya incurred a loss of Rs 29.1 cr at profit before interest and tax
• Recently, Kaya announced it would launch smaller outlets called Kaya Skin Bars at half the cost it took to set up its regular skin clinics
• At present, Kaya has 107 clinics in India, the West Asia and the South East Asian, including Singapore & Malaysia
• The newer smaller-format stores are expected to give a further boost to Kaya’s topline, growing at over 30% a year

Recently, Kaya announced that it would launch smaller outlets called Kaya Skin Bars at half the cost it took to set up its regular skin clinics. The area of the new stores would be under 500 sq. ft and would be unveiled in Bangalore and Delhi, before moving to places such as Mumbai, Pune and Kolkata.

The game plan was to have approximately 150-200 Kaya Skin Bars in five years — more than double the number the division has seen in the last 10 years. Currently, Kaya has a total of 107 clinics in India, the West Asia and the South East Asia, including countries such as Singapore and Malaysia. The newer smaller-format stores are also expected to give a further boost to Kaya’s top line, growing at over 30 per cent a year.

Following the announcement of Kaya’s demerger from Marico, the company’s stock rose to a intra-day high at Rs 230 on the BSE on Monday, before closing the day’s trade at Rs 227.45, up 1.36 per cent.