Marico scouts for buys in domestic market

As part of its inorganic growth strategy, FMCG major Marico Ltd is aggressively scouting for acquisitions in domestic markets. The company is planning to acquire two regional brands in the beauty & wellness sector in India. Currently, the company is in talks with two players based in southern states in this space, informed industry sources. Incidentally, Marico has decided to divest its entire stake in its wholly owned subsidiary Sundari LLC which is engaged in the manufacturing and marketing of skincare cosmetics in the USA. According to industry analysts, Marico will be investing in domestic acquisitions after completing its formalities to divest stake in Sundari LLS. “Since the acquisition of ‘Manjal’ (herbal soap) in Kerala in 2006, Marico has been scouting for southern skin care brands for a while”, said an analyst based in Mumbai. In 2006, Marico had bought out Hindustan Lever Ltd's Nihar brand for a Rs 227 crore. In the same year, the company also acquired Fiancee (a hair care brand) from Egypt-based Ready Group.
When contacted, Chaitanya Deshpande, head of Mergers & Acquisitions (M&A), Marico declined to comment on Marico’s specific acquisition plans. “The company has identified inorganic growth as part of its corporate strategy and is open to considering acquisition opportunities. We can not comment on any specific opportunities,” he said. On the rationale behind Marico’s decision to divest in Sundari LLC, Deshpande said that a majority of Sundari’s revenue is generated from B2B sales to spas located within luxury resorts and hotels globally. “Sundari constituted only a small share of Marico’s revenue. Moreover, the US which is Sundari’s base, has not been a part of Marico’s focus geographies for growth, which has come increasingly from Asia and Africa. The divestment is thus a logical part of Marico’s global strategy,” he added. The Group posted a net profit of Rs 188.7 crore for the year ended March 31, 2009, 11.6 % higher than the Rs 169 crore net profit for the year ended March 31, 2008. The group’s total income rose by 25 % to Rs 2402.6 crore for the year, compared to Rs1914.5 crore for the previous year. Enthused by its performance in FY 09, Marico is planning an increase in its advertising and marketing spend in 2009-10

Source: Financial Express

Marico still hungry for acquisitions

After acquiring a slew of brands recently, Marico is in restructuring mode even as it hunts for more buys in its segment.

"Marico would always be looking out for acquisitions. Some proposals are under active consideration," Mr Milind Sarwate, chief for HR and strategy, told Business Line.

He added that most of the recent acquisitions have already started yielding results.

After restructuring, Marico now comprises three strategic business units (SBUs): consumer products business, Kaya business and international business, all of which are profit centres, and three support units - technology, finance and IT and HR and strategy.

This has been carried out as a proactive measure and to accelerate growth.

Mr Sarwate said that certain segments have been modified and the business units have now become more cohesive.

He added that Marico expects growth in sales of its domestic business to be led by flagships Parachute (coconut hair oil) and Saffola (edible oil).

"We believe that growth in one business unit does not come at the cost of growth in another unit. Thus, we can keep firing on all cylinders, be it domestic or international business."

He added that the company's recent acquisition, Nihar (an oil brand), boasted of a turnover of about Rs 120 crore during 2006-07.

The two brands which the company acquired from a company in Egypt, Fiancee and HairCode, have been integrated into its portfolio completely.

The company expects to generate a turnover of about Rs 90 crore during 2007-08 from these two brands.

However, the growth of the recently acquired soap brands, Manjal in India and Aromatic and Camelia in Bangladesh, have been moderate.

"We expect that the soap brands will take some time to perform because we are still new to the soap category," Mr Sarwate said.

During the fourth quarter of 2006-07, the Group recorded net sales (plus services) of Rs 397 crore, posting a 33 per cent rise over the same period last year, 21 per cent of which came organically and 12 per cent inorganically.

Mr Sarwate said with the company raising equity through the qualified institutional placement route, Marico expects the funds situation to be under control, "such that a further equity issue may not be required."

Marico raised funds worth Rs 150 crore through private placement of 29 lakh equity shares at Rs 522 a share in December 2006.

Mr Sarwate also said that the interest costs went up in 2006-07 and may go up further during the current fiscal with the increase in the average level of debt.