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Moneycontrol.com >> Messageboard >> Stocks >> Wipro >> Multibagger from IT
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Multibagger from IT (1)   09-Nov-09 07:57Track this thread   Tracked by (0)  
Posted by:   rvk41 on ( 09-Nov-09 07:57 )
Price : BSE: Rs 598.95 ( 0.11 % ), NSE: Rs. 598.45 ( -0.24 % )
Wipro has made some key buyouts – both in India and overseas — in the consumer businesses. The latest has been the acquisition of British consumer and home care brand Yardley’s business in Asia, Australia and north and west Africa, for a ticket value of $45.5 million (Rs 215 crore). Yardley will retain its businesses in markets like the US and Europe.

Yardley is a brand that is over 200 years old and boasts of a portfolio which has Lavender. Before Wipro bought it, the Yardley brand had changed hands at least four times. The last owner was UK’s Lornamead Group. “Yardley is a very strong brand and will help complete our portfolio of products,” said Vineet Agrawal, president, Wipro Consumer Care and Lighting. He adds that Yardley’s revenues, for the last financial year, was Rs 100 crore for the regions where Wipro has acquired the brand. In that context, Wipro has paid a little over two times Yardley’s annual revenues. “It is not expensive as FMCG deals typically happen at 2.5-3 times the revenues,” points out Agrawal, who adds that the brand is one that is profitable.

In July 2007, Wipro acquired Singapore-based consumer care company, Unza for $246 million to expand the reach of its consumer care businesses in the Asia Pacific region. A year before that, it bought Delhi-based North-West Switches which was preceded by the acquisition of Hindustan Unilever’s glucose drink brand Glucovita.

Meanwhile, Wipro’s bathing soap brand, Santoor, has consistently remained at the third position in terms of market share in the category. The company’s other brand, Chandrika, which it took over on a lease in 2003, is snapping at the heels of the top five brands in Kerala and other southern markets. In the context of the Yardley transaction, Shirish Pardeshi, an analyst with Anand Rathi Securities says, “One needs a vehicle to introduce its products in other geographies and setting up a distribution channel often entails a huge investment.” According to him, FMCG majors like Godrej and Marico have gone to markets like Egypt and South Africa to grow their portfolios.
The revenues from the consumer and lighting division have grown from Rs 816 crore in FY07 to Rs 1,520 crore in FY08. For FY09, it stood at Rs 2,083
crore. “We have grown at a CAGR of 25% in the last five years,” says Agrawal. The division has an operating profit margin of 12%.

Though the business contributes only 8% to Wipro’s total revenues, the decision to go inorganic has been productive. “Unza contributed as much as 40% to the consumer and lighting business revenues in FY09,” says Agrawal. Though in terms of the size of the deal, Yardley is much smaller than Unza, the former gives Wipro a boost to its revenues from the Middle East. “It will double our revenues from the Middle East and will make our presence stronger there,” adds Agrawal. Yardley earns 70% of its revenues from the Middle East alone.

For Wipro, Yardley is a brand that has more premium value than Unza’s Enchanteur. Though Unza is the third-largest selling brand in Malaysia and Vietnam, it does not have a large presence in the Middle East. That could change with Yardley in the time to come.

For your information,with regards
rvk41
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