Jyothy Labs` Henkel India stake buy: GEPL Capital report

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Jyothy Labs` Henkel India stake buy: GEPL Capital report

Jyothy Laboratories (JLL) has acquired 14.9% stake in Henkel India from Tamilnadu Petroproducts (TPL) for Rs 607.3mn (17.3mn shares at Rs.35).

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Jyothy Labs BSE | NSE 29/05/12 Are Mutual Funds betting on Jyothy Labs? Other Stocks in this news Henkel India | Tamilnadu Petroproducts |

GEPL Capital has come out with its update on Jyothy Laboratories  (JLL) stake in Henkel India. The research firm believes it is important for JLL to have controlling stake in Henkel India to achieve synergetic benefits from the deal.

GEPL Capital reports on stake buy:

Jyothy Laboratories (JLL) has acquired 14.9% stake in Henkel India from Tamilnadu Petroproducts (TPL) for Rs 607.3mn (17.3mn shares at Rs.35).

Eying Majority Stake: Henkel Germany holds a 50.97% stake in Henkel India, which was a joint venture with TPL. JLL has bought 14.9% stake from JV partner TPL to avoid open offer, leaving 1.8% stake with TPL. JLL is eyeing majority stake in the company and has indicated that it seeks to buy additional 50.97% stake from Henkel AG in Henkel India. Henkel India, last week approved hiving off its detergents and personal care business.

Synergies in FMCG brand portfolio: JLL and Henkel India both are present in laundry care, dish wash and home care segments. Henkel India brands portfolio includes flagship brands Henko and Mr White in laundry care category,  Pril utensil cleaners, Margo soap, Fa deodorants, Neem toothpaste and Bref surface cleaners. It also has professional hair care brands.

Outlook: We believe it is important for JLL to have controlling stake in Henkel India to achieve synergetic benefits from the deal. Key things to watch will be

(1) successful acquisition of additional 51.97% stake from parent company

(2) cost of acquisition, which could be higher than Rs.35 per share. We are positive on the JLL's long term growth prospects led by its continued focus on entering new product categories and profit contribution from higher margin laundry service venture (JFSL). However we expect current business to be key earnings driver in the medium term.