Godrej Consumer surges on Temasek stake buy, acquisition

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Godrej Consumer surges on Temasek stake buy, acquisition

Shares of Godrej Consumer Products jumped over 8% on Monday morning after the company announced over the weekend that it was acquiring 60% stake in Chile's hair care and colour cosmetics maker Cosmetica Nacional.

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Shares of Godrej Consumer Products jumped over 8% on Monday morning after the company announced over the weekend that it was acquiring 60% stake in Chile's hair care and colour cosmetics maker Cosmetica Nacional.

At the same time, Temasek will acquire 4.9% stake in the fast moving consumer goods maker for Rs 685 crore, which the company will use to fund the Chilean acquisition and pare its debt.

Temasek's subsidiary Baytree Investments will buy 1.67 crore Godrej Consumer shares at Rs 410 a piece. 

The Mumbai-based company has debt of around Rs 2,000 crore on its books.

This is the tenth acquisition Godrej Consumer has made in the last six years and third in Latin America. It already owns the Argentina-based hair care companies Argencos and Issue Group.

"Cosmetica Nacional is a natural addition to our earlier acquisitions - Argencos and Issue Group - in Latin America...We believe that the Latin American market has strong growth potential in household and personal care and that this partnership positions us very well to further establish our presence in the region and take advantage of the future growth opportunities," said Chairman Adi Godrej.

Angel Broking analyst Sreekanth PVS told moneycontrol.com that the investment would help Godrej Consumer reduce its debts. However he feels diversifying into many geographies (it owns companies in Asia, Africa, Latin America and UK) and managing so many companies could be challenging.

At 10:15 hrs, Godrej Consumer shares were trading up 6.6% on NSE at Rs 429.20.

Cosmetica sells brands like Illicit, Pamela Grant, Adictive, U2 and Milleflori. Its total sales in 2011 are estimated around USD 36 million, up 19% year-on-year and EBITDA margin at 20%.

Meanwhile, Godrej Consumer also announced its third quarter results. Consolidated net profit was up 41% to Rs 167 crore, while net sales rose 36% to Rs 1,344 crore in October-December.

Adi Godrej said the business had done extremely well on all parameters, even as the macro economic environment continued to be challenging.

"Our performance is a reflection of our rigorous effort in driving six strategic pillars of growth, viz. leading in the core categories, growing our international business systematically in line with our 3 by 3 strategy, driving innovation, building a best in class supply chain, creating a future ready sales organization and fostering an agile and professional entrepreneurial culture," he said.

Also Read: Temasek to invest USD 136m in Godrej Consumer Products

Nachiket Kelkar
nachiket.kelkar@network18online.com