Jyothy-Henkel merger to be complete in 6-8 months, says CMD

Detergent maker Jyothy Laboratories announced on Friday that its board has approved the merger of Henkel India with itself. In May 2011, Jyothy Lab had acquired 51% stake in Henkel India. In an interview with CNBC-TV18, MP Ramachandran, CMD, Jyothy Laboratories said that the integration of the companies is almost complete. However, the merger process is likely to take another six to eight months and it will be effective from April 1, 2012.

The combined entity of Jyothy and Henkel would see at least 50% growth, informed Ramachandran. The share swap ratio in case of a bonus issue is going to be 1:4, explained the CMD.

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: How do you expect this to improve your operational synergies? What kind of benefits are we likely to see?

A: Naturally, we are looking for one of the best consolidated result as on March 31, 2013. These are expected to do well and we have decided now on a swap ratio of 1 share of Jyothy to 8 shares of Henkel India Ltd. In case that bonus issue happens before this month, it will be 1 share of Jyothy for 4 shares of Henkel India Ltd.

Q: By how much will your equity increase?

A: There will be a dilution of about 2.87%, that means approximately about 23 lakh shares of equity will be increased.

Q: This bonus in Henkel is confirmed, so it will be 1:4?

A: There is no bonus in Henkel but, there is bonus in Jyothy. It has been recommended by the board and if the AGM approves that, it will be issued.

Q: When does the merger get completed? Will the whole process take a couple of months?

A: The process will take about six months. We hope that after all the procedures, the court matters are over, the merger may be completed around January 2013. It will be effective from April 1, 2012.

Q: What do you expect will be the impact on Jyothy Laboratories and its actual operations? There are some products in which you all have allied products like for instance fabric care. You have Ujala and Henkel has Mr. White and such products. How do you expect the strategy to pan out from hereon?

A: No, Mr. White is a washing powder and Ujala is a fabric whitener, a post-wash preparation whereas, Mr. White is a washing product. Everything has been considered by us before the takeover. There is a good synergy in all the product categories of Jyothy as well as Henkel India Ltd.

Q: There is an expectation on the street that while the merger is being actualized in the near term, there could be some issues when you try to reposition Henkel's products. Do you think there will be some loss of market share or some issues in the near term while that merger is being actualized or do you think it should be a smooth one and there shouldn't be much of an impact on financials when the merger gets into effect?

A: All the integration part is almost completed. It is expected to have combined results and definitely it is going to bring up the top-line as well as the bottom-line.

Q: How are you expecting revenue growth in FY13, the current year? You have two months of data. How is it looking?

A: It is looking very good. As on today, it may not be right, but we are seeing good progress.

Q: Would you expect 30-40% revenue growth? What are you looking at by way of volumes?

A: Both these put together, it is not going to be less than 50% growth.

Q: You are in the consumer space. Tell us about how the market is panning out. While consumer staples don't really get impacted, have you seen any kind of a slowdown? What's the outlook going into FY13?

A: Absolutely there is no slowdown. If you look into the past two months record, we have shown substantial growth. Our size is not that big to have an adverse impact of any of the inflationary trend or any other matter. I think market is good for us now.

Q: Are you looking to buy anymore companies or brands under Jyothi?

A: First we will digest this one. Definitely there are lots of programs for our future in the FMCG sector.