International sales may exceed domestic in FY17: Godrej Consumer

The acquisition of 'Strength of Nature' by Godrej Consumer Products will help the firm's international revenues exceed its Indian sales in FY17, says Godrej Group Chairman Adi Godrej.

Strength of Nature is a US-based firm that sells haircare solutions in markets across the globe, especially in Africa, Middle East and Caribbean.Speaking to CNBC-TV18, Godrej Consumer MD Vivek Gambhir said Africa was one of the biggest growth areas for the company and contributes to around one-sixth of its business."So far in Africa, we have been leaders in hair colours and in dry hair. Wet hair products are very complimentary to dry hair and hair colours. So we believe that we will now be able to address the complete hair colour needs of women of African descent," he said.Below is the verbatim transcript of Adi Godrej and Vivek Gambhir's interview with Priya Sheth on CNBC-TV18.Q: Can you tell us about the company's latest acquisition in 'Strength of Nature'? Godrej: The company has an annual turnover of about USD 95 million which is around Rs 600 crore. It has a 22 percent EBITDA margin and it will be extremely accretive for us. Q: In terms of how this fits into the overall strategy of GCPL, run us through that as well? Gambhir: Africa is one of our biggest growth areas and over the last few years, we have been scaling up our business in Africa quite well and it is almost one-sixth of our business. So far in Africa, we have been leaders in hair colours and in dry hair. Wet hair products are very complimentary to dry hair and hair colours. So we believe that we will now be able to address the complete hair colour needs of women of African descent. Q: How will this acquisition be funded, are you looking at external borrowing? Godrej: We will do an international borrowing in US dollars and our interest rate cost will be about 2 percent. Q: Africa contributes about 35 percent to the overall pie. How significantly do you expect this to expand because this is keeping in light of course India business and the other international businesses? Godrej: Africa contributes about 16-18 percent to our overall consolidate. It contributes 35 percent to our international sales and with this of course the African sales will go up a little. With this acquisition in the new financial year 2016-2017, our international sales might exceed our Indian sales. Q: What does Geometric and HCL merger -- we just wanted to understand from you -- mean for the Godrej family in terms of will be completely exiting stake in Geometric, will there be some dilution? Godrej: Yes, we will be exiting our stake in Geometric. The part of the company will be merged with HCL, the rest will be sold to a partner from France and we will be exiting it once all the paper work is done and the court orders come through. Q: So this will be a complete exit that we are talking about? Godrej: Yes. Godrej Group will exit Geometric. Q: In terms of value, what is the kind of value, how much will thing bring to the table because I believe it is about 31 percent stake that you have held in Geometric? Godrej: We had about 31 percent stake. So, I think totally it will add about Rs 500 crore. Q: This would be the larger Godrej pie? Godrej: It will be in the companies called Godrej & Boyce and Godrej Investments. They own the stake. Q: What will these funds be utilised for? Godrej: It will be used for internal growth in these companies.