India's top adult diaper maker Nobel Hygiene, backed by Quadria Capital, weighs stake sale

Nobel Hygiene dominates the adult diaper space in Indian markets.

A  stake sale is in the works at private equity fund Quadria Capital-backed Nobel Hygiene, India's largest manufacturer of disposable hygiene products, multiple sources in the know told Moneycontrol.

Nobel Hygiene's brand 'Friends' is a market leader in the adult diapers segment. The company also makes baby diapers under 'Teddy' and 'Snuggy' brands and women's sanitary pads under the 'Rio' brand.

"The company is a market leader in the adult diaper space but now the business needs capital to grow and scale up further with additional spends required in marketing. All options are on the table and, based on valuations and intent of the parties, a significant minority stake sale or a majority stake sale can be explored either to a strategic suitor or a private equity firm," one of the sources told Moneycontrol.

Quadria Capital holds around 42 percent stake in Mumbai-based Nobel Hygiene, while Sixth Sense Ventures, a consumer-centric fund, holds around 15 percent and, the rest is with the promoter family, promoter entities and angel investors.

A second person told Moneycontrol that leading global investment bank Goldman Sachs had been given the sell side mandate for the proposed deal and was expected to soon launch the process. "The deal is poised to be a combination of primary and secondary issue of shares and will offer a window to the external investors to dilute their stake or exit," said the source.

"Nobel Hygiene has experienced challenges in the past in terms of expansion and raw material pricing but has strong brand equity and plays in a very niche segment. It is a category creator of sorts as arguably the first Indian maker of adult diapers and that aspect may attract a premium when it comes to valuations. Any MNC which doesn't operate in this space or has a small market share may find this opportunity interesting," elaborated a third slource.

Nobel Hygiene competes with the likes of the US-based P&G's 'Pampers', Japanese firm Unicharm's 'Mamy Poko' and Johnson & Johnson, which collectively dominate the Indian baby diaper market.

A fourth person also confirmed the stake sale plans and the appointment of Goldman Sachs. The exact quantum of stake which was proposed to be sold collectively or by each of the interested parties was immediately unclear, the source said.

All the four persons spoke to Moneycontrol on condition of anonymity. Email queries sent to Nobel Hygiene, the firm's MD and CEO Kamal Johari, and Quadria Capital were left unanswered till the time of going to press. Reminders have also been sent to these parties. Attempts made to connect to Johari's Mumbai office were unsuccessful. When contacted, Goldman Sachs declined to comment.

In Jun 2021, Quadria Capital announced the acquisition of a significant stake in Nobel Hygiene and became the largest minority shareholder.  As part of the transaction, Nobel Hygiene raised fresh capital and gave a complete exit to existing angel and PE investors, including CLSA Capital Partners, Access India Fund and its co-investors. The deal also included participation by Sixth Sense Ventures.

Last year, the sector saw a transaction involving a PE fund. In February 2023, Motilal Oswal Alternate Investment Advisors picked up a minority stake in Rajkot-based baby diaper and sanitary napkins maker Pan Healthcare for around Rs 400 crore.

"In the overall hygiene segment , based on parameters like growth, profitability and management pedigree which can vary widely from company to company, deal valuations can typically range between 2x sales to 5x sales. When compared to the US and China, India is still a hugely underpenetrated market," said Vijay Dhanuka, MD of Motilal Oswal Alternate Investment Advisors, who focuses on the consumer sector.

A closer look at Nobel Hygiene 

The firm was incorporated in 2001 by Kamal Johari and started with the production of baby diapers and later increased its product range to adult diapers, adult pull-ups, baby pull-ups and under pads. Its manufacturing facility is at Sinnar, near Nashik, Maharashtra.

According to a July 5, 2023 report by Crisil Ratings, Nobel Hygiene's operating profitability remains "susceptible to sharp change in raw material prices, intense industry competition, particularly in larger baby diapers segment", where the company competes with more established brands such as Pampers, Huggies and Mamy Poko.

As per the Crisil report, Nobel Hygiene had an operating income of Rs 680 crore at the end of March 31, 2023, which rose from Rs 625 crore a year before. Its profit after tax slipped from (-) Rs 19.96 crore in FY22 to (-) Rs 50.89 crore in FY23, the report added.

Also read: How Nobel Hygiene, the Nashik-based diaper maker, carved a niche in a market dominated by MNCs

Quadra Capital's healthy bets 

According to its website, Quadria Capital is a healthcare-focussed private equity firm with assets under management exceeding $1.5 billion and investments in 18 companies across the Asia-Pacific region.

On September 23, 2023,  Moneycontrol reported that Quadria Capital-backed Akum's, the country's largest contract manufacturer of drugs, had signed up investment bankers to go public in 2024.

Last year, Quadria Capital exited Concord Biotech by selling its entire 20 percent stake, when the Ahmedabad-based biopharmaceutical firm made a healthy market debut on the domestic bourses in August.