In terms of valuations, Godrej Consumer’s Chief Financial Officer Sameer Shah said that while the company will pay Rs 2,725 crore net of cash for the deal, the real value is around Rs 2,325 crore. “That’s because we will have around Rs 400 crore in tax savings due to (a) slump sale,” Shah said.
So, this works out to around 3.75 times value to sales.
Raymond Consumer Care is an associate company of Raymond Ltd., a branded textile and real estate company.
The Raymond Group holds 47.66% in the consumer care business, which recorded annual sales of Rs 622 crore in the previous fiscal.
The Singhania family-owned group has been in talks with multiple potential suitors over the last two years to sell its business.
Last year, there were talks of Good Glamm Group, the direct-to-consumer beauty and personal care conglomerate, acquiring Raymond’s consumer business. But the talks fell through, likely because of valuation concerns.
In FY22, Raymond recorded Ebitda margin of 6%, which is significantly lower than Godrej Consumer’s Ebitda margin at 19.5%. But, Sitapati said that the gross margin of both the businesses are similar.
“Over a period of time, relatively shortly, we anticipate that the Ebitda margins of this business [Raymond] meet and then probably beat GCPL given the nature of these categories,” he said.
“If we can match the company Ebitda with GCPL level and grow the newly acquired business at anything over 10% or mid-teens, which I think we will … it will be a good acquisition for us,” said Sitapati.
In India, Godrej Consumer has got salience in the soap segment.
“But it is a relatively slow growing category. So, we would like to increase our total addressable market on the fast-growing categories in India, and we felt that both deodorants and sexual wellness categories have a long runway of growth, which would help us significantly expand our TAM in areas that are GCPL’s strengths, i.e., the household and personal care segment,” Sitapati said at a press briefing.
Godrej Consumer is yet to announce how the acquisition will be funded. It roughly has Rs 2,000 crore of cash on its books.
“We will figure it out in the next few days,” said Sitapati.