Godrej Consumer eyes foreign buys
"We are placing a premium on globalisation," Hoshedar Press, executive director, said in an interview.india Updated: Mar 09, 2006 16:16 IST
India's Godrej Consumer Products Ltd, which spread its wings to Europe last year, is looking for more acquisitions that would eventually bring in half its revenue from overseas, a senior official said on Thursday.
The Mumbai-based company, India's second-biggest maker of toilet soaps, is looking for firms in Asia, the Middle East and Africa, where it can find a ready market for its black hair dyes.
Godrej, which also makes liquid detergent, acquired UK toiletries maker and distributor Keyline Brands Ltd, last October for an undisclosed sum.
Keyline owns brands such as Cuticura, Erasmic and Nulon, and had revenue of $29 million last year.
It gave Godrej access to markets in Europe, Jordan, Australia and Canada, as well as a customer base that includes UK retailer Tesco Plc and J Sainsbury Plc.
"We are placing a premium on globalisation," Hoshedar Press, executive director, said in an interview. "Eventually, we want 50 per cent of our revenues to come from outside the country, and have been talkingto investment bankers to identify targets."
But acquisition targets are hard to come by, as firms are either family-owned, like in India, he said.
"There are not many distressed firms in this space overseas, as margins are quite attractive," Press said.
So the opportunity is in companies that are looking to rationalise their portfolios by divesting brands, he said.
"Size and price are not a constraint," he added.
Shares in Godrej Consumer were down 3.8 per cent at Rs 650 in a weak market.
They have gained 28 per cent this year, beating a 21 per cent gain for the sector index and a 12 per cent rise on the benchmark index.
The company, which has about 10 per cent of India's toilet soap market and 40 per cent of the hair colour market, is also expanding its capacities, and will be spending an additional Rs 400 million to build a new plant, Press said.
Godrej had previously earmarked about Rs 600 million as capex and had set up a plant in the northern Himachal Pradesh state to take advantage of fiscal benefits there.
"We are a distant second to Hindustan Lever in soaps now, and we want to be a strong second," Press said. Godrej recently pipped Nirma Ltd to second spot.
The market for soaps is growing at about 5 per cent annually, while the hair colour market - in which Godrej competes with L'Oreal in the premium segment - is growing at 25 per cent, and liquid detergent at 10 per cent, he said.
"The overall economic climate has improved, and the share of wallet for consumer goods that was slipping appears to have bottomed out as disposable incomes rise," he said. "How many mobile phones can you buy?"
India's consumer goods market, dominated by Hindustan Lever Ltd, is expected to expand 2.5 times over the next 10 years from more than $9 billion now.
There is also more competition: cigarette maker ITC Ltd has recently entered the personal care market.
A value-added tax introduced last year has helped large firms like Lever and Godrej, as it brought smaller regional firms into the tax net and prevented their undercutting the big firms.
A focus on improving rural areas will also help increase sales in rural markets, Press said.
"We haven't even completely saturated urban markets yet," Press said. "Our per capita consumption is so low ... as little as 500 gm of soap, so there is plenty of room for improvement."