Emami buys stake in Zandu

Kolkata: Is on the lookout for more acquisition opportunities at home and abroad.

Emami, the Rs 600-crore fast moving consumer goods (FMCG) company, increased its stake in Zandu Pharmaceutical Works to 27.5 per cent from its earlier holding of 3.5 per cent. The company bought the 24 per cent from the Vaidyas, who are the descendants of Zandu Pharmaceutical Works' founder Vaidya Zandu Bhattji. Before this deal, the promoters were holding 42 per cent in Zandu, as per the official declaration available with stock exchanges.

Emami aims to be the largest shareholder of Zandu, representing over 70 per cent of the total promoters' holding, subject to necessary legal and compliance formalities. As per regulatory provisions, the Kolkata-based Emami will have to make an open offer to buy an additional 20 per cent stake in Zandu. However, it is subject to promoters' approval. Therefore, for now, Zandu will continue to be controlled by the Vaidyas and its other promoters.

Post the deal, Emami and Zandu will leverage each other's resource and development (R&D) strength and marketing muscle, especially useful during product launches and while planning product extensions.

Emami and Zandu also have a few competing brands such as ‘Menthoplus' and Zandu Balm. For now, the brands will continue to co-exist, but later a strategy will be drawn up to curb competition between the two.

Emami's management decided to go for the deal with its own resources but declined to comment on the amount invested. In an earlier statement, Emami had said that it had earmarked over Rs 200 crore for acquisitions.

Emami is also on the lookout for more acquisitions, both nationally and globally.

According to Emami director Harsh Agarwal, 'This is a strategic investment with the objective to be a part of Zandu's management. We are looking for more acquisitions in the FMCG space in India and abroad to grow our business.'

He said that the idea was to leverage Zandu's expertise in herbal and healthcare products with Emami's own.

'Zandu has a tremendous business potential, which can be exploited with strong marketing, research and development and other operating efficiencies coupled with long-term entrepreneurial vision,' Agarwal added.

Zandu is an ayurvedic herbal and healthcare products company with brands like Zandu Balm, Zandu Special Chyawanprash and Kesri Jeevan among other products.

Zandu balm is the market leader with a 45 per cent market share, while Chyawanprash enjoys around 10 per cent of the market pie.

Zandu's current turnover is in excess of Rs 150 crore and profit invest Rs 15 crore. Emami, at the same time, has power brands like Navratna Oil, Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, Menthoplus Balm and other new products. Malai Kesar Cold Cream, which was launched last winter, has been a super-hit as it captured 3 per cent market share immediately.

Led by its power brands, Emami registered 19 per cent increase in turnover to Rs 179 crore and 52 per cent rise in net profit at Rs 35 crore for the fourth quarter ended March 31, 2008, over the corresponding period last year.

Emami's EBIDTA increased by 45 per cent to Rs 35 crore. For the year ended March 31, 2008, Emami's turnover increased by 13 per cent to Rs 584 crore, while net profit grew by 41 per cent to Rs 92.7 crore. The company's EBIDTA during the same period grew by 43 per cent to Rs 99 crore.

The Emami Group enjoys the reputation of being one of the major players in the personal and healthcare industry in India with a group turnover of Rs 1,600 crore.