Wipro Ltd plans to leverage its Unza connection to grow its consumer care business which has emerged as a natural hedge against uncertainty in the US, the largest IT market in the world, for the company that derives most of its revenues from IT services.
Spoilt for choice: An inside view of a store selling cosmetic goods.
Wipro acquired Singapore-based Unza Holdings Ltd in July 2007 for Rs1,010 crore and the benefits are already evident on its financial statement. In the year ended 2008, Wipro Consumer Care and Lighting (WCCL) , the division of which Unza is a part, generated revenues of Rs1,521 crore, 86% higher than the Rs 817.7 crore it generated in 2006-07. WCCL accounted for 7.6% of Wipro’s revenues in 2007-08 and 5.4% of pre-tax profit, compared with 5.9% and 3.1%, respectively, in 2006-07.
WCCL has launched a range of products from Unza’s portfolio under the brand Enchanteur in India. This includes deodorants, body lotions, shampoos and shower gels. “We have just launched at least seven products under the Enchanteur brand at select modern retail stores in Kolkata and Bangalore,” said Vineet Agrawal, Wipro’s president for consumer care and lighting.
Wipro also plans to continue to invest in Unza, restructure the management of the company, and set up more plants. Wipro has its own sourcing operation in China; it will now integrate this with Unza’s. And WCCL is trying to use Unza’s expertise to understand how to deal with modern retail chains; half Unza’s revenues come from sales to such chains. “We have brought Unza’s experts here to help us understand and service the modern trade better,” said Agrawal.
However, analysts say it will not be easy for Wipro to build Unza’s brands here because of strong competition from companies such as Hindustan Unilever Ltd, ITC Ltd and Godrej Consumer Care Ltd.
“Unza’s brand is not known by Indian consumers and Wipro would have to spend huge money on advertising and marketing to create a brand identity,” said Sameer Deshmukh, analyst at IL&FS Investsmart Securities Ltd, a Mumbai-based brokerage.
“Wipro would not be able to earn profit from the brand in the next few years,” he added.
Agrawal said while Wipro is talking to investment bankers about future acquisitions, it is not close to finalising a deal. He said Unza already has some presence in Africa and that Wipro plans to expand further using Nigeria as a gateway.