Mumbai: Henkel AG and Co. KGaA, which will receive bids from prospective buyers next month to exit from its local subsidiary, could maintain a presence in India through haircare brand Schwarzkopf, besides some of its best-known laundry products, said two investment bankers with direct knowledge of the transaction.
The Schwarzkopf brand, one of the German firm’s most profitable globally, will be retained by the parent, which may then look for a potential licensee that can sell the styling and colouring products in India, the bankers said. On 1 March, Henkel India Ltd told the Bombay Stock Exchange it had decided to sell movable assets and other components of its haircare division.
The buyer of Henkel’s 50.97% stake in the local unit will have the licence to market both global dishwasher brand Pril, and soap and deodorant brand Fa, according to the sale information memorandum, one of the investment bankers said. The seller also has the option to enter long-term agreements with the buyer, or transfer brand rights for detergent brands Henko and Mr. White, one of the two bankers said.
“The German company will allow the buyer to retain global brand and intellectual property rights for Margo, Chek and Neem,” the same banker said. The buyer can also make Henko and Mr. White at the existing Karaikal, Puducherry, plant, but won’t be allowed to export these products.
Jyothy Laboratories Ltd, the maker of fabric whitener Ujala, appears to be the frontrunner for the Henkel India stake, having purchased a 14.9% holding in the unit from Tamilnadu Petroproducts Ltd on Wednesday for Rs60.73 crore. Also in the running are soap and detergent makers Godrej Consumer Products Ltd; Wipro Ltd’s consumer arm, Wipro Consumer Care and Lighting; and Emami Ltd, Mint had reported on Thursday.
The purchase by Jyothy “has not deterred Emami from bidding for the (Henkel) stake”, said Harsh Agarwal, director of Emami. “We have signed a non-disclosure agreement, so I will not be able to comment more.” Emami hasn’t appointed an investment banker, he added.
Mint couldn’t independently verify whether Godrej Consumer and Wipro Consumer Care would be bidding for the stake. Godrej Consumer managing director A. Mahendran did not respond to calls made to his mobile phone. A member of Wipro’s communication team said the company cannot comment on market speculation.
HSBC Securities and Capital Markets (India) Pvt. Ltd and HSBC Trinkaus and Burkhardt AG are advisers to Henkel AG.
Henkel India, established in 1987 as a subsidiary of Henkel AG, is saddled with high debt and declining margins. The firm declined to comment on queries sent by email on Friday.
Despite Henkel AG’s plans to increase its focus in certain key markets, including Asia, the move to exit the Indian joint venture wasn’t a surprise, said an analyst with the brokerage arm of an international investment bank.
“The company exited its business in China last year,” the analyst said, declining to be named due to company policy.
Henkel has not been able to stand up to competition from global rivals in the detergent business in India, the analyst said. The company will stay only in markets in which it can grow profitably, it told analysts in a recent conference call.
Henkel’s worldwide sales amounted to €15.09 billion (Rs95,670 crore today) in fiscal 2010, according its website. Eastern Europe, Africa, West Asia, Latin America and Asia, excluding Japan, contributed to 41% of sales. The firm intends to increase this to 45% by 2012.
According to BSE information, Henkel India posted a loss of Rs2.34 crore for the quarter ended 31 December on sales of Rs97.14 crore. Detergent brand Henko posted sales of Rs132 crore for the year ended 31 March. Detergent brand Mr. White and dishwasher brand Pril earned revenue of Rs52 crore and Rs68 crore, respectively. Margo, Neem and Fa had revenue of Rs78 crore, Rs7 crore and Rs22 crore, respectively.
Shares of Henkel India fell 4.94% on Friday to close at Rs45.25 apiece on BSE.