Mumbai: Godrej Consumer Products Ltd India (GCPL) sold its Indonesia-based non-core foods business for $35 million to private equity (PE) firm Creador.
The Mauritius-based PE firm’s acquisition of PT Simba Indosnack Makmur (Simba) is expected to be completed within two months. The acquisition has given Creador an opportunity to invest in a consumer-oriented business in Indonesia, Godrej Consumer and Creador said in a joint statement. Simba sells branded cereals, snacks and instant food products.
“The total investment amount is $35 million for a 100% interest representing a PE ratio of 12x which is very attractive given the growth potential and scarcity of consumer-orientated business in Indonesia,” said Creador. The Indonesian brands of Simba have excellent growth prospects, said Brahmal Vasudevan, chief executive of Creador.
Creador, which is focused on long-term investments in growth-oriented businesses across India, Indonesia and Malaysia, pegs the average PE ratio for the foods sector at 18 times, globally. The sale of Simba will allow Godrej Consumer to focus on its core business—home and personal care. Creador expects a 32% internal rate of return from its investment in Simba over a span of five years.
“The divestiture of the business will improve the margin profile of our Indonesian business and help the team to take the household and personal care platforms to their full potential,” said Adi Godrej, chairman of Godrej Consumer. The Indonesian unit of Godrej Consumer, which had acquired Simba as part of its purchase of household products manufacturer Megasari Group in 2010, will continue to expand its insecticides and air freshener business.
“Under GCPL, our foods business did not have the benefit of a global innovation platform like we have in our other categories of household insecticides and air care,” said Naveen Gupta, chief operating officer of Godrej Consumer’s Indonesian business. “The divestment will allow us to focus on our key brands and accelerate their growth trajectory.”
HSBC India advised Godrej Consumer on the transaction.
On Friday, Godrej Consumer rose 0.1% to Rs.723 on the BSE, while the benchmark Sensex gained 0.9% to close at 20,103.53 points.