Mumbai: Kokuyo Co. Ltd will buy about one-third of Camlin Ltd for around Rs 186 crore as the $3.2 billion (Rs 14,430 crore) Japanese stationery and furniture maker gets set to take a majority stake in the Indian company.
It will acquire a 10% stake through a preferential allotment at Rs 85 per share and 20.3% from the promoters for Rs 110 apiece. It will also make an open offer for up to 20% of Camlin at Rs 110 a share, for a total acquisition value that’s put at Rs 225 crore. Camlin rose 0.8% to Rs 80.80 on Monday on the Bombay Stock Exchange.
“Considering the brand, the penetration and the margins that Camlin has, valuing the company at around 2.2 times sales is inexpensive,” said Avinash Nahata, head of fundamental desk at Aditya Birla Money Ltd.
The deal is valued at about two times 2010 sales and 27 times earnings before interest, tax, depreciation and amortization, said Shriram Dandekar, executive director of Camlin.
On an expanded share capital basis, after the open offer and preferential share allotment, Camlin promoters Dilip and Shriram Dandekar will hold a 13.5% stake in the firm.
“It has been our stated intent to scale revenue and increase our portfolio of products through line extensions,” chairman and managing director Dilip Dandekar said in a release. “We believe that Kokuyo and Camlin have complementary product portfolios and this joint venture will facilitate faster roll-out of portfolio of products by Camlin.”
Camlin has been marketing Kokuyo notebooks in India for the last one-and-a-half years.
“Apart from the complementary product lines that both the companies have, we get access to newer and bigger overseas markets like China and Vietnam,” said Shriram Dandekar.
Camlin currently exports its products to Russia, North Africa, Bangladesh, Sri Lanka and West Asia.
The promoters of Kokuyo will get four board seats after they build up a 51% stake in the company, Shriram Dandekar said. Both Dandekars will continue in their current posts, the company said.
Kokuyo’s advisers in the deal, which took more than three months to be concluded, were Kotak Mahindra Capital Co. Ltd, GCA Savvian Corp. and AZB and Partners. The Dandekars’ legal adviser was J. Sagar Associates.
The acquisition marks Kokuyo’s entry into the $2.2 billion Indian stationery market and gives Camlin the opportunity to boost exports and gain marketing know-how and technology, it said.
“As the transaction will add new products to Camlin’s portfolio, this will add value to the company’s shareholders,” said S. Ranganathan, an analyst with LKP Securities Ltd.
According to an October report of Aditya Birla Money, the school and office stationery market is unorganized, with many regional players. Camlin’s main competition comes from AW Faber-Castell (India) Ltd and Pidilite Industries Ltd, it said.
“The market is growing at around 25% annually and we expect these companies to cannibalize more of the unorganized market. Camlin, with its reach and distribution, is definitely going to have the winning edge over its competitors,” the report added.
For the year ended 31 March, Camlin reported a net profit of Rs 12.04 crore on revenue of Rs 330.80 crore. It reported a loss of Rs 0.63 crore for the quarter ended 31 December on revenue of Rs 69.25 crore.
Camlin has four manufacturing units, three of them in Maharashtra and one in Jammu. It will look to increase the network of retailers through which its products are sold after December, Dilip Dandekar told Mint on Sunday. The number of retailers is put at 50,000 on its website.
The company will be able to capitalize on its strengths with aggressive new leadership and owners with deep pockets. It can enter the notebook market, besides selling more high-end stationery, said Nahata. India’s notebook market is valued at about Rs 5,000 crore.