New Delhi: GlaxoSmithKline Plc. (GSK) is exploring a partial or full sale of its 72.5% stake in its Indian unit GSK Consumer Healthcare Ltd, besides separately selling the company’s dietary supplement brand Horlicks as it looks to fund its $13 billion buyout of Novartis’s stake in a global consumer healthcare joint venture.

“The company is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction. The strategic review also includes assessment of the company’s stake in Indian entity," GSK chief executive Emma Walmsley said in a conference call with reporters on Tuesday.

The decision is part of GSK’s plan to “drive increased focus on over-the-counter (OTC) and oral health categories".

Emma Walmsley, chief executive of GlaxoSmithKline. GSK is said to need $13 billion in total to fund the Novartis deal. Photo: Reuters
Emma Walmsley, chief executive of GlaxoSmithKline. GSK is said to need $13 billion in total to fund the Novartis deal. Photo: Reuters

“Dilution of stake or a complete exit cannot be ruled out. The company has been having a tough time during the past three years. And GSK needs $13 billion in total to fund the Novartis deal," said a Mumbai-based equity analyst, asking not to be named.

The outcome of the strategic review, said GSK, will be concluded around the end of 2018. “There can be no assurance that the review process will result in any transaction," GSK said in a statement.

According to GSK, the company will increase focus on OTC and oral health categories. This portfolio includes Sensodyne toothpaste, Eno antacid, Panadol headache tablets, muscle gel Voltaren and Nicotinell patches, among others.

“The majority of Horlicks and other nutrition products sales are generated in India, with the Horlicks range widely recognized as a portfolio of premium nutrition products," the company said in a statement.

The combined sales of Horlicks and other nutrition products were approximately £550 million in 2017, GSK said in its statement. Nearly 85-90% of total Horlicks sales come from the India market. Besides India, GSK sells Horlicks in Sri Lanka and Bangladesh.

Of the parent’s 72.5% shareholding, Horlicks Ltd held 43.16% stake in GSK Consumer Healthcare at the end of 31 December 2017 while the remaining equity is with GlaxoSmithKline Pte Ltd, according to the company’s filings with BSE.

GSK had, in July 2017, announced its decision to sell its small Horlicks business in Britain.

Walmsley, however, said India “remains a priority market" for GSK. “The Consumer Healthcare business will continue to invest in growth opportunities for its OTC and Oral Health brands, such as Sensodyne and Eno. The Group is also actively investing in its Pharmaceutical and Vaccines businesses, including building new manufacturing capacity in Vemgal, Karnataka and Nashik," the company said in the statement.

Horlicks, which was invented in 1873 by the British-born brothers William and James Horlick, was brought to India by the British towards the end of World War II as a dietary supplement. It soon became popular and remains the market leader. It competes with Complan (sold by GSK to Heinz), Bournvita (Mondelez International Inc.), Boost and Viva (both owned by GSK) in India.

“GSK India, over the last two years, was trying to deepen penetration of Horlicks, launch new products, improve communication of its product and its efficacy to markets but has been struggling," Abneesh Roy, an analyst at Edelweiss Securities, said, adding that Horlicks is a good brand for any buyer considering the scope for possible extensions and penetration opportunity.

According to market research firm Euromonitor, Horlicks had a 42.8% market share (off trade volume) in the malt-based hot drinks market in 2017, while the company claimed to have a 55.7% value share till December.

The company has been witnessing slow growth in India during the past few years. GSK Consumer Healthcare’s reported revenue rose 2.6% to Rs4,421 crore in the year ended 31 March 2017 from Rs4,309 crore in the previous year.

On Tuesday, shares of GSK Consumer Healthcare rose 2.24% to close at Rs6651.65 on BSE while the exchange’s benchmark Sensex rose 0.33% to 33,174.39 points.

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