Hindustan Unilever buys Indulekha in return to hair oil segment2 min read . Updated: 18 Dec 2015, 01:42 AM IST
The Rs330 crore deal with Mosons Extractions marks HUL's re-entry in the hair oil segment to take on local challenge
Mumbai: Packaged consumer goods firm Hindustan Unilever Ltd (HUL) has acquired Kerala-based hair oil brand Indulekha for ₹ 330 crore, marking a comeback to the segment which it had exited in 2006. HUL has signed the agreement with Kannur-based Mosons Extractions Pvt. Ltd to acquire Indulekha hair oil brand, the company said in a statement on Thursday.
In June, Mint had reported about the discussions between Mosons Extractions and HUL to sell Indulekha brand.
Anand Rathi Investment Banking advised Mosons Group on the sale of its brand Indulekha. The brand, with a presence across Kerala, Tamil Nadu and Karnataka and a recent foray into Maharashtra, has a turnover of ₹ 100 crore and an earnings before interest, taxes, depreciation and amortization (Ebitda) margin of around 30% for the year ending March 2015.
“The deal envisages the acquisition of the trademarks ‘Indulekha’ and ‘Vayodha’, intellectual property, design and know-how, for a consideration of ₹ 330 crores, payable upon closing of the transaction and a deferred consideration of 10% on the domestic turnover of the brands each year, payable annually for a five-year period commencing FY18," HUL said in its statement.
“The acquisition of Indulekha brings to HUL a premium brand with strong credentials around Ayurveda that will complement our existing portfolio and strengthen our presence in the hair care category.We are excited by the strong equity that the brand enjoys among consumers and see an opportunity in leveraging its ‘naturals’ and therapeutic positioning," said Sanjiv Mehta, chief executive and managing director of HUL.
This move is inline with HUL’s strategy to take on local competition, say analysts.
“Hindustan Unilever has laid out a strategy to counter regional competition and the focus is to increase bespoke products and strategies to counter local competition," said Nitin Mathur, analyst, emerging markets consumer research, Société Générale.
“MNCs have a keen eye on this space as this space can’t be ignored with companies like Patanjali which are seeing rapid growth," said Samir Bahl, chief executive officer, Anand Rathi Investment Banking.
Patanjali Ayurved Ltd’s revenue have grown from about ₹ 450 crore in 2011-12 to over ₹ 2,000 crore by end of 2014-15, as per an August report by research firm CLSA, which also said that it could be the fastest growing consumer goods firm in India.
The purchase of Indulekha will help HUL, the local unit of Anglo-Dutch consumer goods maker Unilever Plc, re-enter the lucrative market for hair oils.
The company had in 2006 exited the business by selling its coconut oil brand Nihar to Marico Ltd.
The coconut-based hair oil market accounts for 43% of the ₹ 8,700-crore overall hair oil market in India.
Hair care has a ₹ 17,102-crore market in India in 2014, Bajaj Corp. said in an investor presentation, citing figures provided by market researcher Nielsen.
Of this, shampoo was the largest segment at ₹ 5,217 crore, followed by perfumed oil at ₹ 4,996 crore and coconut oil at ₹ 3,786 crore.
In June, Emami Ltd entered the rapidly growing ayurvedic hair and scalp care category by buying hair and scalp care business under the Kesh King brand from Himachal Pradesh-based SBS Biotech Pvt. Ltd for ₹ 1,651 crore. Kesh King brands had a sales of ₹ 300 crore in 2014-15 and was growing at an annual rate of 60% over the last three years.
Even Emami ayurveda brands, such as Navratna oil and Zandu balm, have been growing at an average annual rate of 17% and 26%, respectively, for the last five years, according to a company investor presentation.