Godrej eyes more global acquisitions

Godrej Industries Ltd is understood to be looking at buying companies in the household and haircare segments in the developing economies of Brazil, Russia, China and Indonesia to expand its fast moving consumer goods business.

Indian companies, including Godrej, do not have a significant presence in these countries. While admitting that Godrej was scouting for companies in these countries, Adi Godrej, chairman, Godrej Group, told Business Standard, "We do not comment on developments that have not happened, the nature or the size of the target company." He also did not comment on whether the company was planning to acquire the 51 per cent share of its joint venture partner, Sara Lee, in Godrej Sara Lee.

The company, which has liquid detergent brands like Ezee and liquid cleaning agent brands like Godrej Dish Wash Liquid and Kiwi Kleen, is looking at companies that have good brands and distribution networks, largely in household care (detergents, cleaning agents segment) and haircare, with focus on colours and hair dyes.

"Given the right opportunity, the company will spend around $100 million (Rs 5 billion)," said a source close to the development.

In 2008, the company had put in place a centralised mergers and acquisitions team, headed by Navin Gupta, vice-president, M&A, business development, FMCG portfolio, with a mandate to work with the group companies for global inorganic growth opportunities.

The FMCG business for GIL constitutes three companies -- Godrej Consumer Products, Godrej Sara Lee and Godrej Hershey's. For the financial year 2007-08, the three -- GCPL (Rs 11.03 billion), GSL (Rs 5.94 billion) and GHL (Rs 1.98 billion) -- accounted for over 60 per cent of GIL's consolidated revenues of Rs 2,948 crore (Rs 29.48 billion).

Over the last couple of years, Godrej has been slowly transforming itself into a global FMCG company. For instance, GCPL, which accounts for 37 per cent of GIL's consolidated revenues, acquired Kinky, a leading hair brand, and Rapidol, a marketer of permanent hair colour in South Africa.

The company acquired Keyline, the maker of Cuticura, Erasmic and Nulon brands in the UK. It also acquired Global Mideast FZE, a 100 per cent subsidiary of Godrej International Ltd in Sharjah. More recently, the company became the 100 per cent stakeholder of Godrej SCA Hygiene, the owner of the Snuggy brand of baby diapers, as it bought 50 per cent stake from its joint venture partner, SCA Hygiene Products of Sweden.

However, the move comes despite GCPL's global consumer businesses registering a slowdown. "GCPL's international operations, which account for 25 per cent throughput, are witnessing a downturn as the two key international markets of South Africa and the UK, where the company is present, are faring poorly," said Nikhil Vohra, managing director, IDFC-SSKI India.

Vohra pointed at the changing global economic scenario and said, "The company will have to be selective about future acquisitions as the past acquisitions of GCPL still have not given a positive return on capital."