Jyothy Henkel merger

8/12/2019 Jyothy Henkel merger

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Jyothy Henkel Acquisition

Presented By: Group 2

Atanu Misra

Debolina Chakraborty

Manish Watharkar

Jaskaran Singh

Date: 3rdJuly, 2014

Suraj Seshadri

Rohan Agarwal

Viraj Kondawar

Vivek Kar

Sumanth B. S.


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Introduction

Jyothy Laboratory

Founded in 1983 by Mr. M.P.Ramachandran

headquartered in Mumbai Maharastra.

Famous brands - Ujala, Maxo, Exo, Jeeva and

Maya.

Companys research and development facility

focuses in area of new formulations, creating

cost effective processes and new product

offering

Business area Fabric care, Household

Insecticide, Allied business.

Henkel India

Established in 1916 as a subsidiary of Jyothy

Laboratories Limited headquartered at

Chennai

Comprises of brands such as Pril, Henko,

Fa, Margo, Mr. White, and Chek

Business area - Laundry, Home Care,

Cosmetics and Toiletries in retail

businesses

6thMay 2011, Jyothy Lab had acquired 51% stake in Henkel India.


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Strong Synergies - Jyothy Henkel acquisition

Strong strategy in place to unlock brand potential - Leveraging its brand Ujala witha strong sub-segmentation strategy

Synergies to play out in FY13 - Acquisition of Henkel India has given Jyothy a range

of fabric-care brands across price points and geographies.

Sale of assets to reduce debt burden- Plans to sell land at Ambatur and Karaikal for

Rs. 2bn to substantially reduce its interest cost burden.

Change in estimates Estimates the earning by 22% but expect higher profit margins

due to less competition from HUL & P&G as the price war tapers off. Estimate 14%

revenue growth in FY14

Valuation - DCF-based valuation method, we value the stock at a price target of Rs 210

(earlier at Rs 300).

Better use of Henkelsincreasing revenues Revenue was increasing despite of low

profit margin


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The Project Process


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Project Set-up

Project SponsorJyothy Laboratories.

Project LeaderUllas Kamath, Deputy M.D, Jyothy Laboratories.

Project PriorityTo acquire at least 51% stake in Henkel- India.

BudgetRs.3308 million for 86% acquisition of Henkel India.

Project Deliverables -

Improvement in overall growth profile.

Increase its customer base.

Growth in detergents and dish wash segment.

Establishment as one of the leading FMCG companies in India.


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Project Definition

Draft Statements of requirements

Buy Henkel Indias 59.35 million shares for Rs.20 each.

To take Henkels debt of Rs.454 crore.

Buy more than 68 million preference shares worth Rs.43.9 crore.

Team - Ullas Kamath, M.P Ramachandran.

Undertake project risk assessment :

Mature detergent market.

Effective integration of the two entities.

Debt and interest payment on the debt.

Procurement Plans:

Raw materials to be supplied by the current suppliers of Jyothy.


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Conceptual Design

Constraints Convincing top management of Henkel inGermany.


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2,00,000outlets

1.1 millionoutletsRe

ach

1 plant in

Karaikal

28 plants

across the

country

P

roduction

Premium,

metro

Mass-

market, tier-

2 townPositioning

Pays 18-23%

margins todistributors

Pays 13 %

Distribution

Rs. 40 crore

a year

Rs. 120 crore

a year

A

dvtg.&

P

romotion

Henkel India JyothyLabs

Jyothy will get into

departmental stores, Henkelwill get access to rural India

Will spread production of Henkel

products(except detergents)

saving approx 3% EBITDA

margins

The Combine

Pan-India presence across

segments

Overall distributor margins to

come down; expected savingRs. 60 croresApprox.

Approx. Rs. 120 crores a

year

Scheme Design


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Implementation of the project

Continuous negotiations with the top management of Henkel,

in Germany.

Usage of Henkelscontinuously growing revenues.

Usage of Jyothyscontinuously growing profits.

Inability by Henkel to sustain the continuous losses it incurred.


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Confirm completion

Confirm technical completion: May 6, 2011

Resolve reservations

Removal of bureaucracy

Increase efficiency of logistics system

Low expenses and high efficiency

Removal of unnecessary delays

Obtain acceptance of completed project: Apr 1,2012


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Project review

Undertake post Ullas Kamath, Joint Managing Director of Jyothy Laboratories

Project review

Enhanced distribution network

Opportunity to benefit from the turnaround in the business Optimization of manufacturing

Jyothy gets into departmental stores, Henkel gets access to rural India

Pan-India presence across segments

Saving 3% EBDITA margins Saving 60 crores from overall distributor margins

Building blocks in place for a bullish long term thesis

Transformation drives visible and achievable EPS growth


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Thank You

Documents

Jyothy Henkel merger