Post on 03-Jun-2018
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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