Godrej Consumer acquired Raymond’s FMCG biz
Godrej Consumer (GCPL)’s recent acquisition of two prominent brands – Park Avenue consumer goods and Kamasutra – from Raymond Group comes at a time when the fast moving consumer goods (FMCG) sector is buzzing with mergers and acquisitions. The transaction, at Rs 2,825 crore, represents Godrej’s Group’s entry into two rapidly rising categories: deodorant and sexual health. That, however, brings its own set of challenges that GCPL may have to overcome in order to reap the benefits of success in the short term.
According to Sameer Shah, Chief Financial Officer of GCPL, the business thoroughly researched the two categories and brands before taking the plunge. According to Shah, each of these groups “provide
According to Sameer Shah, Chief Financial Officer of GCPL, the business thoroughly researched the two categories and brands before taking the plunge. According to Shah, both of these categories “offer the possibility of multi-decadal double-digit sales growth rates.” “While we do not currently operate in the deodorant market, we have extensive experience in the segment.” “We have a pretty good understanding of the two markets’ level of penetration, sales, and consumption patterns, among other things,” he stated. While GCPL previously attempted to enter the deodorant market with its brand Cinthol, it was forced to exit the category some time ago.
The acquisition was valued at Rs 2,825 crore, or 4.5 times the company’s FY2023 sales of Rs 622 crore. According to Shah, it will cost GCPL around Rs 2,325 crore. “While we paid Rs 2,725 crore in cash for the deal, the real value is around Rs 2,325 crore because of the lower cash tax due to the slump sale.” This equates to around 3.75 times the value to sales,” he explained.
While the business had a reach of 650,000 outlets under Raymond, GCPL’s 6.5 million (or ten times that) retail reach would be critical in scaling the brands in the near future.
Analysts, on the other hand, refer to a number of issues that GCPL is now facing.