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AGENDA
FMCG Sector Analysis
Overview : Sakaar & CavinKare Valuation Synergy Deal Structure Potential Issues
2
YoY Growth(2010-11): Sales 15.3%, Operating Profit 12.4%, PAT 19.5%2 Rural Sector (2011) USD 9 Bn, Expected to become USD 100Bn by 2025 Penetration Rural/Semi Urban increased from 9.5% in 2000 to 51% in 2011 By 2025, India is poised to become the world's fifth-largest consuming country from the twelfth position in 2010
Multiple Working Members Reduced Taxation 12%+ salary increase over past 5-6 years
Continued
Organized Retail
Adds to shelf space visibility Enhanced supply chain and penetration
Government Incentive
Tax holiday in Uttaranchal, HP, Assam and J&K Implementation of VAT and now movement to GST Change in FDI policies; 100% in Single brand and 51% in Multi Brand retail
PEST Analysis
POLITICAL GST Regime Transportation & infrastructure development in rural areas to help in distribution network Restriction in import policies Help for agricultural sector ECONOMIC High GDP growth (7-8%) Increased disposable income High Private Consumption Growth of Modern Retail Low Labour costs
PEST Analysis
SOCIAL Rural Employment Volume driven growth in rural market Major young population can increase revenue Indian culture, social and lifestyles are changing drastically 6 TECHNOLOGY Strong IT Infrastructure to enhance productivity and drive down cost FMCG major investing in IT
SAKAAR In a Nutshell
Growth
Sales increased by16% in 2011 Gross Profit declined from 36% to 34% Operating Profit declined by 1.2% to 13.8%
Product Beauty Products, 10%
Food Products, 30% Personal Care (Hair), 15%
Product Portfolio
Presence in 3 categories Personal Care, Food Products and Beauty Products Portfolio of over 20 brands Presence in more than 30 countries
800
700
8.00%
7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Mar 06 Mar 07 Mar 08 Sales Mar 09 NPM Mar 10
Product Portfolio
Personal Care, Foods, Dairy Products, Beverages Known for Chik Shampoo Introduction of Sachets
Operations
Operations in - SriLanka, Bangladesh, Nepal, GCC, Malaysia, Singapore Expansion plans for Africa and Other Gulf nations
Revenue = 773 Cr| Net Profit Margin = 4.6%| YoY Growth 28%
VALUATION
Weight CavinKare Sakaar
EV/Sales DCF
3 1
2202 1469
8363 11120
2019 4.5
9052
SYNERGY
Presence in hair care, food and personal care segment Opportunity to derive operational synergy Global presence Opportunity to cross sell in new markets
10
Deal Structure
External Commercial Borrowing (ECB) and Debt
from Domestic Banks not permitted for acquisition. (RBI Guidelines) Deal Structure
Mode of Finance Equity Cash* Percentage 79% 21% Value (Rs. Cr) 1500 400
Potential Issues
Acquisition Issues CavinKare - high promoter stake Possibility of Poison Pills and White Knight Takeover May lead to hostile takeover attempt and over bidding Integration issues Shadow of leader Improper Management Due diligence
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Q&A
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