$250 million invested quadruples in value in under three years.
34 months back, Adi Godrej paid $250 million to acquire PT Megasari Makmur Group of Indonesia, a manufacturer of household insecticides, air fresheners and wet tissues.
Today, investment bankers are lining up to float the company for $1 billion.
“They are telling me now to float it for four times the value. Megasari has been one of our best acquisitions till date,” Godrej told DNA.
But the doyen would rather enjoy the embedded valuation gains now.
“The listing should be done only when there is a need to raise money. We don’t need the money now, so we won’t list Megasari for now,” he said.
That’s a quarter of the valuation of the mothership Godrej Consumer Products.
GCPL’s revenues have doubled since the acquisition, while market capitalisation has nearly trebled. HSBC advised Godrej on the deal.
Analysts believe that unlike several other companies, Godrej had paid the appropriate market value for the acquisition of Megasari. The fact that the acquisition provided strong cross pollination potential — of leveraging brands from either geographies — has been an added advantage.
Even in the October-December quarter, Megasari was the start performer, growing at 30% on-year basis.
“Megasari contributed 50% to GCPL’s international business last fiscal. Although we expect this to come down to 38% by fiscal 2015, it will remain the largest international market for GCPL. We think Megasari is an astute and thoughtful acquisition given the market growth opportunity, category presence, operational scale, brand market share and complements to its Indian business,” Amit Mishra and Priya Ranjan of Macquarie Securities noted, adding, Megasari has improved GCPL’s margins by 100 bps due to sourcing-cost synergies.
Godrej has made 11 acquisitions since 2005.
“Even this year, we will continue to look at acquisitions,” he said.
“We have a strategy called 3x3 when we buy. The company should be in any of the three geographies — Asia, Africa and South America — and should be in three categories where we are very strong -household insecticides, hair colour and personal wash. And it should also be profitable and will add value to the shareholder. That’s when we buy. ”
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}