Godrej Cons looking at Israeli insecticide company

A Mahendran, managing director of the $1 billion Godrej Consumer Products (GCPL), has spent a good number of hours in recent days doing due diligence for what could be the company’s next buy — an Israeli insecticide company.

The latter’s officials were in Mumbai earlier this month, but did not disclose details.

Between 2010 and the first half of 2012, GCPL acquired seven African, Asian and Latin American firms in the business of hair colour, insecticides and personal care.

This was in tune with GCPL’s stated ‘3 by 3 strategy’ for growth – focus on three products across three continents where it commands market leadership.

The buys “helped transform” GCPL into “an international emerging markets consumer company,” wrote Nitin Mathur, analyst at Esprito Santo Securities, in a report last week.

Mahendran says GCPL is “always and all the time” on the lookout for buying opportunities, recent acquisitions notwithstanding.
Last fiscal, international business contributed 38% to overall consolidated revenues.

Currently, GCPL is scanning opportunities in Latin American markets like Uruguay and Paraguay. It has already bought firms in Argentina and Chile.

“The target (company) should be EPS (earnings per share) accretive in year one, it should be growth-oriented and have a specific Ebidta growth,” says Mahendran.

Toilet soaps – GCPL makes brands like No.1 and Cinthol – now have 22% share in the company portfolio, down from 41% in fiscal 2010, as the company shifts its focus to household insecticides.

Another focus area is identifying products for cross-selling or cross-pollination from abroad to India. At its hair-care R&D centre, Godrej is developing \”a far cry\” solution for balding men in India, using the nylon fibre hair extensions of Darling, its firm in Africa where hair extension is a $1 billion business.

Similarly, GCPL will be launching sachet-based hair creme from its Argentinean business under the Godrej Expert brand, a known presence in the powder segment. It has also evaluated the launch of Salon Selective, a hair grooming brand under Keyline Brands in the UK.

Leveraging its Indonesian business Megasari, GCPL is keen to launch a paper-based mosquito repellent in India. (Last week, it forayed into the air-care category using Megasari’s expertise.)
Mahendran says the key growth drivers for GCPL over the next few years would be its focus on innovation in existing categories, increasing rural penetration and growing consumption.