Jyothy Labs to buy 2 fabric care firms for Rs 250 crore

Jyothy Laboratories Ltd, the maker of Ujala fabric whitener, is in the process of acquiring two domestic fast moving consumer goods (FMCG) companies, both in the fabric care space, K Ullas Kamath, deputy managing director of the company, told DNA on Thursday.

He did not disclose the names of the companies being acquired but said it would give Jyothy Labs access to newer markets in detergents.

The total cost of the acquisitions, expected to be completed by end-December, will be around Rs 250 crore, said Kamath.
Jyothy Labs’ foray into mid-priced detergents with Ujala washing powder a few years ago and its recent aggression in the space spells trouble for the likes of Hindustan Unilever and Procter & Gamble, which have been locked in mortal combat of sorts over marketshare.

The company on Thursday said it has successfully raised Rs 228 crore through qualified institutional placement at an issue price of Rs 282.62 (face value of Re 1) per share. The major investors included Sundaram, ING Insurance, IDFC Mutual Fund, Premji Investments and T Rowe Price. The total dilution post issue works out to 10%, following which promoters holding stands at 63%.

“The entire purpose of raising this money is to acquire businesses which are at a primary stage. There are two acquisitions that we will be closing in December quarter and both will be EPS (earnings per share) accretive. Both companies are 25 years old and profit making,” Kamath said.

Jyothy Labs is keen to benefit from the synergies, especially in procurement of raw materials and brand building.

“We can definitely take some advantage on pricing on those products and increase the price. Organically, we are growing at 25% and this inorganic growth will give us in the next one year at least 15-20% more turnover with additional profits,” Kamath said.
Jyothy Labs is not looking at buying the manufacturing units of the two companies. It will only acquire the business and the brands and will shift the entire production to its unit in Uttaranchal, which has a tax break for nine years.

The company is already the biggest player in the fabric whitener space with value market share of 72% pan-India. “In Kerala, where we have almost become number one in the mid-priced (detergents), we have increased prices and competition has reduced the price. So this is a clear indication that customers are happy with our product,” Kamath said.