Confirming months of media speculation that the venture between Godrej Industries Ltd (GIL) and The Hershey Company, US, is on the rocks, the GIL board on Friday approved various possibilities including referring the joint venture to BIFR or exiting the tie-up partially or fully.
Formed in 2007, after Godrej took over confectionery company Nutrine, based in Chittoor, AP, a year earlier, the venture is present in the confectionery and beverages segments.
In a notification to the stock exchanges today, GIL said its board had decided to explore various possibilities of restructuring the , ‘potentially sick’ Godrej Hershey Limited.
The Board approved various possibilities and/or any combination thereof, to restructure its shareholding in GHL including, but not restricted to, referring GHL to BIFR and/or sale of entire/partial investment held by the company in GHL, the statement said. GHL has a presence both in the confectionery segment (hard candy, éclairs, toffee, lollipop and roll formats), and in beverages, with such brands as Jumpin (Fruit Drinks), Xs (Juices and Nectars) and Sofit (Soya Milk). Hershey chocolate syrup was added to the beverages portfolio in 2008.
There have been media reports in the past few months about an impending break-up of the alliance between the two groups. The reports indicated that The Hershey Co was aiming to go it alone in the confectionery business. At present, while Hershey has a majority stake of 51 per cent in GHL, the Godrej Industries has 43.4 per cent, with A. Mahendran, a Director in GHL, holding the remaining equity.
Godrej Industries’ announcement comes as a surprise because, according to earlier reports, it was its partner that was planning to walk away from the alliance.
Media reports had hinted that IL&FS Investment Managers Ltd (IIML), the private equity arm of Infrastructure Leasing & Financial Services, was involved in buying out Hershey’s stake in the venture.
Though the alliance was forged between two FMCG majors, it was the products of Godrej rather than those of its iconic US partner, that dominated its India portfolio.
The only Hershey product launched was Hershey Chocolate Syrup.
Incidentally, it was from IL&FS Investment Managers Ltd (IIML) that Hershey had acquired a 40 per cent stake in 2007. Hershey purchased 11 per cent stake in GHL from other stakeholders to hike its holding to 51 per cent.
The value of the investment made was not officially disclosed. GHL is an unlisted entity.