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The Mumbai-based Jyothy Laboratories which has paid Rs 60.7 crore at Rs 35 share to get a 14.9 per cent stake in Henkel India may not be willing to pay more than Rs 40 share to acquire controlling stake in latter.
According to analysts tracking the company who interacted with the management, “Jyothy may have the cash to buy more stake but it would not be willing to go beyond a certain price.” They feel that aggressive players like Emami, Wipro and Godrej may be willing to pay a higher price to get controlling stake in the company.
In fact, analysts say, Jyothy Labs is well aware that the bidding price may be higher for other contenders and that it is willing to remain a minority shareholder in Henkel, if need be. Citing the case of EIH of the Oberoi group, where ITC has remained a minority shareholder, Mr Ulhas Kamath , Deputy Managing Director of Jyothy Labs at the recently concluded analyst meet, said that a similar situation could arise for Jyothy Labs. “We would continue to be a strategic investor and beyond a point we would not like to take part in a bidding war,'' said he.
Focus more on growth
In fact Jyothy would rather focus on other domestic buys and expand its laundry business rather than paying a high price to get controlling stake in Henkel India. In fact, Mr Kamath in a recent interview to Business Line had said that Rs 300 crore had been set aside for acquisitions alone and that there were enough surplus funds on his balance sheet to bankroll this.
“We will leverage Jyothy's balance sheet but there will be no dilution of equity even if other acquisitions happen. The company is still open to other acquisitions if EPS accretive, Mr Kamath stated at the recent analysts meet.
Even if Jyothy Labs did manage to get controlling stake in Henkel, it would have to spend significantly on turning around the Henkel brands with spends on advertising for brands such as Fa, Pril, Henko and Mr White. “There would be an increase in brand building expense initially at 10-12 per cent of the revenues of Henkel and that will impact Jyothy's consolidated margin. We will also have to continue offering other brands such as Margo and Neem where we do not have presence right now,'' added Mr Kamath.
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