Will German major Henkel stick to adhesives segment in India?

Parvatha Vardhini C | Updated on January 08, 2018

Erdem Kocak, President of Henkel GCC and Regional Head of Finance for IMEA

Company mum on re-entering FMCG market via Jyothy Laboratories stake

With just a few days to go for the October 31 deadline, Henkel is tight-lipped on whether it will exercise its option to acquire an up to 26 per cent stake in Jyothy Laboratories.

In 2011, Henkel had sold its Indian FMCG business (Henko, Pril, Fa and Margo brands) to Jyothy Labs. As per the terms of the agreement dated May 5, 2011, the German company has the option to acquire a 26 per cent stake in the Indian firm, beginning the fifth year ( i.e, May 5, 2016) until the sixth year, or until a mutually extended period.

Earlier this year, the end date was extended to October 31, 2017. The acquisition of an at least 25 per cent stake in Jyothy Labs will require a mandatory open offer to other shareholders for an additional 26 per cent, as per SEBI rules.

Stiff competition

Henkel’s decision will show whether the company is convinced about fresh prospects for its laundry and home-care business in India. The company gave up earlier due to stiff competition from other well-entrenched multinationals such as Hindustan Unilever and P&G.

“One of the reasons we closed business at that time was that we entered the market late,” explained Erdem Kocak, President of Henkel GCC and Regional Head of Finance for India, Middle East and Africa (IMEA).

“At the end of the day, a company has limited resources and we have to prioritise them. We have to decide based on our ability to win. The ability to win was not so high in laundry and home-care in India. There was a much bigger opportunity in adhesives,” he elaborated, when addressing journalists from IMEA at Henkel’s regional hub in Dubai.

Henkel operates its adhesives business in India through a private company and is also present in the beauty-care space (Schwarzkopf) in the B2B segment.

Globally, adhesives bring in almost half the total revenues for Henkel, with the remaining coming from laundry/home and beauty care. India’s contribution to the adhesive business revenue is in low single digits.

For the year ended March 2017, the Indian company reported a revenue of €250 million (about ₹1,900 crore).

New adhesives plant

“Today, India is the Number 3 country in our region in adhesives. It should be Number 1,” said Kocak. Towards this, the company is putting up a plant replete with the latest technology for adhesives at Kurkumbh, near Pune.

It has invested about €30 million (₹230 crore) in the first phase, covering an area of 22,000 sq m, which is expected to be up and running in 2018. The first phase will focus primarily on adhesives for the automotive, packaging and consumer goods industries.

With the setting up of the new plant, exports from India are expected to go up. “We will have products shipped regionally from this site. One or two categories will also be shipped globally. This implies we will be replacing shipments from other places with shipments from India for these products across the globe,” said Christof Becker, Henkel’s V-P, Operations and Supply Chain, IMEA.

CSR initiative

Henkel is soon bringing its CSR initiative for children, ‘Forscherwelt’ (‘Researcher’s World’), to India as well. Under this programme, children understand concepts through experiments. To begin with, municipal schools in and around the company’s headquarters in Navi Mumbai have been identified for the programme.

(The writer was recently in Dubai at the invitation of Henkel)

Published on October 26, 2017

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