Cigarettes-to-hotels conglomerate ITC has entered into an agreement with Johnson & Johnson to acquire Savlon and Shower To Shower trademarks and other intellectual property primarily for use in India in order to expand its FMCG portfolio.
This acquisition of brands, which will be ITC’s first purchase in the personal care segment, is in line with the company’s growing focus on its non-cigarette FMCG business.
“The company has entered into asset purchase agreements with Johnson & Johnson, India, & Johnson & Johnson, Singapore, on February 12 for purchase of ‘Savlon’ and ‘Shower To Shower’ trademarks and other intellectual property, respectively, primarily for use in India. These agreements are subject to customary closing conditions and regulatory permissions as may be necessary,” ITC said in a BSE filing on Friday.
“Earlier also we have used inorganic route to expand and strengthen our business. We acquired juice brand B Natural for our entry into fruit beverages market. The current acquisition is in line with ITC’s aim for a revenue of R1,00,000 crore from the new FMCG businesses alone by the year 2030,” a senior official told FE on condition of anonymity.
ITC had acquired Bangalore-based Balan Natural Food’s B Natural brand last year.
The company declined to divulge the size of the deal for purchasing Savlon and Shower To Shower brands from Johnson & Johnson.
Analysts tracking FMCG firms, however, said the size of the current acquisition would be small compared to the company’s total size of business.
“Compared to ITC’s total size of business, this deal size is very small. After this acquisition, the company’s topline in FMCG segment may go up by a small amount of about 1%,” Amnish Aggarwal, senior VP-Research, Prabhudas Lilladher told FE.
ITC’s non-cigarette FMCG revenue stood at R8,122 crore during the 2014 financial year.
The company has posted 10.47% year-on-year growth in its net profit to R2,635 crore for the third quarter ended December 31, 2014, from R2,385.34 crore for the corresponding period a year ago.
Its profit as well as revenue growth was impacted as the cigarette business witnessed a tepid growth in the third quarter this fiscal.
ITC posted just 2% year-on-year growth in its net sales at R8,800 crore during the quarter under review against R8,623.11 crore in the year-ago period.
The company’s non-cigarette FMCG segment, however, registered a healthy revenue growth of 11.4% amidst continuing weakness in discretionary demand.
ITC scrip gained 2.01% to end at R378.05 apiece on the Bombay Stock Exchange.