A potentially sick company, the promoters of Henkal Spic are in the process of reviving it and reducing the erosion in its networth. The infusion of funds has been done through allotment of preference shares and the proposed rights issue would bring down the accumulated losses as a proportion of peak networth to about 19 per cent.

The accumulated losses as an September 30, 1998, amounted to Rs 49.44 crore, which is over 60 per cent of the networth of Rs 78.03 crore. A preference share allotmentworth Rs 28 crore has already been made to Henkel KGaA, Germany and is coming out with a 1:1 rights issue at a premium, for which shareholder approval has already been obtained. Post-rights issue, the equity would swell to Rs 147.66 crore, up from the current level of Rs 73.83 crore. The company has been struggling to stay afloat and has been incurring losses. Fierce competitive detergent industry, where established MNCs, with the advantage of an early entry, dominate the field over the years.

Henkel's case has been similar to that of Vashisti Detergents, which struggled in the initial years until Hindustan Lever formally took over and helped it turn around. Henkal Spic, too, has now found full support of its strong parent, Henkel AG of Germany. The infusion of funds and the recent acquisition of Shaw Wallace Co. Ltd's consumer products business would help company return to the profit sharts. The company has already started marketing the brands it acquired from Shaw Wallace. Henkel Spic recently acquiredtwo Shaw Wallace group companies -Calcutta Chemicals and Detergents India. These companies own a clutch of FMCG brands and a good distribution network especially in the Eastern market with brands like Chek detergent. The acquisition has added new facilities to the company's existing plant in Pondicherry. Calcutta Chemicals has a plant situated in West Bengal to make soaps, toothpastes and detergents while Detergents India has a plant in Andhra Pradesh to make detergents.

The company has also introduced house care products 'Brisk' range of surface cleaners and 'Limeshot' scouring products. It has been spending heavily on promoting these products in different markets. The acquisition of the products of these two companies will round off its product portfolio to include other categories too.

The larger distribution network as a result of the acquisition will help the company push higher volumes of its existing as well as new products. Further, the wider range of products with better margins in categorieslike soaps will enable it to improve profit margins substantially. Although the company is currently in red, it may not be long before the company breaks even to be back in the black. The cause of worry is the large capital base and accumulated losses. This, however, is set off with the fast growth being witnessed in the FMCG segment.