Godrej Consumer Products Ltd (GCPL) has bought two firms in quick succession?Tura and Megasari. The company’s MD Dalip Sehgal, told FE that both acquisitions will be earnings accretive in the very first year itself even if there is dilution in the equity base. While business in the home market has been brisk, with GCPL gaining market share in both soaps and hair colour, Sehgal’s somewhat concerned about high food inflation.

GCPL’ s operating margins in the March quarter have been strong and raw material prices have come off sharply?

One reason for the improved operating margins is the change in the sales mix. Since it was a winter quarter, we sold more of the high value-added products like liquid detergents and a higher quantum of deodorants. That apart, the lower cost of raw materials has helped us; sequentially our gross margins are up about 200 basis points. And we have gained market share in soaps to10.3% from 9.4% last year and have just re-launched Godrej No 1.

Has the pricing strategy for soaps changed?

We will not give deep discount but neither will we out price ourselves. So both Godrej No 1 and Cinthol are priced at par or slightly higher than the competitors. We were always focused on value share and it will increase.

You have gained share in the hair colour space too?.

We have gained share sequentially to 33.8% and our rural market share is about 42%. However, Nielsen doesn’t always manage to capture our share in the hinterland. The category has grown at 14%, whereas we have grown at 17% with both Expert and Nupur doing well. Going ahead, the category should grow at 11-12% and we should grow ahead of that.

How do you read the trend in palmolein prices?

Prices have been somewhat weak since the soya crop worldwide has been good.

How will you fund the Megasari acquisition?

We have an approval mop up around Rs 3,000 crore via a mix of debt and equity. The equity dilution will not be too large and we will try to stay within a debt to equity ratio of 1 and 1.5 times. We have Rs 250 crore of cash on our books currently.

How will exploit synergies between your African and Asian buys?

We should be sell ing household insecticides (from Megasari) in the African markets by outsourcing the production. We are keen to acquire the remaining 51% in Sara Lee, it’s a priority for us.