In a bid to strengthen its position in the personal care segment, Hindustan Unilever (HUL) signed an agreement with Mosons Group to acquire its flagship brand Indulekha for Rs 330 crore.
In a bid to strengthen its position in the personal care segment, Hindustan Unilever (HUL) on Thursday signed an agreement with Mosons Group to acquire its flagship brand Indulekha for Rs 330 crore.
The deal envisages the acquisition of the trademarks Indulekha and Vayodha, intellectual property, design and know how, for a consideration of Rs 330 crore, payable upon closing of the transaction and a deferred consideration of 10% on the domestic turnover of the brands each year, payable annually for a five year period commencing FY18, the company said in a statement.
Mosons will continue to manage the business until the completion of the transaction. Sanjiv Mehta, chief executive officer and managing director of HUL, said, “The acquisition of Indulekha brings to HUL a premium brand with strong credentials around Ayurveda that will complement our existing portfolio and strengthen our presence in the hair care category.
The brand has strong equity among consumers and we see an opportunity in leveraging its naturals and therapeutic positioning.”
Indulekha was first launched in 2009 as a premium Ayurvedic hair oil. Over the years, Indulekha Bringha Oil has carved a niche for itself supported by endorsements and sustained investments in brand building.
The product was later relaunched in 2014 with a unique comb like cap (popularly referred to as the ‘Selfie’) that aids direct application of oil on the scalp. The brand, with a strong presence across Kerala, Tamil Nadu and Karnataka and a recent foray into Maharashtra, had a turnover of R100 crore and an EBITDA margin of around 30% for the year ending March 2015, the company statement said.
According to analysts the deal appears to be reasonable. “The deal at 4.1x FY15 sales (assuming 10% sales CAGR) appears reasonable compared to 5.5x paid by Emami for Kesh King. We believe owing to HUL’s retail presence and cash reserves R2,800 crore free cash flow, Indulekha can get the necessary investment and scalability. With 80% gross margins and 30% EBITDA margin, it will be margin accretive for HUL. Indulekha brand clocked Rs 100 crore (0.3% of HUL sales) in FY15. HUL, had said it would continue to look at the ayurvedic segment and in our view Indulekha acquisition is a step in this direction. HUL already has Ayush in the ayurvedic category but at a lower price point and we expect this brand to continue,” said Abneesh Roy, associate director at Edelweiss Financial Securities.
HUL already has presence in light hair oil category with brands like Dove Elixir and Clinic. With the acquisition of Indulekha, now HUL straddles across price points in hair oil category. Since Indulekha is in the super premium hair oil category it will have limited impact on hair oil players like Dabur, Emami, Bajaj Corp and Marico. HUL has acquired a company of this size after many years (recently sold Modern bread business), Roy said.