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Essel Propack is all set to increase its stake in Essel Deutschland Germany (EDG) to 100 per cent for $32 million. Speaking to BTVi , Essel Propack Vice-Chairman and MD Ashok Goel says the deal will remove restrictions and help the company expand in Europe. The firm’s debt will go up by ₹121 crore, he said. Excerpts:
What kind of synergies in the back-end prompted you to hike the stake?
First of all, it is important for us to understand that EDG is a minority joint venture as far as Essel Propack is concerned. Essel also has other 100-per cent subsidiaries in the rest of Europe. As per the shareholders agreement, there were some restrictions on certain business we could do outside Germany. As a result, we were potentially losing some opportunities. By becoming a 100-per cent stakeholder of the German company, that restriction will be removed and therefore we can tap entire Europe
The second fundamental thing is that Europe is growth geography and the economies of scale need to go up. Europe as a segment will grow 63 per cent annualised as a result of the 100-per cent acquisition. The revenue boost to the global number will be 11 per cent and PAT (profit after tax) boost will be 4.1 per cent on an annualised basis. This will also push up the non-oral care revenue share on a global basis by 2.85 percentage points. The revenue of this company is ₹268 crore.
What kind of growth outlook can we expect in FY17?
We still believe that we will grow 12-15 per cent on top-line basis and 20 per cent on the bottom-line for the full fiscal year.
How will the capacity utilisation improve after the acquisition?
As far as synergies are concerned, I can’t give you the quantification at this moment; but this unshackles the whole of European operations as to what we can do and what we cannot. We also have some headroom in Poland which we can leverage.
How will your debt level change after the acquisition?
The enterprise value of EDG is ₹214 crore, and Essel’s net debt will increase by ₹121 crore. Our net debt at present is ₹640 crore.
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