German consumer products major Henkel is planning a re-entry into India by hiking its stake in Jyothy Labs. The company, which exited India in 2011, is looking to buy 26 per cent of Jyothy Laboratories.

Speaking to Bloomberg TV India , Jyothy Labs Joint Managing Director and CFO K Ullas Kamath says it will be a “fantastic fit” between Jyothy and the €200-billion FMCG major. The pricing of the stake Jyothy offers will depend on a lot of parameters, including product portfolio, technical and R&D support and product distribution, he said.

Henkel is reportedly keen to buy a strategic stake in Jyothy Labs. Can you confirm these reports?

It is a fact that Henkel has the right to invest up to 26 per cent in Jyothy Labs. And the window is open for them from April 2016 to March 2017. As of now the status is that the window is open for them to negotiate with us and invest up to 26 per cent if they feel it is a good investment strategically.

So are you in negotiations with Henkel?

I will not be able to comment on that because in case it happens, we will make a public disclosure and tell the press ourselves. But at this point in time, all I can say is that the window is open for them and they are aware of that. It is a one-year-long window and three months have lapsed now. All such things will take its own time, which has to be in the interest of both the companies and the shareholders of both the companies. A lot of negotiations have to happen. And that’s why we have kept a long window. That is what I can confirm at this point in time.

Assuming that this deal will happen, what kind of price formula are you working on? Will there be a fresh issue or will there be a stake dilution or a combination of both?

If at all it happens, it will be based on the negotiations in the interest of both the companies and what value addition they will bring in because it will not be a financial investment for them, it will be a strategic investment for them to re-enter India. There are a lot of things that we need to discuss — the product portfolios, what works and what all things we need from them, such as technical support, the R&D support and product distribution. However, the price will be negotiated together and we will come to an amicable price. And it will not be lower than the SEBI guideline price of what we agreed upon in the past when we signed the agreement. However, as of now, it is just that they have the right to invest. It’s their call to exercise.

Although you are in the negotiation stages, can you indicate what kind of price level you will be comfortable with?

It is a complete basket of price and value addition of what they bring in and the technology support they give. And if it is in the interest of the company, specifically for Jyothy Labs to go through the next level, then everything can be negotiated. It is not just the money they bring in, we are also interested in their technology, products, and R&D they can bring in to the table. It is a combination of all these things and that is something we can negotiate.

Any indications of what kind of products Henkel can bring into this market?

Worldwide, they have bodycare products, detergents and world-renowned brands. In most of the countries they are ranked number two or three in FMCG. A lot can be done in the detergent space where they are number one in Europe and number two in the US. They are a €200-billion company. So it will be a fantastic fit for them to re-enter India. And for us it will be a great fit if they come in and partner with us in major product portfolios.

Related Topics