FMCG major Marico is de-merging its skincare business under Kaya Skin Care Solutions and listing it separately as Marico Kaya Enterprises. The restructuring has been done to consolidate its fast moving consumer goods (FMCG) business by converging its consumer products business and the international business, even as it keeps its skin care business as an independent entity. This will get effective from April 1.
Shares of Marico were up by 1.36 per cent and closed at Rs 227.45 on Monday.
Marico shareholders will be issued one share of Marico Kaya Enterprises (MaKE, to be formed) with a face value of Rs 10 each at a premium of Rs 200 per share, for every 50 shares of Marico with a face value of Re 1 each.
Kaya, a Marico subsidiary, has yet to get profitable having completed nearly a decade with sales turnover of Rs 240 crore. It expects to double its turnover in the next five years with a CAGR of 20 per cent. In 2010, it acquired the Derma Rx range of products in Singapore.
Milind Sarwate, Group CFO, Marico, said: “It has been a decade and Kaya did look at expanding operations, but it did not meet our expectations.
“We would be partitioning the balance sheet of the two companies within the group and there will be no cross holding between them. Like in any scheme of de-merger, there will be no transfer of assets or liabilities and the shareholders of both the companies will remain the same. Kaya, today, has estimated losses of Rs 59 crore and is almost on the verge of becoming profitable.’’
A release from the company notes, “The company strongly believes that for the next phase of its value creation journey, the Kaya business should be run in an entrepreneurial manner independently from the FMCG business of Marico.”
According to Kaustubh Pawaskar, Research Analyst at Sharekhan, “As Kaya was a loss-making business, the de-merger will lead to better profitability for the FMCG company of Marico. But the group will also look at redefining the Kaya business going forward.”
organisational changes
Marico Kaya Enterprises will be listed on the BSE and NSE and will have its own board of directors which will be separate from Marico’s existing board. Harsh Mariwala will continue to be the Chairman and Managing Director of both Marico Ltd and Marico Kaya Enterprises Ltd.
As part of more organisational changes, Vijay Subramaniam, currently the head of the international FMCG business, will takeover as Chief Executive Officer of Kaya from April 1.
He will replace Ajay Pahwa, Chief Executive Officer, Kaya, who will be leaving to pursue an entrepreneurial venture backed by private equity investment.
Vijay Subramaniam will be in charge of the Kaya Business in India and overseas and will continue to report to Harsh Mariwala.
The finance function will continue to be centrally organised and will be a shared service group for both Marico and Kaya, with Milind Sarwate as Group CFO.
Saugata Gupta, who currently heads CPB (Consumer Products Business), will lead the overall FMCG business as Chief Executive Officer in both the domestic and international business.
purvita@thehindu.co.in