P&G, Marico race to buy Paras Pharma

           There’s a new twist to the ongoing race to acquire the Rs 500-crore Paras Pharmaceuticals in domestic markets. Even as Emami is leading the race for Paras, Procter & Gamble Hygiene and Health Care (PGHHCL) and Marico have joined the fray. At present, Paras Pharmaceuticals’ OTC (over-the-counter) brands include Moov, D’Cold Total, Krack and Dermi Cool among others. Incidentally, pharma majors such as Cipla and Piramal Healthcare are also interested in acquiring Paras Pharma’s OTC brands to extend their product portfolio.The race for Paras Pharma is hotting up with new companies jumping into the fray.

“With increasing competition, the valuations of the Paras Pharma has gone up to Rs 3,250 crore in the last few days. Despite the high valuation of Paras, many companies are keen to acquire the company’s OTC brands,” said an industry analyst based in Mumbai. Meanwhile, FMCG major Jyothi Laboratories is in advanced talks with Bengal-based Safechem Industries(makers of Safed) to acquire its detergent brands. In essence, the Rs 1.2- lakh crore Indian FMCG industry will witness a spate of acquisitions in the next few months.

According to industry analysts, PGHHCL has been looking at acquisition opportunities in consumer health care space for quite some time.” Paras Pharma’s OITC brands will have a strategic fit in P&G health care portfolio which includes Vicks,” said an analyst in Mumbai. 

When contacted by FE, Tapan Buch, chief financial officer, P&G India, said: “As per our company policy, we do not comment on strategy or future plans.” Meanwhile, Emami a key contender for Paras Pharma has just got its board’s approval to raise Rs 5,000 crore through debt and equity dilution-a clear signal that Emami is looking at a big ticket acquisition in the near future. In fact, the company has recently moved a special resolution in this regard. After its acquisition of Zandu Phrama two years ago, Emami is now keen to acquire controlling stake in Paras Pharma. Aditiya Agarwal, director of Emami, who is currently holidaying in Thailand, was reluctant to comment on his company acquisition plans.

Yet another FMCG major Marico is also in talks with Paras Pharma to acquire its OTC brands. Like P&G, Marico has been scouting for acuqitions in domestic market for quite some time. Chaitanya Deshmukh, head of Mergers &Acquisitions, Marico said, “As you might expect, Marico cannot either confirm or deny queries on this.” 

Marico to hike prices across categories by 6-7%

              
             Marico Ltd, the maker of Parachute coconut hair oil that initiated a price hike on flagship brands Parachute and Saffola in August to offset high input costs, is on course to take additional price increases this month.

On flagship Parachute alone, the companyplans to take a further 7-8% price hike.

Sector analysts suggest the hike across product categories the company is present in will be to the extent of 6-7%.

While prices of some of the products like the value-added hair oils portfolio have been hiked marginally during September-October, that of others are underway; Marico officials said on an analyst call on Tuesday.

The company is evaluating a second round of price hikes in the hair oils portfolio consisting of brands Parachute, Nihar, Oil of Malabar, Shanti Badam Amla, and on Saffola edible oil.

In August the hike on Parachute was 5% to offset a 10% increase in input costs. Similarly, Saffola prices were hiked by 3%.

While in August, the company limited the price hike to larger stock-keeping units (SKUs), it has this month increased prices of entry-level or the recruiter packs, in a move to place margin over volumes.

Marico expects the full impact of these price increases to flow in from the third quarter leading to an inflationary impact on the topline.

Typically, it takes 3-4 weeks for the finished goods to reach from the factories to retail stores.

Prices of copra oil, which make up for 40% of Marico’s input costs, rose 26% during the September-ended quarter on a year-on-year basis.

The company has recently started prototyping an ayurvedic hair oil under the Parachute Advansed brand in Tamil Nadu.

The ayurvedic hair oil category is vauled at Rs235 crore and growing at 19% annually. Marico has also rolled out 5 specialised skin care products from its acquisition of Derma Rx under the Kaya brand in India.

The company’s efforts to increase distribution in rural markets and to increase consumer base through increased focus on smaller SKUs has increased revenues contribution from rural markets to 27% now from 25% last year.

Marico achieved a turnover of Rs779 crore during in the second quarter, a growth of 12.6% year on year, with underlying volume growth of 15%.

Last fiscal had witnessed deflation in key input prices and the company had passed a part of this on to the consumers only during second half of last fiscal.

Value growth during the second half is therefore lower than the volume growth. Profit after tax for the second quarter was Rs72 crore, a growth of 15% year on year.