Emami bought ayurvedic hair and scalp care brand Kesh King for Rs 1,651 crore.

1. Date: June 3, 2015

2. Source: The Economic Times
3. M&A news in brief:
FMCG player Emami on June 2, 2015 announced acquisition of ayurvedic hair and scalp
care brand Kesh King for Rs 1,651 crore in its foray into the fast-growing haircare
segment.
Emami will acquire the entire Kesh King portfolio, including shampoos, conditioners,
capsules and hair oil. It is one of the largest deals in the segment in the recent times, after
the seller agreed to lower the original asking price. SBS Biotech's promoter Sanjeev
Juneja expected about Rs 2,200 crore for Kesh King. However his expectations had come
down considerably, almost by Rs 600 crore, investment bankers said. "The original price
demanded by the promoter was steep but owners of FMCG brands have typically got
away doing this because of the excitement around India's consumption story. In a sense,
here is a good case of a resetting of priorities," a Mumbai-based investment banker said.
Emami said in a statement that the acquisition would mark its foray into the ayurvedic
hair and scalp care segment, which is growing at a rapid pace and it (the acquisition) also
envisages transfer of the business as a growing concern on a slump sale basis and will
include brand portfolio of ayurvedic medicinal oil, herbal shampoo and conditioner and
ayurvedic capsules, along with its respective formulations and all related assets, rights
and liabilities, including working capital for a total consideration of Rs 1,651 crore.
At 5.5 times Kesh King's 2014-15 sales of Rs 300 crore, the acquisition will be the
second transaction in a week when fast-moving consumer goods (FMCG) brands have
been offloaded at a price less than expected. Kesh King will be Emami's fourth
acquisition in the past year. The others are organic personal care company Fravin, edible
oil brand Rasoi and sanitary napkin She.
4. Acquirer: Emami Emami's portfolio includes Emami 7 Oils and the therapeutic
Navratna Cool Oil.

5. Target Company: SBS Biotech

Kesh King brand, introduced in 2009 by Sanjeev Juneja, offers products such as oil,
herbal shampoo and conditioner and ayurvedic capsules.
The brand has presence in 5.4 lakh outlets across India.
Kesh King bought for about 5.5 times its 2014-15 sales of Rs 300 crore
Product Portfolio:

Hair oil, shampoos, conditioners and capsules

Hair oil contribute 80% of sales; shampoos/ conditioners at 15%; and balance by

capsules
Ebitda (or operating profit): Rs 140 crore
Operating margins: close to 50 %
3-year CAGR: 61%
Ranked among the top players in ayurvedic hair oils in India, with an estimated
market share of 40%
6. Type of Transaction:
The transaction envisages transfer of the business as a going concern on a slump sale
basis. It will include the Kesh King portfolio of hair oil, shampoo, and ayurvedic capsules
along with its respective formulations and all related assets, rights and liabilities,
including working capital. Emami director Harsha V Agarwal said: "This acquisition is
part of our aggressive growth strategy ... We plan to leverage the target business with our
existing strength to make our presence stronger and deeper. The transaction is a perfect
strategic fit for Emami."
7. Classification:
8. Method followed:
On the funding part, Emami CEO - finance, strategy & business development N H
Bhansali said: "The acquisition will be funded by a judicious mix of surplus funds, shortterm and long-term debt and the process is expected to be completed in a month."
9. Consideration:
The transaction envisages transfer of the business as going concern on a slump sale basis
and will include brand portfolio of ayurvedic medicinal oil, herbal shampoo &
conditioner and ayurvedic capsules along with its respective formulation and all related
assets, rights and liabilities including working capital for a total consideration of Rs 1,651
crore. The valuation is pegged at 5.5 times Kesh Kings sales, which are equivalent to
about 15% of Emamis Rs. 2030 crore turnover in the previous financial year. SBS
Biotech's promoter Sanjeev Juneja expected about Rs 2,200 crore for Kesh King.
However his expectations had come down considerably, almost by Rs 600 crore,
investment bankers said. "The original price demanded by the promoter was steep but
owners of FMCG brands have typically got away doing this because of the excitement
around India's consumption story." a Mumbai-based investment banker said.
10. Comments:
Emami Kesh King deal is one of the largest deal in Indian FMCG space
Current size of the hair oil market is Rs.7178 crore, grew by 7% during 2014-15.

Industry executives quoting Neilson said that while with the current market size of hair
oil market, Emami has not been able to capitalize on growth as much as Marico and

Dabur, which dominate the hair oil market.

N.H.Bhansali, Emami CEO, finance, strategy and business development, said that it is a
big ticket deal but the pricing has been reasonable. The margin of the acquired portfolio

is higher than that of Emamis existing portfolio.

"Kesh King has a 40 per cent share of the Rs 300-crore ayurvedic hair oil market and
its operating margin is attractive at 50 per cent. Acquiring Kesh King makes sense for

Emami," an FMCG analyst said.

"This acquisition marks our foray into the ayurvedic hair and scalp care segment. We
plan to leverage the business to make our presence stronger," Emami's Director Harsh

Agarwal said.
11. Impact Analysis
Emami shares declined after the deal was announced and closed at 5.8% lower at
Rs.1066.15 on the BSE while the Benchmark Sensex fell 2.37%.

2009
March: NTT DoCoMo buys 26.5% stake in Tata Tele for $2.22 bn
2014
April: DoCoMo announces plan to exit loss-making Tata Tele
July: DoCoMo asks Tata to find a buyer for its stake, valued at Rs 7,200 cr
Dec: Tatas fail to find a buyer for DoCoMos stake within 90 days
2015
Jan: DoCoMo moves London court of arbitration, threatens to foreclose Tata Sons
assets
Jan: RBI allows Tata group to buy back DoCoMos 26.5% stake in Tata Teleservices at
Rs 58 a