18 December 2015 06:43:20 IST

Indulekha buy can strengthen HUL’s Ayurveda play

In deferred payment structure, FMCG major will pay Mosons Group 10% of brand sales for 5 years

Consumer goods major Hindustan Unilever Ltd (HUL) has agreed to buy hair care brand Indulekha from Kerala-based Mosons Group for ₹330 crore.

The deal is structured such that HUL will have to pay the Mosons Group about 10 per cent of the sales from the brand for five years starting from FY-18.

Samir Bahl, CEO, Anand Rathi Advisors, that advised the Mosons Group on the sale said: “The deferred payment structure was to ensure that the valuation and risk is equalised.”

Launched in 2009, Indulekha is a popular brand in the South where ayurvedic products have a huge customer base. The brand, with ₹100 crore turnover and 30 per cent EBITDA margin, is also very popular in the Gulf. This deal also ensures HUL’s leadership position in the growing ayurvedic segment in these markets.

According to industry experts, the ayurvedic personal care segment is currently a ₹5,000-crore market and is growing at 10-15 per cent annually. Several local players such as Dabur, Emami, Himalaya, Ayushakti, Kama Ayurvedic and Baba Ramdev’s Patanjali have already entered this segment as consumers are opting out of chemical-based products in the personal care segment.

“HUL’s decision is not driven by competition but consumer’s choice. Patanjali is growing at 68 per cent CAGR and has already crossed the ₹2,000-crore mark. While the acquisition is mainly done for the hair-oil category, where HUL is still lagging behind, it will be interesting to see what the company plans for the other personal care products,” said Nitin Mathur, senior analyst at financial services and research firm Societe Generale.

“The acquisition could help HUL strengthen its ayurvedic play in skin and hair categories.”

HUL currently has no hair-oil brand in its portfolio after it sold its Nihar hair oil brand to Marico. HUL has also extended its soap brand Dove into the infusion oil segment.

Meanwhile, HUL in a statement said the deal envisages the acquisition of trademarks ‘Indulekha’ and ‘Vayodha’, intellectual property, design and knowhow.

Sanjiv Mehta, CEO & Managing Director, HUL, said: “The acquisition of Indulekha brings to HUL a premium brand with strong credentials around ayurveda that will complement our existing portfolio and strengthen our presence in the hair-care category. We are excited by the strong equity that the brand enjoys among consumers and see an opportunity in leveraging it’s ‘naturals’ and therapeutic positioning.”

Of late, HUL has increased focus in the ayurvedic space after it re-launched its ayurvedic brand Ayush early this year. However, the company is pushing the distribution of the brand through e-commerce, but for Indulekha it plans to go the omni-channel way.

Meanwhile, this is HUL’s first acquisition in the last one decade. The Indian arm of the Anglo-Dutch firm Unilever has grown in the Indian market through small inorganic growth starting with its first merger with Tata Oil Mills Company on 1993. After this, it acquired Tata’s Lakme that is now known as Lakme Unilever Ltd.

It also bought Brooke Bond Lipton India Ltd and Ponds (India) Ltd followed by Modern Foods in 2002.