Promoters of stationery products maker Camlin Ltd are close to selling their equity stake in the company, two sources with direct knowledge of the deal told VCCircle. The promoters Dandekar family own 38.1 per cent stake in Camlin. Any potential sellout would trigger an open offer for further 20 per cent stake.
It is learnt that the promoters are in talks with few strategic acquirers to sell their stake at Rs 101 a share that will value the company at around Rs 620 crore. This would be 34 per cent higher than the current value of the firm. Camlin Ltd shares were last traded at Rs 75.55 at the Bombay Stock Exchange on Friday. The promoters’ 38 per cent stake at Rs 101 per share would be worth around Rs 235 crore ($54 million).
An e-mail message sent to Camlin’s investor relations did not elicit a response till the publication of this article.
Anil Singhvi, the former CEO of cement maker Gujarat Ambuja, is believed to be involved in the transaction. When contacted by VCCircle to confirm the development, Singhvi declined to comment. “I am only a non-executive director in the company. You need to check with the company,” he said on the phone.
Singhvi is a non-executive director of Camlin since September 24, 2007. In 2007, Singhvi, while working for European asset management firm Notz Stucki, picked up 3 lakh shares and 3 lakh warrants for a 10 per cent stake in the company. Notz Stucki had exited the firm last year but Singhvi continues on the board of Camlin.
Even though the details of the potential suitors are sketchy, sources said that the company was in discussions with leading manufacturers of writing instruments such as Pilot Pen Corporation of the USA and the Zebra Pen of Japan.
Pilot Pen Corp, which is the third largest writing instrument company in the USA, may emerge as a serious contender, sources said. In addition to its presence in its home market, Pilot has subsidiaries in the UK, France, Germany, Hong Kong, Indonesia, Italy, Malaysia, Singapore, Taiwan, Brazil, Russia and Australia.
The other contender Zebra has over a century-long history in Japan and has $300 million annual sales. Camlin had recently joined hands with Zebra to distribute the latter’s products in India. The tie-up would initially focus on the Indian market but later, it would also look at exporting opportunities to SAARC and other countries, arising out of sourcing benefits, the company had said.
Camlin, almost synonymous with stationery products in India, was founded in 1931 by the Dandekar family. It started as a single-product company, but currently features more than 2,000 products today. The company’s flagship brands are Camel and Camlin, which are the leading stationery and art brands in the country. Dilip D. Dandekar is executive chairman of the board and managing director of Camlin Ltd.
The company had not been on a strong earnings path due to the low margin in the industry. But it still managed to hit record net profit of Rs 11 crore during 2009-10. For the quarter ended December, 2011, the firm had net loss of Rs 63 lakh on revenues of Rs 69 crore (at a standalone level). A possible motive for a sellout could be to allow a bigger firm to put in money to expand the product portfolio in turn, thus providing a boost to the business.
The street already had some inkling of the deal as it appears. The scrip has spurted over the few weeks, moving from Rs 46 at the end of March, 2011 to around Rs 76-Rs 77 currently.
For the strategic acquirers, the deal would mean getting a pie of the Indian writing instrument market whose size is pegged at close to $1 billion and estimated to be growing at an annual rate of 8-10 per cent.
In 2009, France’s Societe BIC (BIC Group) acquired 40 per cent stake in Cello Writing Instruments & Containers Pvt Ltd for $162.4 million. The transaction included a payment of approximately $44.2 million to the promoters and also a call option in 2013 to increase stake to 55 per cent at a price based on a formula tied to earnings. Cello Writing Instruments & Containers manufactures, supplies and exports ball pens, gel pens, refills and other writing instruments in India. It is a bigger firm than Camlin.