Kolkata-based consumer goods firm Emami appears to be eyeing the big league of the FMCG space with one or more deals in India or abroad cumulating to transaction worth up to Rs 5,000 crore ($ 1.1 billion).
The firm that has in the past not shied away from striking M&A deals (having plucked a prized asset in Zandu Pharma) has also been linked for a possible bid for Paras Pharma where the private equity shareholders are eyeing an enterprise valuation of around $1 billion.
Emami’s board has allowed the firm to raise up to Rs 2,000 crore through securities besides enhancing the maximum borrowing limit from Rs 1,500 crore at present to Rs 3,000 crore.
The company has a market cap of Rs 7,309 crore ($1.6 billion) with promoters owning as much as 72% stake. At the current market price, the company can raise up to Rs 1,600 crore with 30% equity dilution that will still allow the promoters enough room to maintain their majority stake in the firm, as per VCCircle estimates.
The company’s board also gave a green signal to chase investments cumulating to Rs 5,000 crore in one or more body corporates in India and/or overseas engaged in the business of personal and/or health care products.
The company had two months ago said it is gearing up for acquisitions worth Rs 2,500 crore in India and abroad. The company chairman R S Agarwal had said the firm is negotiating with few domestic companies for deals worth Rs 800-1,000 crore and had asked Ernst & Young to look for potential targets.
Given this scenario, it is possible that Emami is not particularly preparing a warchest to bid for Paras Pharma where Japanese drugmaker Taisho is reportedly leading the race to buy 70% stake held by PE investors Actis and Sequoia Capital.
The company had said besides a large domestic transaction it was also looking to buy an overseas firm where the transaction could amount to as much as Rs 1,500 crore. It was eyeing potential targets in CIS nations besides, West Asia and southeast Asian markets. Emami had bought Mumbai-based Zandu Pharmaceuticals for around Rs 750 crore in 2009 and had merged its FMCG business with itself.
Emami is no stranger to fund raising activity. It had last year raised around Rs 310 crore through a QIP to reduce debt and develop new products. Emami-backed AMRI Hospitals, a Kolkata-based healthcare venture in which Emami owns 66% stake, is also looking to raise up to Rs 100 crore from private equity investors to expand its footprint.