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German consumer goods major Henkel not to buy stake in Jyothy Labs

08 November, 2017

Jyothy Laboratories Ltd said German fast-moving consumer goods major Henkel AG has not exercised its option to buy as much as 26% stake in the Indian FMCG firm.

Henkel has not exercised the option available to it pursuant to an agreement signed with Jyothy Labs in May 2011 when the Indian firm had bought a majority stake in Henkel’s local listed arm. Jyothy Labs later merged Henkel India with itself, consolidating the business.

The German firm had to acquire the stake in the year ended March and the deadline was later extended till 31 October. The option has now lapsed, Jyothy Labs said in a stock market disclosure.

Jyothy Labs, which is known for fabric care brand Ujala besides brands such as Henko and Maxo, did not cite any reason as to why Henkel did not exercise the option.

In May 2011, the two companies had agreed to keep an option for Henkel to buy up to 26% stake in Jyothy Labs after a period of five years. After the window for the German firm to exercise the option opened early last year, the deadline was set for 31 March 2017. But Henkel missed the deadline and had requested for an extension, according to the disclosure.

Despite the lapse, Jyothy Labs’ existing licensing agreement with Henkel for its detergent brand Pril and soap brand Fa will continue, the company said in an investor presentation. “We are mutually exploring other possibilities to work together,” it said.

The development effectively stalls Henkel’s re-entry into the Indian market for now even as media reports suggested that the German firm was keen on a comeback.

Last September, The Economic Times had reported citing unnamed sources that Henkel was in talks to exercise the option and the deal may be completed at Rs 500-600 a share.

During interactions with media, Ullas Kamath, joint managing director and CFO of Jyothy Labs, had also hinted that Henkel could be preparing for a bid. He had told CNBC TV18 that the exercise of the option could involve a combination of fresh issue of shares and some stake sale by promoters.

Jyothy Labs, which was founded in 1983, counts private investment firm PremjiInvest and private equity firm MCap Fund Advisors Pvt. Ltd as investors. Its promoters held a 66.87% stake as on 30 September 2017.

Meanwhile, the company said its revenue from operations fell 0.5% to Rs 429.9 crore in the quarter ended 30 September on an annualised basis. Net profit, however, jumped 47% to Rs 45.7 crore during the quarter.

Shares of Jyothy Labs were trading up 4.1% at Rs 349.7 apiece in a flat Mumbai market on Wednesday.

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German consumer goods major Henkel not to buy stake in Jyothy Labs

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