Stationery major Camlin said today that it had entered into a definitive agreement with Kokuyo S&T Co of Japan under which the latter would acquire 50.3 per cent of the Indian company for an estimated value of Rs 360 crore. VCCircle was the first to report , on April 15, 2011, that promoters of the stationery products maker are close to selling their equity stake in the company to a strategic partner.
Kokuyo S&T is a fully owned subsidiary of Kokuyo Co, a leading firm in Japan with over 100 years of experience in stationery and furniture products, design and construction of office and store interiors, mail order business, lifestyle retail and distribution, and having an annual turnover of over $3.2 billion. “The transaction will bring together two highly recognised stationery companies with complementary product portfolios, and will facilitate sustained long-term growth for both companies,” a press release issued by Camlin said.
The transaction will be executed in three tranches, which includes the immediate acquisition of 10 per cent of the share capital of the company on a fully diluted basis, pursuant to the preferential allotment to be made by the company at a price of Rs 85 per share.
The monies will be utilised for expansion and modernisation of manufacturing facilities and new projects, the release said. In the second tranche, Kokuyo will purchase 20.3 per cent of the share capital of the company on a fully diluted basis from the promoters, as contemplated by the joint venture agreement, for a price of Rs 110 per share. Finally, post the acquisition of shares, the Japanese firm will make an open offer for up to 20 per cent in Camlin at 110 rupees a piece. Following the completion of the joint venture, Dilip Dandekar will continue as chairman and managing director, and Shriram Dandekar will serve as executive director.
Currently, the promoters of Camlin (the Dandekar brothers) have a 38.1 per cent stake in the 80-year-old company. Commenting on the joint venture, Dilip Dandekar, CMD of Camlin Ltd, said, “It has been our stated intent to scale revenues and increase our portfolio of products through line extensions. We believe that Kokuyo Co., Ltd. and Camlin Ltd have complementary product portfolios and this joint venture will facilitate faster rollout of portfolio of products by Camlin Ltd.”
Dandekar added that this alliance will also open opportunities for joint exploration of increasing exports for Camlin products to other countries, and sharing the know-how in marketing and technologies. This alliance will also strengthen the presence of existing Camlin products in India, with greater emphasis on scale, efficient manufacturing facilities and increased reach and marketing.
Kokuyo Co., Ltd. will bring in managerial, marketing, manufacturing and product research and development skills. Kokuyo Co., Ltd. will have the right to nominate four directors for appointment on the Board of Camlin Ltd. The joint venture will facilitate the entry of Kokuyo Co., Ltd. products, primarily paper and office stationery, into the Indian market.
According to analysts, this partnership allows for Camlin’s foray into the premium end of the market with a strategic partner who can help it tide over its sourcing needs and also address the demands of modern trade. Increased allocation of funds on educational sector has led to a higher consumption of stationery and allied products and also a shift from sub-standard products to superior quality branded products. This has attracted increased presence from both local and global players.
The company had not been on a strong earning path due to the low margin in the industry. But it still managed to hit a record net profit of Rs 11 crore during 2009-10. But for the quarter ended December, 2011, the firm had a net loss of Rs 63 lakh on revenues of Rs 69 crore (at a standalone level). A possible motive for a sell-out 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. Of late, Camlin has been planning to move from a mass range to a more premium product portfolio to improve its margins.
Currently, the company has a series of distribution tie-ups and this includes brands such as Zebra (for writing pens) and Kokuyo (for notebooks). But a distribution tie-up does not necessarily end with the brand getting the right push. Also, analysts feel that considering the de-growth in the Japanese market, the home-grown stationery maker can actually fetch a premium.
Sourcing for premium components in the high-end writing instruments segment is the biggest challenge for the stationery major. The move was expected by market observers in the wake of the stationery segment getting increasingly global and more competitive.
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 the 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. In the same year, Linc Pens & Plastics, a manufacturer and exporter of writing instruments, got into a joint venture with Japanese company Mitsubishi.
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. 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