Singapore’s sovereign wealth fund Temasek is investing Rs 685 crore($135 million) to buy 4.9 per cent stake in consumer products firm Godrej Consumer Products Ltd, in the single largest alternative investment deal in the Indian FMCG industry.

Temasek is investing through a preferential allotment, making it the largest institutional shareholder in Godrej Consumer, the flagship of the $3.4- billion Godrej group.

The Singapore government’s investment firm is picking up the stake through Baytree Investments (Mauritius) Pte Ltd, an indirect wholly-owned subsidiary. The fresh issue will be made at Rs 410 a

share, a little over 2 per cent premium to the last traded share price of Godrej Consumer on Friday.

Godrej Consumer had in July 2010 raised Rs 530 crore through a qualified institutional placement, which was done at Rs 345 per share. The current transaction is at 19 per cent premium to that deal. Kotak Private Equity had picked up a stake in that QIP for Rs 54 crore.

The deal would help Godrej Consumer finance its aggressive inorganic strategy, wherein it has acquired seven companies across the world since 2010 and consolidated its holding in two joint ventures.

The Chilean Buy

Godrej Consumer has also announced acquisition of 60 per cent stake in Cosmetica Nacional, a hair colorant and cosmetics company in Chile. The company has over 30 per cent market share (by volume) in the $110 million hair colorant space in the Latin American country. Godrej Consumer will raise its holding to make it a wholly owned arm in 3-5 years. The acquisition is expected to be completed by April 2012 and funded through low cost overseas debt.

Cosmética Nacional was founded in 1979 by Fernando García, a chemist by training who continues to lead the company as its CEO. The company had sales of $36 million for the year 2011 (growth of 19 per cent over 2010) with EBITDA margins of about 20 per cent. The company has a

presence in seven Latin American countries through exports.

While the deal size was not disclosed, the transaction valued the firm at 9X EV/EBITDA multiple, said Godrej Consumer in an analyst presentation. According to a back of the envelope calculation, this would put the enterprise value at $64.8 million and the current deal at $38.88 million (assuming no debt).

Temasek's First Deal In India After Change Of Guard

The deal would be the first transaction after the leadership change at Temasek. Manish Kejriwal, who was heading India office since 2004, left the sovereign wealth fund in late 2011 to start his own PE firm. Rohit Sipahimalani, who joined as managing director (investment) in 2008 from Morgan Stanley, took over after Kejriwal departed.

This would also be Temasek’s first big fresh investment in India since 2010, when it invested $200 million in GMR Energy besides striking a deal to buy 5 per cent stake held by New York Stock Exchange in the National Stock Exchange. In 2011, it was busy picking up equity stakes in public listed companies like Max India and Jain Irrigation through open market transactions.

Temasek’s other portfolio companies in India include ICICI Bank, Tata Sky, Bharti Airtel and its tower arm Bharti Infratel.

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