The $3.5-billion diversified soap-to-software major Wipro Ltd is evaluating the options of divesting two of its small-sized businesses, babycare and vanaspathi, which are housed under the Wipro Consumer Care division.
Wipro, which sells babycare products such as soaps and diapers under the Baby Soft brand, has initiated the exercise of finding potential buyers for the businesses. Observers say, the move could be a part of a strategic intent to stay focused on mainstream opportunities in the personal care segment.
Market watchers say, Wipro has been steadily training its sights on emerging as a formidable player in the personal care segment. Its acquisitions of Unza and a part of Yardley’s businesses are in line with that strategic intent, they add.
While babycare is small in size, vanaspathi is a commoditised business with little scale up opportunities. A person familiar with the development said, Wipro will sell only at the right price. For instance, Wipro, through an informal process, has been looking to sell the vanaspathi business but it may not be averse to rolling back its plan in the absence of attractive deals.
Responding to a VCCircle query on the plan to divest these two businesses, a Wipro company spokesperson said, “we do not react to market speculation/rumour.”
The consumer care business of Wipro contributes to about 8% to the overall revenue. The revenue breakup of babycare and vanaspathi businesseses is not available at a disaggregate level. FMCG watchers say, typically, valuations of well-established FMCG businesses would be at a multiple of 18-20 times the earnings.
The IT service major has been equally aggressive on growing the consumer care business through the inorganic route.
In 2009, Wipro Consumer Care and Lighting acquired the Yardley businesses for Asia, Australasia and the North and West African markets for close to Rs 214 crore from the UK-based Lornamead Group. With this acquisition, it is expected that the Wipro Consumer Care would see its revenues from West Asian countries double at around Rs 141 crore from the current Rs 70 crore.
The company also made another big-ticket acquisition in Singapore-based Unza for Rs 1,010 crore in July 2007. In a recent report in Business Standard, Vineet Agrawal, president of Wipro Consumer Care and Lighting, has been quoted as saying that nearly half the Rs 2,500-crore top line comes from its two main soap brands, Santoor and Chandrika. Another Rs 800 crore comes from Unza, from Malaysia, Singapore, Vietnam, Indonesia, China and the West Asian markets. The rest is accounted for by a few of Wipro’s wellness and baby care products.
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