Henkel Spic to place 5.7 m shares with Henkel - Views on News from Equitymaster

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Henkel Spic to place 5.7 m shares with Henkel

Feb 29, 2000

According to newspaper reports, Henkel Spic is to place 5.7 m shares with Henkel, a co promoter, in order to up the latter's stake to 51%. Henkel (Germany) currently owns a 48.5% stake in the company. Henkel Spic, a 54% subsidiary of German consumer products major Henkel KgaA is engaged in the manufacture of eco-friendly detergents (surface cleaners and laundry). The other co promoter of the company is the Spic group. Among the products introduced by the company are Brisk, Henko, Limeshot and Pril.

The decision to make a preferential allotment to Henkel will result in an inflow of Rs 450 m for the company. In the process the Spic group's holding in the company is expected to reduce to 17%.

Henkel Spic had recently completed a rights issue for the purpose of recapitalising itself in view of the accumulated looses incurred over the years. The company is widely expected to break even in the near future, pushed on by its acquisition of Calcutta Chemicals (owner of Margo, Neem toothpaste brands among others).

The inflows of the proceeds are well timed. The company is in the process of rolling out its products in northern markets (currently it is focussed in the South). This will require spending on supply chains and marketing. Furthermore, with the competition in the consumer products sector intensifying by the day, Henkel Spic would be in a position to step up its own marketing efforts. This would, needless to say, weigh down on the company's bottomline.

Most importantly, a 51% stake would make Henkel Spic a subsidiary of Henkel. This would benefit the company in terms of inflow of technology, management practices and new products (and brands). All these factors would increase Henkel Spic's competitiveness in the Indian markets.


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