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M-seal sticks to Pidilite

Apr 4, 2000

Pidilite has acquired the adhesives business (comprising M-seal and Mr. Fixit) from a subsidiary of the Mahindras. Both the brands together have a turnover of Rs 180-200 m. Pidilite owns brands such as Fevicol, Feviquick and the Acron range of art materials. Adhesives and sealants contributed almost 48% of the company's Rs 3495 m turnover last year and M-seal acquisition would give a further boost to this division's turnover.

Pidilite has been able to establish a niche for its Fevicol range of adhesives primarily due to innovative marketing. Last year the company spent almost 4% of its turnover in advertisement and publicity and a commensurate push to M-seal and Mr. Fixit could substantially enhance the turnover from these products.

Although the consideration for the takeover has not been disclosed, even a cost of around Rs 400 m (two times turnover) would not cause a problem for Pidilite since the company generated cash from operations to the tune of around Rs 750 m last year and had cash and marketable investments of almost Rs 100 m in its books. (In the past the company has used its impressive cash flows to repay its debt.)

Even over the past month the stock has been able to hold its own in the face of the software juggernaut. The M-seal acquisition could further shore up sentiment in the company's stock.

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