Marico Industries (FY99 Sales Rs 5,510 m) is buying the 'Parachute' (market share of 51%) and 'Saffola' brands from Bombay Oil Industries (BOIL) for a consideration of Rs 300 m. These brands had contributed Rs 3.35 bn to the company's turnover in FY99.
Marico Industries, promoted by the Marivala family, is the market leader in the coconut oil and branded refined oil segment. The company was incorporated to take over the consumer products division of BOIL.
The company has been on a buying spree of late. It had purchased the 'Mediker' brand from P&G and also entered into a distribution agreement for some other brands with it. The purchase of 'Parachute' and 'Saffola' is a significant move as these brands contribute over 60% of the company's turnover.
The purchase of these brands will benefit the company in more ways than one. Firstly, the royalty payments will come to a halt thus adding to the bottom line. Secondly, this purchase will remove the uncertainty pertaining to the renewal of the brand licence and the cost attached to such a renewal. Finally, the broadening of the product portfolio will give the company more bargaining power with distributors and retailers.
Being a company operating in the fast moving consumer goods sector, with well known brands and a large distribution network, most analysts have rated it as a 'BUY'.
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