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Godrej restructuring continues - Views on News from Equitymaster
 
 
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  • Sep 24, 1999

    Godrej restructuring continues

    Godrej Soaps is divesting part of its 48% stake in its Joint Venture (JV) Godrej Sara Lee (GSL) to its holding company Godrej & Boyce Limited.

    Godrej Soaps (FY99 Turnover: Rs 9.2 bn) manufactures soaps and detergents, fatty acids, alpha olefin and its precursors and cosmetics. It also trades in medical diagnostic products. GSL (previously known as Godrej Hi-Care) is a leading household insecticide manufacturer with well known brands like Good Knight and Jet in its portfolio.

    The divestment is part of Godrej Group's restructuring efforts to improve performance and maximise returns. Godrej & Boyce will pay Godrej Soaps Rs 995 m for the 22.5% stake in the Sara Lee JV, which will be used to retire its high cost debt. This will reduce the interest burden of Godrej Soaps. Earlier, the company bought brands like Ezee, Trilo and Key from Cussons India Limited to consolidate its portfolio.

    Last week, another group company Godrej Foods, divested its entire stake in its Pillsbury joint venture in favour of Godrej & Boyce Limited. The Godrej management is taking these steps as per the recommendations of Andersen Consulting.

    The restructuring exercise is bound to lend the group greater focus and thereby improve the profitability of its companies. But one common factor in this whole restructuring exercise is that the Group is merely shifting ownership of its JV's to the holding company and not divesting stake to outside parties. This means the group is committed to the businesses its is in and is willing to shove in more investments if the need arises. That's good news for its joint venture partners.

     

     

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