Godrej Consumer in talks to acquire Raymond's consumer care biz; stock down 3%

Godrej Consumer Products shares remained in focus today amid a report that it is in advanced talks to acquire Raymond’s consumer care business, including male grooming brand Park Avenue and Kamasutra condoms. The potential deal will help the Mumbai-based consumer goods company to expand its presence in men's personal care and sexual wellness categories.

Early today, Godrej Consumer shares opened flat at ₹976 against the previous closing price of ₹976.10 on the BSE. In the first hour of trade so far, the stock declined as much as 2.7% to ₹950.15, while the market capitalisation dropped to ₹97,570 crore. The stock touched its 52-week high of ₹994.45 on April 24, 2023, while it currently trades 34% higher than its 52-week low of ₹708.60 hit on June 17, 2022.

Meanwhile, shares of Raymond surged 8.9% to hit a 52-week high of ₹1,755.35 against the previous closing price of ₹1,611.75 on the BSE. The market capitalisation climbed to ₹11,519 crore with 0.55 lakh shares changing hands over the counter compared with two-week average volume of 0.52 lakh scrips.  The stock has zoomed 140% against its 52-week low of ₹738.95 touched on May 12, 2022.

The Singhania family-backed Raymond group has been reportedly looking to divest its consumer care business for over two years. Last year, content-creator-commerce conglomerate Good Glam Group was in talks to acquire Raymond's consumer care business but the deal could not materialise due to higher valuation.

Raymond Consumer Care is the FMCG entity of the 90+ year old diversified conglomerate with leadership status in the Indian deodorant and condom market and competitive presence in multiple other categories. The company, which sells Park Avenue, Raymond and Kamasutra in categories like fragrances, male grooming, home care, and sexual wellness, reported sales of ₹522 crore in FY22. Raymond group holds over 47% shares in the consumer care business.

Earlier this month, Godrej Consumer Products, which sells personal and home care products such as Cinthol, Ezee liquid detergent, and insecticide brands Hit and GoodKnight, announced an investment of ₹100 crore in Early Spring, a new ₹300 crore early-stage consumer fund being set up by Spring Marketing Capital (Spring). GCPL will anchor the fund in addition to offering its expertise and experience to help founders build strong, sustainable companies.

Spring is creating a skin-in-the-game, brand-first investment franchise that aims to back and support founders who are building the brands of tomorrow. Enabling companies leverage marketing expertise along with capital, Spring’s first fund of ₹150 crore continues to invest in companies at Series A and beyond. The Early Spring Fund will be investing ₹5crore to ₹20 crore in each company, from seed to pre-series A stage.

Godrej Consumer Products is set to release its fourth quarter earnings report on May 10, 2023. The company, a part of the 125-year-young Godrej Group, is expected to deliver double-digit volume and value growth in March quarter on the back of steady performance by both home care and personal care businesses, it said in its Q4 business update. “In India, consumer demand trends remained steady through the quarter, with the FMCG sector expected to witness gradual recovery in growth rates. The performance of our India business has exceeded expectations especially on the volume front,” it said.

As per the company, the quality of its profits is likely to improve, led by gross margin recovery and continued marketing investments translating to strong double-digit EBITDA growth.