Jyothy Labs-Henkel merger to be completed by March-end

The merger of Jyothy Laboratories with Henkel India, announced in the first quarter of FY13, will be completed by March-end, said Jyothy's joint MD Ulhas Kamath. The mandatory court approval to the merger would be received by February 22, paving the way for the merger, he added.

Following the merger, the game plan would be to grow top line at 20-25 per cent a year, according to Kamath. The merged entity's combined turnover at the moment is in the region of about Rs 1,300 crore.

The plan is to ramp up sales to about Rs 3,000 crore in the next five years. The combined entity is also expected to double ad spends to nearly 10-12 per cent of sales from six per cent now, said Kamath. Jyothy closed the December 2012 quarter with a profit of Rs 26 crore, down three per cent over the year-ago period as the company's tax and allied finance expenditure shot up significantly. Net sales were up 23 per cent to nearly Rs 204 crore, compared with last year’s Rs 166 crore.

Earnings before interest, depreciation, tax and amortisation, however, was up 29 per cent to Rs 36.5 crore, as the company attempted to control its operating expenditure during the December quarter. Jyothy spent much of the third quarter consolidating the operations of Henkel with itself in the run-up to the merger.

Kamath said the integration has been across functions such as manufacturing, distribution and sales. The endeavour now would be to grow the presence of both Henkel and Jyothy's product portfolios.

Of the Rs 1,300-crore turnover, Rs 500 crore comes from fabric care (Jyothy's Ujala plus Henkel's Henko, Mr White and Chek) followed by Rs 300 crore from household insecticides (Maxo from Jyothy), Rs 250 from surface cleaners (Jyothy's Exo and Henkel's Pril), Rs 150 crore from personal care (Margo and Fa from Henkel) and Rs 20 crore from oral care (Neem Toothpaste from Henkel).

While fabricare and homecare (which includes household insecticides and surface cleaners) would be key drivers of the business, Kamath said he saw personal care also becoming a significant vertical going forward.

Henkel's Margo, for instance, is a big brand in the south, clocking sales in excess of Rs 100 crore. Kamath said the plan was to position Margo, Fa, Pril and Henko in addition to Ujala, Maxo and Exo as national brands. Chek, Mr White and Neem toothpaste, in contrast, would be positioned as regional brands.