Minimalist acquisition an example of making portfolio future fit: HUL CEO

The Rs 2,715-crore acquisition of premium beauty brand Minimalist from a company founded four years ago is "a great example of making" Hindustan Unilever Ltd's portfolio future fit and it shows the startup ecosystem in India definitely has a strong future ahead, according to its CEO and Managing Director Rohit Jawa. 

 

Hindustan Unilever Ltd on Wednesday announced that it has signed and executed share purchase and subscription agreement for acquisition of 90.5 per cent of shareholding of Uprising Science Pvt Ltd -- the firm behind Minimalist -- comprising secondary buyout for a cash consideration of Rs 2,670 crore at a pre-money enterprise valuation of Rs 2,955 crore.

The company will also make a primary infusion of Rs 45 crore with an eventual acquisition of the remaining 9.5 per cent of Uprising's shareholding, HUL said in a regulatory filing.

Addressing an earnings call, Jawa said despite the slowdown in FMCG market, which is transitory in nature, the company is preparing for future opportunities through competitive growth with operational excellence and move where growth is along with "investing behind a strategy of a consistent discipline and doing what's right to make us future fit".

"And Minimalist is a great example of making our portfolio future fit," Jawa asserted.

Like in any acquisition done by the company in the past, he said Minimalist fits in "segments of demand space in the market that we don't have a straight answer for either (from) Unilever stable, or maybe don't have a clear answer in so far as build is concerned".

He further said, "Maybe we feel on balance, (it) is a great asset which we can actually add immense amount of revenue and cost synergies in then action makes sense, and we are not doing it for the first time."  Stating that Minimalist has a "very sharp equity built with lots of love and care" and is a very well curated brand by its founders, he said, "It fills in a very specific opportunity in space in our portfolio."  It fits into a variety of categories, including e-commerce, he said, adding, "we see a lot of opportunity for revenue and cost synergies".

When asked what HUL's acquisition of the firm founded in 2020 at such valuation means for India's startup ecosystem, Jawa said, "We do think that there is space for all forms of business creation and many of the startup entrepreneurs will succeed in other areas, not just in consumer goods alone.

"There is absolutely, we feel, an exciting space ahead, and it will continue being in an economy this vibrant with such a great future, the startup ecosystem definitely has a strong future ahead."  The startup ecosystem in India is vibrant, he said, adding there are a lot of young enterprises and the company also supports the entrepreneurs.

On how the valuation for the acquisition was arrived at, HUL Executive Director, Finance & IT and CFO, Ritesh Tiwari said, "In four years time, the brand has become from the start of the business to a Rs 500 crore annual business. The brand has been profitable from day one, and we have acquired that at 5.9 sales multiple. We believe, when we compare it with (other) transactions in the market, it is pretty competitive.