Emami to clear Kesh King debt of Rs 850 crore by 2018

Firm had borrowed to partly fund acquisition of the brand from SBS Biotech in June 2015 for Rs 1,684 crore

Kolkata based FMCG (fast moving consumer goods) major Emami Ltd is expecting to clear its outstanding debt of Rs 850 crore latest by 2017-18 and will bring it down to Rs 600 crore by the end of March this year.

The company had taken this debt to partly fund its acquisition of the Kesh King brand of haircare products from SBS Biotech in June 2015 for a total amount of Rs 1,684 crore.

Further, the amortisation cost for the brand acquisition will also be over in the coming 7-8 years' timeframe. This overhead, which has pulled down the company's bottomline of Rs 134 crore during the quarter ended December 31, 2015 will be paid in installments of Rs 68 crore each financial quarter over the aforesaid time-period.

 

After the Kesh King buy-out, it was alleged that SBS Biotech had misinformed Emami about the outstanding stocks in the market which had initially impacted the offtake.

However, Naresh Bhansali, CEO of finance, strategy and business development at Emami said the situation is under control and the unsold stocks in the market then was because of the wholesale-based distribution structure of the brand's original owner firm.

"As per their ( SBS Biotech's) books, the stocks reported were correct", he said adding that a "proper distribution structure" for Kesh King is in place now which will give his company the data as well as substantial control over the stock and inventory.

Acquisition of the Kesh King brand was lucrative for the company as the product portfolio had a minimum 40 per cent EBITDA (earnings before interest, tax, depreciation and amortization) when compared to the 20-25 per cent EBITDA -- normal for FMCG products.

"We are expecting a good growth for the Kesh King brand in 2016-17 as the product integration will be completed by the end of 2015-16 and the product strategy is being finalised", he said.

The company will be initially focusing on strengthening the hair-oil sold under the brand-name while other products - shampoo, conditioner and medicinal pills - will also attract marketing attention gradually.

"Once we are clear on the foundation working, we'll explore the southern market", he said.

Kesh King, a medicinal hair-oil, is sold primarily in northern India while the south Indian medicinal hair-oil market is dominated by Indulekha commanding a 36-37 per cent market share.