Colgate Palmolive Lines Up Rs 80cr Expansion Plan

Colgate Palmolive (India), the Rs 776.5 crore cosmetics and toiletries company, will spend around Rs 80 crore in building two new plants in Aurangabad and a corporate office and research and development (R&D) centre in Mumbai.

At a recent meeting, the board of directors cleared the setting up of an EOU for toothbrushes and a dicalcium phosphate (DCP), plant at Aurangabad at a combined cost of around Rs 20 crore.

The investment is part of the companys expansion plan which includes the setting up of a 100 per cent subsidiary in Nepal. At an EGM in April, shareholders had approved the proposal.

 

Colgate Palmolives new R&D centre in Mumbai will be located on the same premises as the new corporate office.

The company does not have a separate R&D centre now. A Colgate spokesperson confirmed that the board had decided to set up the two plants, but declined to comment further.

The capital expenditure for the R&D centre and the corporate office will be around Rs 60 crore. Analysts expect the funds for the projects to come from internal accruals and liquidation of investments.

The export oriented unit will make premium quality toothbrushes for Latin American countries. Colgate Palmolive has two plants in Maharashtra, one at Sewri, Mumbai and another at Aurangabad. While production of toothbrushes and shaving sticks was 1.13 crore dozens last year, the plants have installed capacities of 23,265 metric tonnes (MT) for cosmetics and toiletries. Around 45 per cent of product requirements are outsourced.

The output from the dicalcium phosphate plant will be captively consumed for making toothpaste. Proposed capacities for the plants were not available as company was yet to finalise the figures.

Nishid Shah, research head at Inquire Equity Research said, Global sourcing from the Indian subsidiary and backward integration into toothpaste reflects the parent companys commitment to Indian operations. Besides, the company can make tax savings on account of these plans.

Global sourcing from the Indian subsidiary and backward integration into toothpaste reflects the parent companys commitment to Indian operations

Nishid Shah Inquire Equity Research