The Vanishing Cream

This move has been prompted by increased competition and the need to inject fresh funds. With substantial investment needed in brand building, product launch and development both joint venture partners (HLL and Lakme) would be required to infuse funds more than what was originally envisaged. This was thought to be detrimental to the Lakme shareholder as infusion of fresh funds in the joint venture could have diluted the earnings of the company. Thus the company thought it better to sell out to the stronger partner.

However, with this Lakme has affected a complete sell-out of its business and assets and is being reduced to nothing but a shell company. The shareholders have not taken kindly to this move. The Lakme share which was traded at Rs 279 prior to this announcement has since slumped to Rs 189. And not surprisingly, according to a report by ABN Amro Asia Equities (India) "The NAV of Lakme post sellout would be around Rs 150 per share. Even if the Lakme shareholders get the entire consideration from HLL, they stand to lose because the current value of each Lakme share is much higher." And to think that this share was traded at Rs 428 in August 1997!