SH Kelkar & Company Ltd, which counts Blackstone Capital Partners as its chief private equity backers, has received board approval to acquire Italian fragrance firm Creative Flavours and Fragrances (CFF) S.p.A.
The Mumbai-headquartered fragrance and flavour maker will initially buy 51% stake for roughly 12 million euros (Rs 93.91 crore). The remaining stake will be acquired within three years and the deal consideration will depend on CFF’s business performance.
SH Kelkar informed the stock exchanges on Tuesday that it had entered into an agreement with CFF on January 15.
The deal to buy 100% stake - on its own or through its subsidiaries - in CFF will help SH Kelkar increase its presence in the fine fragrances and fabric care segments, apart from building global clientele.
SH Kelkar said it will finance the deal through internal accruals.
Headquartered in Milan, CFF is a leader in the production and distribution of fragrances in Italy. CFF’s products are sold in more than 32 countries with a presence in Europe, West Asia and Africa.
SH Kelkar's most recent acquisition took place last September, when it bought Mumbai-based VN Creative Chemicals Pvt. Ltd (VNCC) as part of efforts to cut costs in its overseas fragrance division.
A year before that, SH Kelkar had agreed to acquire the flavour division of the Gujarat-headquartered food essence and colour maker Gujarat Flavours Pvt. Ltd for Rs 14.5 crore ($2.1 million). The acquisition was based on a slump sale basis.
Strategic vision
SH Kelkar said the earnings-accretive acquisition is in line with the firm’s strategy to expand its international footprint, extend its presence and build talent in the focused categories of fine fragrance and fabric care.
“The acquisition further reinforces company’s vision to emerge as one of the top 15 global players within the next decade,” the company said in a statement. “The F&F [flavour and fragrance] sector continues to hold huge promise for us. We are already witnessing increasing demand from our customers and are on track to deliver better performance in H2FY18.”
CFF’s revenue from its core fragrance business stood at 13.4 million euros in the calendar year 2016 and 12.4 million euros in 2015, according to the exchange filing.
SH Kelkar’s share price on the Bombay Stock Exchange closed at Rs 284.15 apiece on Tuesday, down 1.81% from the previous close. It had touched an intraday high of Rs 296.65 immediately after the announcement before closing in the red.
Financials
Separately on Tuesday, the company reported Rs 283.12 crore in revenue for the quarter ended December 2017, up 22.1% from the same period last year. Its operating profit stood at Rs 57.59 crore, up 45.7% year-on-year.
SH Kelkar's net profit for the quarter was Rs 33.84 crore, up 33.3% year-on-year.
The company also announced its decision to restructure operations at PFW Aroma Ingredients BV (PFW), Netherlands and relocate part of its production base to India to optimise the cost structure of its fragrance business.
As a result, there will be partial reduction in PFW's workforce on account of termination. This termination cost amounts to Rs 10.07 crore and is disclosed as an exceptional item in the company’s results, it said.
SH Kelkar, in which PE firm Blackstone owns about 10% stake as of December last year, went public in November 2015.
Its IPO was subscribed 26 times , with shares listing at a 23% premium. and made a strong debut on the bourses.
Past acquisitions
In April 2016, SH Kelkar bought one of its distributors, Rasiklal Hemani Agencies Pvt. Ltd, for Rs 30 crore ($4.48 million).
In February that year, Keva Flavours - SH Kelkar's affiliate firm - acquired the flavours division of Mumbai-based High-Tech Technologies Pvt. Ltd for Rs 28.6 crore ($3.7 million).
In the same space, specialty chemicals maker Camlin Fine Sciences Ltd acquired 51% in China’s Ningbo Wanglong Flavors and Fragrances Company Ltd for $6.28 million in cash in July last year.
