New Delhi, Apr 27 (PTI) Acquisition of Kamasutra and Park Avenue brands will increase Godrej Consumer Product Ltd (GCPL) addressable market in the fast-growing area and expand its reach in the chemist channels, said its Managing Director and CEO Sudhir Sitapati on Thursday.

GCPL, which on Thursday announced the Rs 2,825-crore acquisition of Sighania's promoted FMCG business Raymond Consumer Care Ltd (RRCL) through a slump sale, said after the deal it would become the number two player into the deodorant market and among the leading player into the sexual wellness categories.

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The deal would effectively cost around Rs 2,325 crore to the Godrej Group FMCG arm, which is Rs 500 crore less than the actual amount.

"There is a Rs 100 crore cash with them, which is ours and because it is a slump in sales, we get roughly a Rs 400 crore on our existing business. This effectively cost us Rs 2,325 crore," said Sitapati in a virtual interaction with media after the acquisition announcement.

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He further added: "This is 3.75 times of FY23 revenue, which I do not think that it is excessive in the context of both the growth and cost synergies which we get in this business."

This is the 14th acquisition by the Godrej group firm for the expansion of the portfolio. Its last big acquisition was Strength of Nature LLC in 2016.

According to Sitapati, currently, GCPL has approximately Rs 2,000 crore cash on books, which may be utilised for the deal.

In FY23 RRCL, which primarily operated in deodorants and sexual wellness categories with two key brands -- Park Avenue and Kamasutra, had a turnover of Rs 622 crore.

"The deal opens us two large categories for us," said Sitapati, adding "India will see a boom in this category (deodorant) and so in premium condoms."

GCPL operates in soaps, HI (household insecticides), hair colour, hair care and has a little bit of presence in the laundry detergent. With this deal, it will enter into two new categories.

"This opportunity came some times ago, we evaluated it, found a good fit and went ahead," he said, adding, "both the brands have high equities. We bought them for brands."

When asked about the reason for the acquisition, Sitapati said GCPL is constantly building capabilities, especially in market and market development.

Within India, GCPL has a large salience of soaps, which is a slow-moving category.

"We would like to increase in TAM (total addressable market) in fast-growing categories in India and we felt deodorant and sexual wellness are categories" with a long runway of growth and will significantly increase the company's total addressable market, he said.

When asked about the market size, Sitapati said deodorant category is around Rs 5,000 to 6,000 crore and the commercial condom category (sold through private retailers) is around Rs 1,200 crore.

"Growth rate of these categories prior to Covid was in double-digit," he said, adding, both had suffered after Covid and have now recovered to double-digit.

GCPL has around 4 times the direct distribution of RCCL.

"There will be pretty significant synergies in distribution. Chemist distribution would be a reverse synergy for GCPL. Though GCPL and RCCL have similar numbers of chemists, there is a wide number of chemists that do not overlap between the two. Both companies would benefit for chemist distribution," he added.

According to Sitapati, both categories had enough space for growth as the penetration level is very low. In deodorants, Indian consumption per capita is 40 per cent of Indonesia and 5 per cent of Brazil.

While in condom, the company is looking for growth at the premium end.

"It's a large category as over 3 billion condoms are used in India and half of them are free and non-commercial. A lot of non-commercial is moving towards commercial and mass to premium condoms."

As per the deal, GCPL would have the right to brand Park Avenue for deodorants and other products, while Raymond would use it for its lifestyle business.

"It's a symbiotic relationship. It's a sharply positioned mid-premium brand for aspiring men and both of us would work together. It is in symbiotic interest to run the brand together," Sitapati said.

GCPL has not picked Raymond Fragrance, which is also part of RCCL, as it "did not find it appropriate to buy", he added.

(This is an unedited and auto-generated story from Syndicated News feed, LatestLY Staff may not have modified or edited the content body)