Bulls Eye_Mavericks_SCMHRD.pptx

7/31/2019 Bulls Eye_Mavericks_SCMHRD.pptx

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BULLS EYE CASE STUDY

SAKAAR CAVINKARE

S.No Participant Name College

1 Amritansh Rastogi SCMHRD

2 Ashish Ranjan SCMHRD

3 Sitanshu Mishra SCMHRD


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AGENDA

Potential Issues

Deal Structure

Synergy

Valuation

Overview : Sakaar & CavinKare

FMCG Sector Analysis

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FMCG Sector Analysis

2544

74Current Market size = USD 29Bn1

YoY Growth(2010-11): Sales 15.3%,Operating Profit 12.4%, PAT 19.5%2

Rural Sector (2011) USD 9 Bn,Expected to become USD 100Bn by2025

Penetration Rural/Semi Urbanincreased from 9.5% in 2000 to 51% in2011

By 2025, India is poised to become theworld's fifth-largest consuming countryfrom the twelfth position in 2010

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Next Growth Wave Comes

From

Government rural spends: Upfrom USD 5bn in 2006 to USD10bn in 2010

NREGA provided employmentto ~50mn homes

Growth in Minimum Support

Price (MSP)

RuralMarket

Multiple Working Members

Reduced Taxation

12%+ salary increase over past5-6 years

IncreasedDisposable Income

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Continued

Adds to shelf space visibility

Enhanced supply chain and penetration

OrganizedRetail

Tax holiday in Uttaranchal, HP, Assam and J&K

Implementation of VAT and now movement toGST

Change in FDI policies; 100% in Single brand and51% in Multi Brand retail

GovernmentIncentive

Changing Lifestyle

Rapid Urbanization

Increase in brand-consciousness

Lifestyle andPremiumProducts

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PEST Analysis

POLITICAL

GST Regime

Transportation & infrastructure developmentin rural areas to help in distribution network

Restriction in import policies

Help for agricultural sector

ECONOMIC

High GDP growth (7-8%)

Increased disposable income

High Private Consumption

Growth of Modern Retail

Low Labour costs

SOCIALRural Employment

Volume driven growth in rural market

Major young population can increase revenue

Indian culture, social and lifestyles arechanging drastically

TECHNOLOGY

Strong IT Infrastructure to enhanceproductivity and drive down cost

FMCG major investing in IT

PESTAnalysis

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SAKAAR In a Nutshell

Sales increased by16% in 2011

Gross Profit declined from 36%to 34%

Operating Profit declined by1.2% to 13.8%

Growth

Presence in 3 categories Personal Care, Food Productsand Beauty Products

Portfolio of over 20 brands Presence in more than 30

countries

Product

Portfolio

Revenue = 3520 cr | Net Profit = 398 cr | Cash Flow =

PersonalCare (Skin),

45%

Personal

Care (Hair),15%

FoodProducts,

30%

BeautyProducts,

10%

Product Wise Revenue Breakup

India, 70%

Rest ofAsia,15%

Africa, 10%

Europe, 3% RoW, 2%

Geographical Split forRevenue

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CAVINKARE A Compelling

Target

Sales 773 Cr - YoY Growth 28% -NPM 4.6%

D/E 0.52, ROE 23.77%, ROCE18.86%

Growth

Personal Care, Foods, DairyProducts, Beverages

Known for Chik Shampoo -Introduction of Sachets

ProductPortfolio

Operations in - SriLanka,Bangladesh, Nepal, GCC,Malaysia, Singapore

Expansion plans for Africa andOther Gulf nations

Operations

Revenue = 773 Cr| Net Profit Margin = 4.6%| YoY Growth 28%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

0

100

200

300

400

500

600

700

800

900

Mar 06 Mar 07 Mar 08 Mar 09 Mar 10

Sales & Net Profit Margin

Sales NPM

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VALUATION

Weight CavinKare Sakaar

EV/Sales 3 2202 8363

DCF 1 1469 11120

Equity value 2019 9052

Swap Ratio 4.5

9

All figures are in Rs. Cr.


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SYNERGY

Presence in hair care, food and personal care segment Opportunity toderive operational synergy

Global presence Opportunity to cross sell in new markets

Strong rural presence in India

Increased Economies of Scale

Stable cash flow and strong growth prospects

R&D push for CavinKare with better funding capability of Sakaar

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Deal Structure

External Commercial Borrowing (ECB) and Debtfrom Domestic Banks not permitted for

acquisition. (RBI Guidelines)

Deal Structure

* Cash will be raised through sale of investments. Sakaar Promoter Holding

Mode of Finance Percentage Value (Rs. Cr)

Equity 79% 1500

Cash* 21% 400

Before Acquisition After Acquisition

72% 64%

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Potential Issues

Acquisition Issues

CavinKare - highpromoter stake

Possibility of PoisonPills and WhiteKnight Takeover

May lead to hostile

takeover attemptand over bidding

Integration issues

Shadow of leader

ImproperManagement Duediligence

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Q&A

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Documents

Bulls Eye_Mavericks_SCMHRD.pptx