Emami’s Dermicool acquisition may boost its revenue to Rs 4,000 cr by FY24

Kolkata-based fast moving consumer goods (FMCG) company Emami’s latest acquisition bid has the potential to make it a Rs 4,000 crore company within the next two years. The firm has announced its takeover bid for the prickly heat brand Dermicool from Reckitt Benckiser against Rs 432 crore. Market analysts are now predicting the deal would not only place it at the top of the market segment but would also lift its revenue and bottom-line.

As per estimates by brokerage house Prabhudas Lilladher, by the end of FY24, Emami’s net revenue may touch Rs 4,000 crore, while its net profit may double from FY21 (see chart). “Emami’s Dermicool acquisition funded by internal accruals will make it a market leader in cool talc category. Assuming mid-single digit growth and synergy benefits, we believe it will add Rs 0.16 and Rs 0.22 to earnings per share (net of interest income loss and ex-amortisation)”, it noted.

At Rs 432 crore, the deal has been stuck at 12 times the EBITDA (earnings before interest, tax, depreciation and amortisation) of Dermicool that had posted about Rs 36 crore in FY21. While the deal would be about 4 times of its net revenue of Rs 113 crore. The brand’s margins, however, are much higher than Emami’s overall margins - which would help the company. Dermicool has gross margin of 55 per cent and EBITDA of 36 per cent, in comparison to Emami’s EBITDA margin of 30.6 per cent in FY21.

Currently, Dermicool has about 20 per cent share in Rs 800 crore prickly heat powder and cool talc category and its addition in the portfolio will help Emami to emerge as a market leader with 45-47 per cent share in the segment. This would also mean that the long-standing market leader Nycil from Zydus Wellness would be pushed to the second position.

With the Dermicool deal, Reckitt would be selling at least three of the key brands that it had acquired from Paras Pharmaceuticals in 2013 for Rs 3,260 crore. Earlier, it sold personal care brands such as Setwet and Zatak to Marico.

Also Read: Ruchi Soya says message on 30% discount pricing not by firm, FIR lodged 

Also Read: At Rs 432 crore the deal is struck at 12 times the brand’s EBITDA & 4 times that of its revenue.