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
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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
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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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