Wipro on Saturday announced it had signed an agreement to acquire Singapore-based FMCG company LD Waxsons Group for $144 million, making it the second-biggest acquisition for its consumer care business. In an interview with Bibhu Ranjan Mishra, Wipro Consumer Care and Lighting (WCCL) President Vineet Agrawal talks about the significance of this acquisition and how it is expected to be a game-changer for the company. Edited excerpt:
You had some presence in the skincare segment with the acquisition of Unza in 2007. What is the significance of the acquisition of LD Waxsons?
What is the kind of brand positioning LD Waxsons Group enjoys in these markets?
LD Waxsons's two key brands - Bio-essence and Ginvera - account for 80 per cent of their total sales. Bio-essence's positioning is very strong among the Chinese ethnic population, as it uses ingredients based on the beliefs of Chinese people. They have one range of skincare product called Bird's Nest, very strong in China. Besides, beyond these four countries where they are present, we can also extend it to Indonesia and Vietnam where they are not present at the moment. It is because both these countries have a large Chinese ethnic population which we can leverage.
How would you compare this acquisition to Unza's?
Unza was slightly riskier, as it gave us entry to all these new markets. So, our confidence level in case of this acquisition is quite high as all our previous acquisitions abroad, including Unza and Yardley, have done quite well for us.
How long have you been evaluating for this acquisition?
All evaluations usually take long time for us. We have been evaluating this company for the past seven-eight months as we have do a lot of studies about their financials, markets and brand positioning.
Will the funding of this acquisition be through internal accruals?
It will be mainly funded through internal accruals. But there will be some short-term and long-term borrowings. But that will be based on Wipro Consumer Care & Lighting's balance sheet.
Will you consider introducing LD Waxsons's skincare ranges in India?
We may not introduce their brands but we may use some understanding of their packaging and formulations for introducing new products in India. But it is quite unlikely that we will bring those specific brands into India in the short-term because they are very Chinese in their style and origin.
This acquisition will make you more global than Indian! What is your observation?
Last year, we had reported about 45 per cent of sales from outside of India. Now with this acquisition, it should cross about 50 per cent. So definitely, outside of India will be larger than our India business.
How profitable is LD Waxsons?
It is reasonably good from profitability point of view. We think that it is a company which can give us an operating profit of 10-11 per cent.
What about integration. How long do you expect it to take?
We will go through a plan because they have close to 1,500 employees. We have already gone through one integration in South East Asia and have done it quite well. Unza had an employee base of over 4,000. But we don't want to rush for the integration, may be in the next six months or one year. We need to understand their culture and the strengths of the organization. So we will take some time to do the integration. If they have strengths in the organization, we would prefer to maintain those.