Patience amongst Marico shareholders for the Kaya business to break even was running out and the vertical slicing of Marico should provide some respite
After more than a deacde of losses, Marico has decided to cut loose Kaya, the “skin care solutions company”. Marico Kaya Enterprises (MaKE, to be formed). will run the Kaya beauty and wellness chain and will be a separately listed. The appointed date of the demerger is 1 April 2013. It may take about six months to obtain the necessary approvals and complete all formalities, the company said in a statement. Following the demerger, the shareholders of Marico will get one share of Marico Kaya Enterprises with a face value of Rs10 each to be issued at a premium of Rs200 per share for every 50 shares of Marico with a face value of Re1 each.
“This corporate restructuring will lead to enhanced shareholder value through sharper focus and greater energy across both organizations and businesses,” Marico said in the release. Unfortunately, the current proposal does not give an option to minority shareholders in Marico not to participate in the MaKE business, according to the analysts in Espirito Santo Securities. Kaya has tried several measures to break even and the analysts were not enthused by the Kaya business. It is believed that a further cash infusion (or strategic investor) might be required in the MaKE business before it can turn into a sustainable business model.
The shareholding structure of the to-be listed MaKE business will mirror the shareholding structure of Marico on the date of the demerger, with no holding from the current listed FMCG (fast moving consumer goods) business.
The Marico share, after the demerger, is not considered to be an attractive buy by Espirito Santo, and it maintains a ‘sell’ rating.
The accumulated losses of Kaya since inception in FY 2003 are estimated to be Rs145 crore in comparison to the existing direct capital employed by the Marico group in the Kaya business of Rs179 crore.
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