M&A Transactions in

FMCG Industry
August - 2020

Valuation | Investment Banking | Restructuring | Transaction Services | Transaction Tax

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Content
 Executive
Summary 1 Page No. 04

Indian FMCG
Industry 2 Page No. 07

Key FMCG
Companies 3 Page No. 14

M&A and
PE Activity 4 Page No. 19

Acquisition
Strategies 5 Page No. 23

Public Market
Trend Analysis 6 Page No. 28

Conclusion
7 Page No. 36
ONE
Executive Summary

Distress
M&A
Transactions
Transactions
in the
in FMCG
Power Industry 04
05
Executive Summary
It was encouraging to see a surge in deals from 2015 to 2018. The beginning of 2019 proved to be a buyer as well as
seller’s market for FMCG industry. Over the last two years, an increase in number of deals in FMCG sector was
witnessed.

With companies seeking to re-invent their portfolio to reinforcing strengths or selling an underperforming asset- the
impetus behind mergers and acquisition in FMCG industry is varied.

The valuation is M&A is mainly driven by the reach and popularity in form of customer base of target. The companies
with higher customer base combined with higher margins tend to enjoy higher valuation as compared to other
companies.

For decades, FMCG has been among the most reliable value creators in the world, but the trend is slightly defeated as
M&A in FMCG didn’t see huge valuations as seen earlier.

M&A trend in later half of 2019 saw a sluggish growth mainly on account of reducing consumption and demand. The
same was aggravated in first half of 2020 due to concerns around ongoing pandemic. Yet, FMCG as an industry is
expected to be very resilient, mainly because of food and beverages and other essential segments.

Growth seen for players with essential commodities whereas market likely to crash due to low discretionary demand
for the non-essential commodities. Moreover, shortage of staff at factories, distribution centres and availability of
transport continue to be the biggest challenges to resume normal sales.

M&A Transactions in FMCG Industry 05

Impact of COVID-19:
Is FMCG inventory drying up?
Food & Beverages
The lockdown situation has led to
consumers stocking essential
products at home leading to
greater demand initially.
However, the sector has witnessed
the disruptions caused by supply
chain effect in the form of raw
material supplies.
A quick recovery is expected,
given the segment to be essential.
Household &
Personal Care
Due to the ongoing pandemic,
demand for hand hygiene
products, household cleaning
products and many more are
increasing at an exponential rate
Moreover, consumer’s close
attention to hygiene and their
awareness to improve immunity is
expected to surge, prompting a
quick recovery.
Yet, sales of non-essential items
like cosmetics, perfumes, etc. are
expected to see a further decline
due to less demand from
consumers.
Tobacco & alcoholic
beverages
The government of India has
allowed only essential businesses
to open, which hurted the alcohol-
ic beverages and tobacco market.
The plea to deliver online liquor
was rejected in several states of
India. Thus, the sector has
suffered huge downfall in
revenue.
Due to pandemic impact on
consumer behaviour and habits,
sale of tobacco and alcoholic
beverages is expected to have a
sluggish recovery.
M&A Transactions in FMCG Industry 06
TWO
Indian FMCG Industry

M&A Transactions in FMCG Industry 07

Indian FMCG Industry -
A Glance

25% Fall in
Warehousing Cost
Due to
Implementation
of GST

800mn Online 4th Largest

Users in Sector
India by 2023 in the Indian
Economy

Indian FMCG
Industry – A Glance

25.4% CAGR in 23.1% CAGR in

Final Consumption Indian FMCG
During 2017-20 Market During
2018-20

62.0% FDI Inflow

Share of Food
Processing in the
FMCG Sector During
Apr 2000 to
Sep 2019

Source: Nielsen Report, RBSA research M&A Transactions in FMCG Industry 08

Segments of FMCG

Household & Personal Care

Includes Oral care, hair care, skin
care, cosmetics/ deodorants,
perfumes, feminine hygiene and
paper products, fabric wash,
household cleaners

M&A Transactions in FMCG Industry 09

Segments of FMCG

Food & Beverages

Includes health beverages,
staples/ cereals, bakery products,
snacks, chocolates, ice cream,
tea/coffee/soft drinks, processed
fruits and vegetables, dairy
product, and branded flour

M&A Transactions in FMCG Industry 10

Segments of FMCG

Tobacco & Alcoholic Beverages

Includes branded tobacco and
alcoholic beverages

M&A Transactions in FMCG Industry 11

Indian FMCG Industry
The Indian FMCG market is valued at USD 68.4bn in Indian FMCG Market USD Bn
2018 and it is expected to reach at USD 103.7bn in
2020, growing at a CAGR of 23.1% during the same 220.0
period.

India’s household and personal care is the leading 110.0

segment, accounting for 50% of the overall market,
healthcare accounts for 31% and food and beverages
have a market share of 19%.

Fast-moving Consumer goods (FMCG) is the 4th largest 2020E 2025F

sector in the Indian economy with household and
personal care accounting for 50% of FMCG sales in
India.

Hindustan Unilever is India’s biggest consumer goods

firm with a market capitalization of INR 4.6tn. Indian Final Consumption
Expenditure USD Tn
During the FY 2018-19, the FMCG sector witnessed
healthy growth of around 14% of which a major part is
attributed to growth in volume and consumption. 3.6

Economic growth, rising incomes, young population

entering workforce and growing brand consciousness 1.8
among consumers is driving the demand for branded
products.

A shift towards e-commerce and adoption of digital

technologies is also fuelling consumption among
internet and smart phone enabled consumers. 2017 2020F

Source: Euromonitor International, ICICI securities, Nielsen India, RBSA research M&A Transactions in FMCG Industry 12
Key Trends & Growth Drivers

Rising in Accounting for a revenue share of ~ 55%, urban segment is the largest contributor to the
Rural overall revenue generated by the FMCG sector in India.
Segment In the last few years, the FMCG market has grown at a faster pace in rural India compared
with urban India. In2018-19, revenues from the rural segment are expected to grow
15-16percent outpacing.
Demand for quality goods and services has been going up in rural areas of India, on the
back of improved distribution channels of manufacturing and FMCG companies.

Favourable FDI Investment approval of up to 100 per cent foreign equity in single brand retail and 51 per
Policy and cent in multi-brand retail.
Govt. Initiatives Food Security Bill (“FSB”) and direct cash transfer subsidies reach about 40 per cent of
households in India. FSB would reduce prices of food grains for Below Poverty Line (BPL)
households, allowing them to spend resources on other goods and services, including FMCG
products.

The post GST rates for the FMCG industry is capped at 18-20 percent. Before the
Adoption of implementation of GST, most of the FMCG products were taxed at rates ranging from
Goods and 22-24%.
Service Tax
Post GST implementation, prices of various commodities in the FMCG sector, like shampoos,
(“GST”)
soaps, detergents, biscuits, other snacks etc. decreased, leading to about 3-8 % decrease in
prices of goods at modern retail stores.
The lower cost has motivated people to invest more in FMCG companies. The FMCG industry
is going to benefit from the lower logistics cost and better competitive market and rates for
most of the products being kept under the expected tax bracket.

Digital Transition India is undergoing a digital revolution, and in the next three years, essentially half of
and Evolving India’s population ~650mn people will become internet users. A change driven by
Trade Channels increasing mobile penetration, with higher growth coming from non-metropolitan areas.
A shift towards e-commerce and adoption of digital technologies would continue to fuel the
growth of FMCG market. Also, a huge untapped opportunities and low internet penetration
presents the scope of growth in the sector.

Source: Hem Securities, RBSA research M&A Transactions in FMCG Industry 13

THREE
Key FMCG Companies

M&A Transactions in FMCG Industry 14

 Competitive Benchmarking -
Home & Personal Care

Colgate-Palmolive (India) Limited Operates as a FMCG company Established in 1974, a portfolio of

manufactures and trades in person-
al and oral care products in India.
The company was founded in 1937
and is headquartered in Mumbai,
India.
worldwide. It operates through
Consumer Care Business, Food
Business, and Others segments.
It has a wide distribution network,
covering 6.7mn retail outlets with a
high penetration in both urban and
rural markets.
over 300 products based on
ayurvedic formulations.
Manufactures and markets
personal and healthcare products
in India and internationally.
Operations comprise more than 60
countries including SAARC, MENAP,
SEA, Africa, Eastern Europe and the
CIS countries.

Key Products Key Products Key Products

• Toothpaste • Hair Care • Fairness Cream
• Toothpowder • Oral Care • Balm
• Mouthwashes • Health Care • Chyawanprash
• Soap • Skin Care • Deodrants
• Cosmetics • Home Care • Pain Relief Ointment
• Foods • Hair Oil
• Cool Talc
• Facewash

Key Brands Key Brands Key Brands

• Colgate • Dabur • Boroplus
• Palmolive • Vatika • Fair and Handsome
• Odomos • Zandu Balm
• Hajmola • Navratna
• Real • Kesari Jivan
• Fem • Fast Relief

Financial Metrics (INR Mn) Financial Metrics (INR Mn) Financial Metrics (INR Mn)
Market Cap: 371,225* Market Cap: 826,894* Market Cap: 97,705*

LTM Revenue: 44,827 LTM Revenue: 84,103 LTM Revenue: 24,876

LTM EBITDA: 11,971 LTM EBITDA: 17,595 LTM EBITDA: 6,878

EBITDA %: 26.7% EBITDA %: 20.9% EBITDA %: 27.7%

* As of 30th June 2020; LTM as of June 2020

Source: S&P Cap IQ; Company Website and RBSA research M&A Transactions in FMCG Industry 15
 Competitive Benchmarking -
Home & Personal Care

Established in 1897, the Godrej
Group has its roots in India's
Independence and Swadeshi
movement.
Manufactures and sells personal
and household care products in
India, Indonesia, Africa, and
internationally.
It’s a consumer goods company,
manufactures and sells home and
personal care, food, and
refreshment products in India and
internationally.
Operates through Home Care,
Beauty & Personal Care, Foods &
Refreshment, and Others segments.
Marico Limited, together with its
subsidiaries, manufactures and
markets consumer products
operating in the beauty and
wellness space.
Operates in 25 countries across
emerging markets of Asia and
Africa.

Key Products Key Products Key Products

• Household Insecticides • Food & Refreshment • Hair Oil
• Hair color • Home Care • Edible Oil
• Liquid Detergents • Beauty & Personal Care • Hair Cream
• Soaps • Life Essentials • Hair Gel
• Air fresheners • Hair Serums
• Hair care
Key Products Key Products Key Products
• Cinthol • Dove • Parachute
• Good Knight • Horlicks • Hair & Care
• Hit • Lifebuoy • Livon
• Nupur • Lipton • Saffola
• Expert • Pepsodent • Nihar
• Inecto • Rin • Revive
• Ezee • Red Label • Mediker
• Clinic Plus • True Roots

Financial Metrics (INR Mn) Financial Metrics (INR Mn) Financial Metrics (INR Mn)
Market Cap: 609,572* Market Cap: 4,850,193* Market Cap: 397,699*

LTM Revenue: 98,914 LTM Revenue: 401,300 LTM Revenue: 70,740

LTM EBITDA: 21,096 LTM EBITDA: 99,003 LTM EBITDA: 14,678

EBITDA %: 21.3% EBITDA %: 24.7% EBITDA %: 20.7%

* As of 30th June 2020; LTM as of June 2020

Source: S&P Cap IQ; Company Website and RBSA research M&A Transactions in FMCG Industry 16
 Competitive Benchmarking -
Food & Beverages

Manufactures and sells various
food products primarily in India.
Britannia products are available
across the country in close to 5mn
retail outlets and reach over 50%
of Indian homes.
Manufactures and sells malt-based
foods, protein rich foods, and
cereal based beverages in India.
Provides Crocin Cold & Flu, which
provides relief from headache,
body aches and pains, and sore
throat.
Manufactures and sells food
products in India.
Offers milk products and nutrition,
including dairy whitener,
condensed and UHT milk, yoghurt,
maternal and infant formula, baby
food, and health care nutrition
products.

Key Products Key Products Key Products

• Biscuits • Pain reliefs • Dairy Products
• Bread • Nutrient cyrups • Confectionery Products
• Dairy Products • Sensitivity Toothpastes • Ready to Drink Beverages
• Cakes • Instant Coffee and Tea
• Rusk
• Crème Wafers
• Croissant

Key Products Key Products Key Products

• Britannia • Crocin • Nescafe
• Good Day • ENO • Maggi
• Marie Gold • Iodex • Milkybar
• Bourbon • Ostocalcium • Kit Kat
• Otrivin • Barone
• Sensodyne • Milkmaid
• Nestea

Financial Metrics (INR Mn) Financial Metrics (INR Mn) Financial Metrics (INR Mn)
Market Cap: 741,187* Market Cap: 244,184* Market Cap: 1,549,195*

LTM Revenue: 121,511 LTM Revenue: 30,850 LTM Revenue: 126,773

LTM EBITDA: 21,607 LTM EBITDA: 5,937 LTM EBITDA: 28,425

EBITDA %: 17.8% EBITDA %: 19.2% EBITDA %: 22.4%

* As of 30th June 2020; LTM as of June 2020

Source: S&P Cap IQ; Company Website and RBSA research M&A Transactions in FMCG Industry 17
 Competitive Benchmarking -
Tobacco & Alcoholic Beverages

Engages in the FMCG, hotels,
paperboards, paper and packaging,
agriculture, and information
technology businesses worldwide.
Offers formals and casual wear
products, and other lifestyle
products through the Wills Lifestyle
stores.
Manufactures, purchases, and sells
beer in India and internationally
under various brands.
United Spirits Limited
manufactures, purchases, and sells
alcoholic beverages in India and
internationally. Its alcoholic
beverages include Scotch whisky,
Indian made foreign liquor whisky,
brandy, rum, vodka, gin, and wine.

Key Products Key Products Key Products

• Ciggarettes & Cigars • Beer • Liquor
• Food • Non-Alcoholic Drinks • Whisky
• Personal Care • Brandy
• Hotels • Rum
• Safety Matches • Vodka
Key Products Key Products Key Products
• Aashirwaad • Kingfisher • McDowell
• Sunfeast • Heineken • Royal Challenge
• Bingo • Edelweiss • Signature
• Savlon • Sol • Antiquity
• Vivel • Bullet • Black Dog
• Engage • Zingaro • Director’s Special
• Mangaldeep
• Classic
• Gold

Financial Metrics (INR Mn) Financial Metrics (INR Mn) Financial Metrics (INR Mn)
Market Cap: 2,292,250* Market Cap: 287,559* Market Cap: 412,774*

LTM Revenue: 465,474 LTM Revenue: 65,092 LTM Revenue: 79,242

LTM EBITDA: 173,005 LTM EBITDA: 8,851 LTM EBITDA: 9,972

EBITDA %: 37.2% EBITDA %: 13.6% EBITDA %: 12.6%

* As of 30th June 2020; LTM as of June 2020

Source: S&P Cap IQ; Company Website and RBSA research M&A Transactions in FMCG Industry 18
FOUR
M&A and PE Activity

M&A Transactions in FMCG Industry 19

Competitive Benchmarking -
Tobacco & Alcoholic Beverages

Deal Size EV/ EV/

Target Acquirer Year Stake
(INR Mn) EBITDA Sales
GlaxoSmithKline Consumer Hindustan Unilever
Apr-20 30,450 - - -
Healthcare (GSKCH India) Limited (HUL)

Vwash business of Glenmark Hindustan Unilever

Mar-20 - 100% - -
Pharmaceuticals Ltd. Limited (HUL)

Emami Cement Ltd. Nuvoco Vistas Corp. Ltd. Feb-20 55,000 100% 76.61x 5.5x

Wipro Consumer Care and

Canway Pty. Ltd. Dec-19 - 100% - -
Lighting -FMCG unit of Wipro Ltd.

Delectable Technologies Ltd. ITC Ltd. Nov-19 75 33% - 10.9x

Ruchi Soya Industries Ltd. Patanjali Ayurved Ltd. Nov-19 43,500 100% - -

Kusum Spices Foods & Inns Ltd. Oct-19 139.9 100% - 0.8x

DFM Foods AI Global Investments(Cyprus) Sep-19 13,106.9 73.71% 19.1x 2.7x

Wipro Consumer Care and

Splash Group Apr-19 - 100% - -
Lighting -FMCG unit of Wipro Ltd.

The Man Company Emami Ltd. Feb-19 80.5 17% 19.1x 1.5x

Beardo Marico Ltd. Feb-19 210 100% - -

Crème 21 GmBH Emami Ltd. Jan-19 1,000 100% 3x 1.5x

GlaxoSmithKline Consumer
Hindustan Unilever Limited (HUL) Dec-18 3,17,000 100% 45.2x 9.9x
Healthcare (GSKCH India)

Heinz India Pvt. Ltd. Zydus Wellness Ltd. Oct-18 45,950 100% 20.4x 4x

Bombay Shaving Company Colgate Palmolive India Ltd. Aug-18 180 14% - -

BrillareScience Emami Ltd. Feb-18 162.5 26% - 3.5x

Creative Flavour &

S. H. Kelkar & Co. Jan-18 917.6 51% - 0.9x
Fragnances S.p.A

Mean 32.8x 4.12x

Median 20.4x 3.10x

Source: Venture Intelligence M&A Transactions in FMCG Industry 20

Valuation Analysis

Valuation Analysis

In FMCG industry, type of segment of FMCG plays a major role in determining valuation. For example, growth of
medical products is steady and may not see a heavy premium at the time of acquisition of household or personal
care because of its distribution network and reach.

The companies with higher customer base combined with higher margins tend to enjoy higher valuation as compared
to other companies. Barring certain deals, the average EV to revenue multiple falls in the range of 2.5-3.

In transaction of the nature of merger or amalgamation of companies or demerger of businesses, the consideration if
often discharged by way of issue of equity securities with reference to an exchange ratio. In these cases, relative
value is taken as the valuation base. For example, acquisition of GlaxoSmithKline Consumer Healthcare by Hindustan
Unilever Ltd.

M&A in FMCG
900 824.28 16
800 14
700 12
600
10
500
377.47 8
400
298.88 6
300
179.79 4
200 145.5
100 49.3 2
7.4
0 0
2014 2015 2016 2017 2018 2019 2020

Amount in US $ mn Number of Deals

Deal Quantum & past trend analysis

Control has become a key element in most transactions. Investors are increasingly looking for opportunities where
they can enhance or extract maximum value.

M&A deal activity in 2019 has been sluggish mainly on account of concerns regarding reducing consumption. The
same trend is expected to continue in first half of 2020 owing to ongoing pandemic concerns.

Private players have also been interested in Indian FMCG market as witnessed by foreign direct investment
amounting to US $ 15.94 bn between April 2000 to December 2019.(Source : IBEF)

Source: Venture Intelligence M&A Transactions in FMCG Industry 21

Notable PE Deals
During January 2017 to April 2020, around 40 deals happened in Indian FMCG arena. Out of them, packaged foods
and personal care dominated in getting investments from private players Some of the key deals are reported below:.

Target involved in Year Deal Size Pre Money

Target business of Investor Valuation (INR Mn)
(INR Mn)
Sharrp Ventures, Fireside
Mamaearth Personal Care
Ventures, Stellaris Venture Jan-20 1,300 5,830
Partners, Sequoia Capital India

Matrix Partners India, Sequoia

Mosaic Wellness Personal Care Nov-19 358 560
Capital India, SAIF, Others

Peesafe Personal Care Alkemi Venture Partners Oct-19 300 774

Fireside Ventures, Kris

Vahdam Teas Packaged Foods Gopalakrishnan, Sixth Sense Oct-19 750 1,972
Ventures, Ncubate Capital,
Others

responsAbility, Sequoia Capital

Wingreens Farms Packaged Foods India Oct-19 1,250 5,000

Danone Manifesto Ventures,

Drums Food International
Verlinvest, DSG Consumer Packaged Foods Sep-19 9,245 12,543
Pvt. Ltd.
Partners and angel investors

Source: Venture Intelligence M&A Transactions in FMCG Industry 22

FIVE
Acquisition Strategies

M&A Transactions in FMCG Industry 23

FMCG M&A - Key Strategies

Entry Into Wipro Consumer Care gained entry in South African

Particular market by acquiring Canway Corp
Market

Diversification Colgate made a debut in Indian consumer brand space

Of Portfolio by acquiring Bombay Shaving Co.

Wirpo strengthened its position in South East Asian

Increase In
market by acquiring Splash Corp(largest Filipino personal
Market Share
care player)

Strategic
Acquisition of Beardo by Marico.
Synergies

Elimination Of
Acquisition of Emami Cement by Nuvoco Vistas Corp. Ltd.
Competition

Distressed
Acquisition of Ruchi Soya Pvt. Ltd. by Patanjali
Acquisition
Ayurved Ltd.

M&A Transactions in FMCG Industry 24

Acquisition Strategies

More room to dominate:

Acquisition of Horlicks brand of GSK by HUL

HUL, which is India’s biggest consumer goods firm exercised its option from the original agreement made between its
parent Unilever and GSK. As per the original agreement of December 2018, Horlicks was acquired by the parent
company of HUL and HUL would have to pay royalty for its use to India.

The Company took a call to own the flagship health food drinks brand “Horlicks” instead of paying royalty to the
parent Company.

Additionally, the company has completed merger of GlaxoSmithKline Consumer Healthcare Limited with itself for Rs.
3,17,000 millions. Brands like Horlicks, Boost, Maltova will be a part of HUL’s food and refreshments business .

HUL plans to dominate more by leveraging the mega trend of health and wellness.

Sales & EPS of HUL

4,50,000 35
4,00,000 30
3,50,000
25
3,00,000
2,50,000 20
2,00,000 15
1,50,000
10
1,00,000
50,000 5

0 0
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020

Sales(INR Mn) EPS

Deal Value: INR 30,450 MN

Closed Date: April 2020
Acquired by: HUL
Stake Acquired: 100%

Source: Venture Intelligence, BSE filings M&A Transactions in FMCG Industry 25

Acquisition Strategies

Scaling up their businesses:

Acquisition of Heinz India business by Zydus Wellness

The Kraft Heinz Company is the fifth largest food and beverage company in the world. In 2019, consumer healthcare
firm Zydus Wellness completed the acquisition of Heinz India’s consumer wellness business, which includes popular
brands Complan and Glucon D.

With this acquisition, Zydus got an opportunity to go into high growth situation with multiple well-known brands.
Through this acquisition, Zydus Wellness will be well positioned to strengthen its core business of Health Food and
nutrition.

The merger was viewed to bring about a host of synergistic benefits in the form of cross- selling of Zydus’ sugarfree
to make Glucon-D. At the time of announcement of merger in October 2018, Zydus was trading at premium due to
high margins on niche products, high ROCE and negative working capital.

As Heinz is not a market leader of any of its product portfolio, Zydus paid 33% lower EBIDTA multiple for the
acquisition.

Sales & EPS of Zydus Wellness

20000 40

15000 30

10000 20

5000 10

0 0
FY 2016 FY 2017 FY 2018 FY 2019 TTM Dec
2019

Sales(INR Mn) EPS

Deal Value: INR 45,950 MN

Closed Date: Jan 2019
Acquired by: Zydus Wellness
Stake Acquired: 100%

Source: Venture Intelligence, BSE filings M&A Transactions in FMCG Industry 26

Acquisition Strategies

Geographic expansion:
Acquisition of Avadh Snacks by Pratap Snacks

This acquisition helped Pratap Snacks to foray into

Gujarat, the largest snacks market in the country. Deal Value: INR 1,480 MN
Through the acquisition, Pratap Snacks aimed to create Closed Date: Sep 2018
a balanced portfolio with a mix of regional and national Acquired by: Prataap Snacks
flavors and variants across categories.
Stake Acquired: 80%
The products of both the companies are complementary
and through acquisition, the company will expand in
neighboring areas as well.

Debt Reduction:
Emami sells off its cement business to Nuvoco Vistas

Listed Company, Emami cement stated in press release

that selling off its cement business inches the company Deal Value: INR 55,000 MN
closer to becoming debt free.
Closed Date: Feb 2020
In cement industry, consolidation of business is always Acquired by: Nuvoco Vistas
a positive sign as compared to greenfield expansions.
Additionally, through this acquisition, Nuvoco Vistas will Stake Acquired: 100%
also be able to tap demand in East India.

Source: Venture Intelligence, BSE filings M&A Transactions in FMCG Industry 27

SIX
Public Market
Trend Analysis
M&A Transactions in FMCG Industry 28
Market Data -
Home & Personal Care

EV/EBITDA

50.0x 51.3x
45.0x
40.0x

32.5x
30.0x
30.3x
20.0x
14.3x
10.0x

0.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

Colgate-Palmolive Dabur Emami

Godrej Consumer Hindustan Unilever Marico
Median

Price/Earnings
90.0x
80.0x 81.9x

70.0x 72.5x

60.0x 60.0x
50.0x 53.1x
40.0x 41.7x
30.0x
20.0x
10.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

Colgate-Palmolive Dabur Emami

Godrej Consumer Hindustan Unilever Marico
Median

The home & personal care segment traded at median EV/EBITDA of 32.5x and median P/E of 60.0x in FY20, decreased
from FY19 on account of recent market correction due to COVID-19 pandemic. However, the home & personal care
segment is expected to rebound quickly once economy restore the normalcy.

Colgate Palmolive and Darbur are the least affected players due to COVID-19 pandemic, witnessed slight improvement in
EV/EBITDA multiple in FY20 over FY19.

Source: S&P Capital IQ

*As on June 2020 M&A Transactions in FMCG Industry 29
Market Data -
Food & Beverages

EV/EBITDA
60.0x
55.9x
50.0x
47.4x

40.0x

36.5x
30.0x

20.0x

10.0x

0.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

Britannia GlaxoSmithKline Nestle Median

Price/Earnings
100.0x 98.4x
90.0x

80.0x
77.6x
70.0x

60.0x 62.3x

50.0x

40.0x

30.0x

20.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

Britannia GlaxoSmithKline Nestle Median

The food & beverages segment traded at median EV/EBITDA of 47.4x and median P/E of 77.6x in FY20, Nestle India
witnessed an improvement in FY20 over FY19.

Source: S&P Capital IQ

*As on June 2020 M&A Transactions in FMCG Industry 30
Market Data -
Tobacco & Alcoholic Beverages

EV/Revenue
10.0x

8.0x

6.0x

4.5x
4.0x
4.3x

2.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

ITC United Breweries United Spirits Median

EV/EBITDA
60.0x

50.0x

40.0x

30.0x 31.1x
26.9x
20.0x

10.0x 11.0x

0.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

ITC United Breweries United Spirits Median

The tobacco & alcoholic beverages segment traded at median EV/REVENUE of 4.3x and median EV/EBITDA of 26.9x in
FY20.

Tobacco is slated to be battered with COVID-19 pandemic due to its nature of discretionary spend.

Source: S&P Capital IQ

*As on June 2020 M&A Transactions in FMCG Industry 31
Market Data -
FMCG Industry

EV/EBITDA - Median
50.0x
47.4x
45.0x

40.0x

35.0x
32.5x
30.0x
26.9x
25.0x

20.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

Home & Personal Care Food & Beverages

Tobacco & Alcoholic Beverages Overall FMCG

Price/Earnings - Median
100.0x

80.0x
77.6x

60.0x 61.8x
58.2x

40.0x

20.0x
FY15 FY16 FY17 FY18 FY19 FY20 LTM* NTM

Home & Personal Care Food & Beverages

Tobacco & Alcoholic Beverages Overall FMCG

The FMCG sector traded at median EV/EBITDA of 32.5x and P/E of 61.8x in FY20 declined significantly from FY19 trading
multiples on account of recent market dislocation due to COVID-19 pandemic. However, it is one of the least affected
sector compared to broad market and holding up the ground in the uncertain environment & its slowly recovering as
seen in the chart above.

Macro challenges have been weighing on the growth rates for all consumer segments over the last one year and
COVID-19 impact is another variable that would affect the earnings.

Source: S&P Capital IQ

*As on June 2020 M&A Transactions in FMCG Industry 32
NIFTY 50 VS NIFTY FMCG
The Indian equity market has
been grappling with the many
unknowns of COVID-19. Ni�y
decreased ~30% from all �me
high during March 2020 but the
same has been returning to
Ni�y 50 V/S Ni�y FMCG Index normalcy.
180
160
140
120 35.6%
100
80 0.1%
60
40
20
0
Apr-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20

Nifty Index Nifty FMCG Index

Nifty FMCG index has outperformed significantly the Nifty Index over the last 5 years.

Nifty eroded its gain within one month due to COVID-19 pandemic however, FMCG companies holds strong ground
during bear market due to steady demand of essential goods.

Nifty FMCG index gained 35.6% compared to Nifty index gained 0.1% during FY15-20.

Neilsen, global market research provider has forecasted that Indian FMCG industry will grow at a rate of 5-6% during the
year 2020. (Source: Nielsen Quarterly Snapshot)

Source: National Stock Exchange Website; RBSA research M&A Transactions in FMCG Industry 33
Impact of COVID-19 on the
FMCG Sector
Short-term:

Shortage of staff at factories, distribution centers and availability of trucks continue to be the biggest challenges impact-
ing supply chain.

Supply constraints for import of materials for which there is no alternative in India.

Severe mismatch between demand and supply.

The drop-down has led to drop in consumption and shift in preferences. People are moving away from discretionary
spend and focusing on financial security.

Long-term:

Discretionary spend may take a long time to recover due to shrinkages of incomes, job losses and overall negative
sentiment even post lockdowns and many weaker companies will vanish or may need to sell or merge.

Stronger players likely to emerge even stronger from this situation in the long-run.

10% -9%
0%
-3%
-10%
-20% 8%
-20%
-6%
-10% -3%
-30%
-1%
-40% -17% -1% -2%
-50% -25%
-60%

-70% -19%

-80%
NSE Colgate Emani Dabur Godrej HUL MaricoBritannia GSK Nestle ITC United United
FMCG BreweriesSpirits

*
The above captures performance of key companies by way of share price performance from 05-Mar-2020 to
30-Apr-2020.

Source: RBSA Analysis, NSE M&A Transactions in FMCG Industry 34

Initial Impact of COVID-19
hits March ‘20

FMCG Growth Trend

18.00%

16.00%

14.00% 3.8%

12.00% 3.6%
10.00%

8.00% 3.8%

6.00% 11.9% 3.4%

9.9% 3.0%
4.00% 2.7%
6.2% 3.0% 2.7%
2.00% 3.9% 3.5%
2.6%
0.00% 3.5% 3.7% 2.8%
Q4 '18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 0.5%
Q4'19 Jan+Feb'20 Mar'20
Volume Growth Price Led Growth

Initial impact of COVID-19 hits Mar’20 where value growth is down from 6.4% in Jan & Feb to 3.3% in the Mar 2020.
Further, there is uncertainty pertaining to normalcy and potential impact of COVID-19.

Source: Nielsen FMCG Quarterly Snapshot – Q1’20 M&A Transactions in FMCG Industry 35
SEVEN
Conclusion

M&A Transactions in FMCG Industry 36

Conclusion
The FMCG’s industry growth is expected to be ~5% for the FY20 compared to 10% as per earlier estimates on
account of COVID-19 and lockdown implications. Growth in the FY21 is expected to be marginally higher than the
FY20 once normalcy is restored. Extended Lockdown has enforced a drop-in consumption and shift in preferences
and consumers are moving away from discretionary spend and focusing on essential goods and financial security. A
shift is expected to adversely affect industries including automobile, aviation, tourism and hospitality amongst
others. Further, rising unemployment and reduced tax revenue and increased government spending impacting fiscal
deficit in 2020 are the headwinds for the FMCG sector. After subsequent reopening of economies, an increase in
demand is witnessed, especially in rural areas. A sharp decline in crude oil prices would help reduce India’s foreign
currency outflow and inflationary pressure.

The recent pandemic has left none unscathed and all companies faced issues in manufacturing and the supply chain.
Despite the current concerns around the Indian as well as global economy, it’s likely that India would continue to see
rebound in M&A and private equity activity within the FMCG sector, both on a domestic and cross-border basis. The
favorable demographics of India would continue to attract investments for those who seek wider growth opportuni-
ties. We expect better trends in second half of FY21 and a revival in merger and acquisition deals.

Source: RBSA Analysis M&A Transactions in FMCG Industry 37

Services
Investment Banking
Valuation (Category 1 Merchant Bank)

• Business & Equity Valuation • M&A Advisory:

• Valuation of Brands, Goodwill, Other Intangible Assets &
Intellectual Property
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Business Risk Advisory • Business Transfers
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• Enterprise Risk Management
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• Independent Expert testimony • Turnaround Advisory and Business Transformation
• Anti-trust & Competition Advisory • Interim Management Services
• Post-Acquisition Disputes, Joint Venture & Shareholder Disputes
• Civil & Construction Disputes, Real Estate Disputes
• Intellectual Property Rights Dispute

M&A Transactions in FMCG Industry 38

Contact Us

Management
Rajeev R. Shah Manish Kaneria Mitali Shah Ravishu Shah
Managing Director & CEO Managing Director & COO Managing Director Managing Director
+91 79 4050 6070 +91 79 4050 6090 +91 79 4050 6050 Financial Advisory Services

rajeev@rbsa.in manish@rbsa.in mitali@rbsa.in +91 22 6130 6093

ravishu.shah@rbsa.in

Ravi Mehta Chetan Khandhadia Ajay Malik

Managing Director & Head Managing Director & Head Managing Director & Head
Transaction Tax Transaction Services Investment Banking
+91 22 6130 6052 +91 22 6130 6095 +91 22 6130 6015
ravi.mehta@rbsa.in chetan.khandhadia@rbsa.in ajay.malik@rbsa.in

Project Leader Research Analysts

Darshan Shah Piyush Akhaja Durva Raval
+91 79 4050 6074 +91 79 4050 6081 +91 79 4050 6022
darshan.shah@rbsa.in piyush.akhaja@rbsa.in durva.raval@rbsa.in

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M&A Transactions in FMCG Industry 39