The Hindu Business Line : `We notched our highest-ever sales growth in 04'

PROCTER & Gamble stunned the world earlier this year when it announced it has signed a deal to acquire Gillette, a transaction valued at roughly $57 billion, the biggest in recent times.

Things calmed down subsequently, a spell broken by occasional statements that basically reiterated what has been stated by the two companies. Mr Saroj Kumar Poddar, Chairman, Gillette India, shares with Business Line, the company's idea of the shape of things to come.

Excerpts.

How do you see the deal panning out in India?

We view P&G as a respectable organisation, one that will keep the interests of our stakeholders in mind. While Gillette will comply with Indian laws in view of the deal, it is expected that P&G will help it expedite its value-creation process. We need its support in order to grow as fast as possible along the path that has been charted out. If everything happens according to what is planned, it should all materialise by September or October.

How will Gillette's Indian operations be impacted?

Simply put, I expect to see greater benefits for all stakeholders of Gillette. Remember, this is a huge transaction which entails an acquisition of the US company, which is the parent body of all Gillette outfits worldwide, by P&G. I see this as a union of two consumer product behemoths, which should lead to sustainable growth in operations worldwide. That will hold true for India as well.

Will shareholders of Gillette also be given equity in P&G India?

Well, P&G will pay for acquisition of Gillette shares through its stock; the ratio has been announced at 0.975 shares of the former for each share of the latter. However, the acquisition that we are talking about is happening in the US. Elsewhere in the world Gillette may or may not remain as a separate entity. This will really depend on a number of factors, including anti-trust legislations and other local regulations. At any rate, both companies are listed entities in this country and must follow Indian regulations. We will work closely with regulators in this matter.

Can this lead to the premise that strictly speaking P&G may not acquire Gillette in India?

I did not quite mean that. The businesses run by the two companies will certainly be integrated. However, one cannot comment on the exact form of such integration at this juncture. Mind you, the promoters' stake in Gillette is a shade over 88 per cent. That includes holdings by both Indian and foreign promoters. With this serving as the backdrop, I can tell you that all issues, including those related to SEBI takeover code and reverse book building, will be considered, provided they are applicable in this case. In fact, even if the law obliges us to take up a reverse book-building exercise, we will go for it. The idea is to treat minority shareholders fairly.

What are your growth estimates this year?

We grew at around 15 per cent last year and expect to improve on that. The company is a market leader on certain fronts, a position that will be maintained this fiscal too. In blades and razors, for instance, we are the most popular brand. Let me add here that Gillette has done particularly well in the last couple of years or so, a result of certain proactive steps taken by the management. These include a recast exercise. Today, we are growing pretty fast; price wars — evident in a few other FMCG businesses — do not really affect us. In fact, we notched our highest-ever sales growth in 2004. That year the company clocked a net profit of Rs 61 crore, the best since it was set up in India.

But your oral care business seems to lag behind...

It is not that we are not a fast-growing brand. I am specifically referring to Oral-B. But HLL and Colgate currently command sizeable portions of the market. And you will appreciate that both of them are very large players.

For the record, our own oral care business registered a growth of about eight per cent for the year ended December 31, 2004. Let me add here that elsewhere in the world, we have been adding technologically advanced products to our oral care portfolio.

Back home, on another front, the portable power business is expanding steadily, thanks to the volumes growth that is being recorded by Duracell batteries. A similar thing is happening on the personal care side, albeit in a smaller way. We have recently brought in some new products, including some that are tailored to meet a variety of skin types.

Are any capex plans being considered?

Not really. Mind you, in this business fresh capital investments are normally marginal. Large doses of capital are not required too often, not unless, say, the company is setting up a greenfield manufacturing unit. Incidentally, our outgo on advertising has been scaled up recently.

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`We notched our highest-ever sales growth in 04'