INSUBCONTINENT EXCLUSIVE:
MUMBAI: CLSA has raised red flag on Colgate-Palmolive Asia Pacific’s stake purchase in Bombay Shaving Company as it believes the move does
not bode well for the Indian subsidiary’s shareholders
Shares of Colgate-Palmolive (India) came under pressure on Friday, ending down 1.8% at ₹1,168.95 on the BSE.
Colgate-Palmolive NSE Asia
Pacific Ltd, a subsidiary of the global consumer behemoth, has made its debut in the Indian consumer brand space with an investment in
men’s grooming firm Bombay Shaving Company.
The primary investment is pegged at about ₹18 crore ($2.6 million), with the Hong Kong arm
of the global consumer company leading the round and picking up a 14% minority stake in Bombay Shaving Company, according to documents filed
with the Registrar of Companies and accessed from data research platform Tofler
Existing investor Fireside Ventures also participated, the documents showed.
CLSA said the acquisition is small but it raises concerns on
governance due to category overlap
Given Colgate-Palmolive (India)’s local understanding and strong distribution, it would have made more sense if the acquisition was done
by a listed company, said CLSA.
“While the business is small today and only a minority stake was acquired, we still see this as a conflict
of interest for Colgate India’s minority shareholders given BSC also operates in the personal care and grooming segments If the business
format ramps up over time, Colgate India shareholders would be devoid of any upside from this,” said CLSA in a note.
The brokerage said it
is not sure if Bombay Shaving Company will have an alliance with the listed Indian entity and if it does, what would be the potential
commercial terms.
Marico, Emami, United Spirits and Titan have acquired stakes in next generation businesses to understand evolving
preferences of consumers and channels, said CLSA.
