Emami's Dermicool aquisition from Reckitt to add 2-3% to revenues: Centrum Broking

In an interview with CNBC-TV18, Shirish Pardeshi, FMCG analyst at Centrum Broking, said that Emami will benefit by being the market leader of this category. He reckons that the acquisition will add 2-3 percent to the company’s revenue.

He said, "This acquisition is not a very big acquisition. It might add about 2 to 3 percent of revenue to the topline. However, one has to keep in mind that when you become a category leader, you have the challenge of expanding the category and you will get to make a lot of benefit out of it. "

Pardeshi added that he doesn’t see multiple re-rating by Emami. However, he explained that companies and consumers alike are worried about inflation.

He added, "In terms of market point of view, yes, this acquisition may not be having a large difference but you have to keep in mind the benefit that companies have got- it has a strong gross margin and even an EBITDA margin profile, so a lot of valuation change may not happen."

On inflation, he said, "This is the first time in the history of consumer companies that they have seen inflation beyond 12-15 percent. Now, to give you some sense, there are certain companies which have inflation running in the range of about 25 percent plus, especially in the decorative paints segment, while in the pure-play staple consumer segment, the inflation is running ahead of 18 to 20 percent."

"Obviously, with this kind of inflation, you can just pass on saying that you will recover on your margin. You have to keep in mind, we have just come out of the pandemic period and economies are just opening up. So obviously consumer is also wary about the hitting inflation, whether it is real inflation, or whether it is indirect inflation," he added.