Did they skip the dividend this year?
Yes, they disappointingly did that. I think its been almost 2 years with no dividend…
Agree a CEO from HUL and movement of top management away from family is a big positive, but so was the big negative with sudden declaration of family as global CEO an year back.
My personal opinion - Would I want my invested company to break all circuits by movement of just 1 man? Ideally, I woudn’t want that. Will an HUL/Nestle break circuits with change of a CEO - No.
So a big move today is although good to see as an investor, it is a reminder to me that a huge scope lies in this company to upgrade its processes. Investors (Long or short) must respect and rate the business and not a single man. Although big respect to the new CEO, but a huge scope for GCPL to upgrade their processes to top level now. This is a positive as well for me - because as long as there is big scope of improvement, a big scope of rerating also lies…but I must know the level of the company as well in terms of processes. Hope this level increases to top notch now.
Secondly, why do we invest in FMCG company? For less volatility, stable & steady stock up-move over years and …most importantly…growing dividends! Has GCPL given any of these…last 5 years have been very volatile…I think it has not yet crossed its pre-corona levels (all time highs) also and last couple of years even dividend policy is not clear with no dividends declared.
Hopefully the new global CEO makes dividend policy clear.
Disc: Invested, hence critical. Not buy/sell recommendation. I would hold and track above mentioned points.
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I own both Godrej Consumer and Godrej Industries - with different underlying reasons. Godrej Consumer is a great business but now the greatness seems to be baked into the share price.
I know a lot of value investors ‘despise’ taking exposure of Godrej Consumer via a Holding company - Godrej Indutries - and I don’t see any strong argument why.
I recently did some analysis on Godrej Industries and found that it can be a good vehicle for exposure to GCPL given it’s trading at ~70% discount. What do you guys think?
My personal take on Godrej Industries is that all the 3 underlying businesses which Godrej Industries hold are overvalued. Even after a discount of 70% to the market cap, the P/E for Godrej Industries is high at 48, ROCE is low at 6.85, book value is 224 vs current share price of 579. Its debt to Equity is 1.33.
Kindly let me know your take on these numbers.
long term investors should worry about “No dividend”?
Yes - there is a possibility that underlying businesses correct in value and that’s a risk to the investment thesis.
When valuing a holding company - all you should worry about is - 1) What’s the value of the investee companies, 2) What is the holding company doing with cashflows (if any) it gets from investee companies.
The point #2 is the biggest determinant of % discount. If the holding company has a cash guzzling business, high expenses, poor corporate governance then discount will be high. Else, this discount shouldn’t be too high.
You will like this article from 2point2 capital - Investing In Holding Companies (2point2capital.com)
Results were on expected lines. There is again no dividend declared. Until Feb 2020, this used to be a regular dividend paying company. 2 years now and no dividend. Excuse is that the money is being used to reduce debt (if I am not wrong this is the reason cited earlier). With due respect in same 2 years, Marico and Tata consumer (two comparable home grown FMCG players) almost doubled their dividend.
What is the thoughts of other long term shareholders of Godrej consumer on this no dividend for last 2 years? Also, have they mentioned when they will restart dividend and whether they will follow any distribution policy or at whims and fancy of the company?
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Some observations about FY 22 performance:
- Moderate revenue growth of 11%, translating to low 3% PAT growth. This could be due to higher inflation, and OPM has reduced by 2%.
- No Dividend declared for second year, inspite of sufficient profits. Dividend payout was increasing till year FY 20 and now no dividend at all to share holders. Is it used to reduce Debt? I am analyzing this business after long time, so need to find out on this.
- Inspite of good brands, business seems to be struggling to grow revenues in higher double digits for some time. Partially could be due to supply chain constraints induced by pandemic, but even earlier as well, revenue growth seems slow. What are the reasons for this?
Overall, average business but need to analyze further to check whether investment worthy or not?
Disc: On watchlist for few quarters but no investment.
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Little more than one year hence…no dividends still when Tata consumer declares 8.45 rs per share dividend…up from 2.25 rs 2-3 years back…
The entire cash kitty equivalent and more would now go to a whopping 2800 cr + acquisition! Brand Park Avenue and Kamasutra are fine but none is a market leader nor a category definer like Bisleri which the Tata’s were eyeing…
Does this acquisition need to be approved by Nisaba or Adi Godrej or its pure management decision?
Is it a good capital allocation?
Thoughts welcome
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Won’t comment on the deal valuation. Personally, I feel this is a good move, as there is no portfolio overlap.
Part Avenue is a male grooming brand. GCPL wanted to extend Cinthol as male grooming brand, but failed and so this is their second attempt. Male grooming segment is a fast grower. Park Avenue competes with Gillette, although has far smaller market share, I believe.
Park Avenue Beer Shampoo also has good brand recall. It is an anti-hairfall shampoo, a menace that 9 out of 10 Indians face. GCPL has extensive experience in dealing with haircare products in African market and also in India through Godrej Expert Hair Colour.
Also Kamasutra has good potential to scale up in a country like ours. I feel this brand even can be extended to Female Condom segment given that the name has unisex appeal, unlike Manforce!
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There is a Rs 100 crore cash with them, which is ours and because it is a slump in sales, we get roughly a Rs 400 crore on our existing business. This effectively cost us Rs 2,325 crore," said Sitapati in a virtual interaction with media after the acquisition announcement.
Can anyone explain how slump sale benefits the company by 400crs?
Also, I forgot to mention about the deodrant portfolio. Following is the excerpt from a moneycontrol pro article.
The market size for deodorants is around Rs 4,800-5,000 crore… Park Avenue is the number two brand in the deodorant category in India and Kama Sutra is number three. Park Avenue has held its market share around 18-19 percent over the past few years, despite competition. The deodorants category has the potential to deliver double-digit multi-decade growth, as the per-capita consumption of deodorants in India is among the lowest…The deodorants category has grown at 20 percent for the last 10 years and has grown at 10 percent in the past five years in the pre-COVID era.
Disc: Not invested now.
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This is the amount of income tax benefit GCPL will get.
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Its great to see GCPL declaring dividend after few years. Surely a positive sign!
If anyone has clue why dividend declared this time and any change in dividend policy, pls share.
Based on progress of these two brands, any thoughts if this was a good Capital allocation?
Also some news below which I did not understand completely. If someone has better understanding pls let us know the implications…
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