Wipro’s FMCG thrust, a long-term play

Wipro Consumer Care & Lighting, the consumer care business of Wipro Ltd, recently acquired 100% stake in Singapore based Unza Holdings Ltd. for Rs.1010 crore. This is the largest acquisition in personal care segment by an Indian company and will double Wipro’s FMCG revenue and make it the third largest FMCG player in India after Nirma and Dabur.  

However analysts were skeptical about Wipro’s FMCG business, as it contributed just 5% of Wipro’s turnover and 3% of the group’s profits. But the facts tell a different story as Wipro Consumer Care earned a 48% RoCE, it grew by over 38% as compared to FMCG industry growth of 10-12% and had a net profit of Rs 100 crore with a 12% margin.

In acquiring Unza, Wipro outbid large companies like Dabur, Emami, Godrej, Unilever, Colgate Palmolive and Sara Lee. Unza is South East Asia’s largest maker of personal care products and has a successful portfolio of deodorants and household care products.
 
Now Wipro Consumer Care & Lighting is planning to promote Unza products in India as well as 40 countries in which Unza has operations. Along with this it will also promote Wipro’s consumer products globally giving special thrust on its flagship Santoor soap brand.

Earlier, Santoor became the third largest soap brand in India after Lux and Lifebuoy with a value of Rs 500 crore. Wipro has previously acquired Chandrika Soaps for Rs.31 crore and Glucovita for Rs.5 crore to expand its FMCG basket. It has stayed away from lower growth businesses like toothpastes and detergents.

In the FMCG push, it would gains through Unza’s expertise in selling through big retail chains like Carrefour and Walmart, and the model could be replicated in Indian retail. Also with the government planning to reduce VAT on CFL bulbs from 12.5% to 4%, the consumer care company WCCL could charter on a growth path.