Godrej Consumer Products gets A1 plus

ICRA has assigned A1 plus rating to the Rs. 10 crore commercial paper programme of Godrej Consumer Products (GCPL), indicating highest safety. The prospect of timely payment of debt/obligation is the best.

Effective from April 1, 2001, Godrej Soaps (GSL) has been de- merged into two companies. The branded consumer product businesses of GSL have been spun off into a new company called Godrej Consumer Products (GCPL). The remaining businesses, that is, the chemicals business, the investment portfolio held by GSL and all other divisions such as medical diagnostics, real estate and the like have been retained in the existing company which has been renamed as Godrej Industries (GIL).

GCPL commenced business as a separate entity with effect from April 1, 2001 with a share capital of Rs. 23.93 crores and a total balance sheet size of Rs. 185 crores. The main products of GCPL are toilet soaps, cosmetics including hair colour, shaving products, talcum powder, fairness creams and liquid detergents.

The overall sales of the consumer products division increased by 22 per cent from Rs. 382.48 crores in 1999-2000 to Rs. 468.43 crores in 2000-01. Toilet soaps accounted for around 66 per cent of total sales while cosmetics and detergents accounted for 28 per cent and 6 per cent respectively during 2000-01. Toilet soaps witnessed a growth of 15 per cent, cosmetics 44 per cent and detergents 28 per cent during this period. The growth in toilet soaps was spearheaded by the good performance of the Fair Glow brand launched by the company during December 1999.

The cosmetics division also witnessed high growth as the company expanded its range of hair colours and launched a fairness cream under the Fair Glow brand. Most of the other products introduced by GCPL also received good response. As a result, in spite of a sharp increase in advertising and selling expenses from Rs. 44 crores during 1999-2000 to Rs. 86 crores during 2000-01, the PBDIT improved from Rs. 64 crores to Rs. 78 crores during this period. The operating margins have been maintained at around 17 per cent while the return on capital employed has improved to 53 per cent during 2000-01 from 38 per cent during 1999-2000. The gearing and the coverage ratios of GCPL are comfortable.

GCPL has strong brands such as Cinthol, Fair Glow and Godrej No.1 in its portfolio. The company is the market leader in hair colours and liquid detergents. Given these strong brands and a good management, ICRA expects GCPL's operating performance to improve over the medium term.

The rating takes into account GCPL's position in the consumer product industry and its strong brand image. The good performance in 2000-01 along with comfortable gearing and coverage ratios during 2000-01 provide comfort.

Corporate Bureau

Send this article to Friends by E-Mail

Section  : Business
Previous : Highest safety rating for Rane TRW's CP programme
Next     : A1 plus for Hexaware Technologies