Park Avenue, Kamasutra have double-digit sales growth potential for decades to come: Godrej Consumer CFO

Godrej Consumer Products (GCPL), which has acquired two key male grooming and sexual hygiene brands from another consumer-centric behemoth, Raymond Group, is planning to rapidly scale the businesses. Park Avenue consumer goods business and Kamasutra, a leading sexual hygiene brand from Raymond, which GCPL has acquired at Rs 2,825 crore will further boost its revenue, a senior company executive told Business Today.

According to Sameer Shah, Chief Financial officer, GCPL, the acquisition of the two brands also marks GCPL’s foray into the two fast-growing categories that have reported healthy growth over the last decade in India. While GCPL had entered the deodorant category with its in-house Cinthol brand, the company moved out of the business some time ago.

“Both of these categories offer a multi-decadal double-digit sales growth rate possibility. Over the past two-three months, we did extensive due diligence on the deodorant and sexual wellness categories, before taking the leap,” Shah told Business Today. According to him, the deodorant market is growing steadily over the last 10-15 years, with some hiccups in sales during the Covid period due to lockdowns and work from home.

In the recently concluded deal with Raymond Group, GCPL is acquiring the consumer goods business of the Park Avenue brand, which includes deodorants, premium soaps and certain categories of shampoos for men. Additionally, it has also acquired Kamasutra - a popular sexual wellness brand that offers condoms. While as per a report published by Allied Market Research, the Indian sexual wellness market clocked a revenue of $1.15 billion (Rs 9,200 crore) in 2020. It is likely to go up to $2.09 billion (over Rs 16,700 crore) by 2030.

“While we currently do not operate in the deodorant market, we have significant experience in the segment. We have a pretty good understanding of the level of penetration, sales, and consumption patterns, among other aspects, on the two markets,” Shah added.

The two brands, together, raked in Rs 622 crore in sales during FY2023 for Raymond - up from Rs 522 crore in the previous year. Taking on the valuation of the deal, Shah said, “While we have paid Rs 2,725 crore net of cash for the deal, the real value is around Rs 2,325 crore as we will have around Rs 400 crore of lower cash tax due to slump sale. This works out to around 3.75 times value to sales.”

According to Abneesh Roy, Executive Director at Nuvama Institutional Securities, the addition of two brands will boost GCPL’s annual revenue by 4.3 per cent based on its FY22 revenue.

Shah says, while the brands had a reach of 650,000 outlets under Raymond, GCPL has a retail reach of 6.5 million outlets or 10 times its current reach - opening up to massive potential for increasing penetration. “The penetration of products like deodorant is quite low, which further leaves clear headroom for growth".