Kaya contributed approximately 7 percent to the company's topline and the return on capital employed for the group was 23 percent last fiscal. The return on capital employed (ex-Kaya) stood at 27 percent last fiscal. Kaya's India business has started earning profits in terms of cash levels.
Below is an edited transcript of the interview on CNBC-TV18.
Q: Now that Kaya is going to be in a separate entity post restructuring, what is the growth trajectory you see for the retail business? What sort of equity infusion might the company need going forward?
A: I feel that the growth prospects of Kaya as a business would only get better once it is hived off as a separate company. There are a couple of issues which we wanted to highlight and one of them is that as regards culture, clearly a retail business requires a different kind of focus and organisational approach. It needs to be more entrepreneurial.
We have to keep in mind that Kaya although it is one entity, there are over 100 clinics all over India, Southeast Asia and the Middle East. So, this calls for a entrepreneurial culture which may not have been feasible in a larger corporate group. The other reason was that we wanted to make sure that the focus of the entire team is more on growth rather than in terms of adhering to the group.
Coming to growth prospects, we feel that India is currently going through some kind of a slowdown and as a result, discretionary expenditure has received a setback. Kaya has not been an exception although we have recorded same-store growth for the past six-seven quarters in a row.
The trajectory of the growth has been falling and that has been a matter of concern. But we are sure that as all cycles go even, this cycle would turn. If the tide turns and we recapture the growth trajectory for the country as a whole, I am sure Kaya will only gain.
The other big growth driver is product play. About ten days ago, we launched a new offering called Kaya Skin Bar, which is a smaller version of the Kaya Clinic which is very product heavy. Kaya Skin Bar is a low cost version and occupies less space. We are confident that the return on capital employed through the new offering is going to be much higher than the earlier offerings and it will enable us to expand the Kaya franchise all over the country in a much better manner.
Q: Will you look for talent over to manage Kaya which is very different from a fast moving consumer goods (FMCG) company. Are you considering strategic partners or outright sale with Marico being a minority partner?
A: There is a no-no for outright sale. We could have done that, but we never did it. We do not want to do it. But we would consider the option if there is a specific value-add by a strategic partner although even that would take some time because we wish to first consolidate after the completion of this process of restructuring.
We could have taken a strategic partner even while continuing the earlier configuration. But the answer for your specific question is there will be no outright sale but we will look at strategic partners over a period of time and not immediately.
Q: Was the lack of right valuations for a 'different' kind of business for Marico one of the triggers?
A: Yes and no. When we set up Kaya, it added that zing or luster to the Marico group about eight-to-ten years ago. Over time, the Indian FMCG scenario changed and the sector has become both a value and a growth sector and resulted in FMCG valuations touching the roof. So the Kaya valuation may not have necessarily added value to that valuation. In a separate company, the chances of a better price discovery are higher and that could be one of the reasons we see value in restructuring.
Q: When will Marico Kaya be listed?
A: We expect that the entire process to be over by mid-June. If you add another 15-20 days for contingencies, then we should be ready to list by the start of July. Our target is to list Marico Kaya Enterprises Limited by mid-July. We are calling it MaKE internally.
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