About the Company

Zydus Wellness is an Ahmedabad based company that manufactures and sells a big range of health and wellness products all across India. They have a number of recognizable brands like Everyuth, Sugar free, Nutralite and Actilife. They have three manufacturing facilities in Gujarat and two in Sikkim.

Q3 2019 Updates

Financial Results & Highlights

Standalone Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales 9159 7510 21.96% 8503 7.71% 25047 21524 16.37%
PBT 4040 3529 14.48% 4103 -1.54% 10698 9651 10.85%
PAT 3959 3612 9.61% 4110 -3.67% 10640 9752 9.11%

Consolidated Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales 15583 14123 10.34% 14841 5.00% 45706 41508 10.11%
PBT 4558 3926 16.10% 4617 -1.28% 12115 10994 10.20%


Detailed Results

  1. Zydus Wellness along with Cadila Healthcare will acquire Heinz India for Rs 4595 Cr.
  2. They stand to gain many category leading brands like Glucon D, Complan, Nycil and Sampriti through the above acquisition.
  3. The transaction is expected to be completed by Q4FY19 subject to regulatory approvals.
  4. The company is being aggressive in pursuing their goal of becoming India’s leading consumer wellness company.
  5. The acquisition target Heinz is almost double the size of Zydus wellness in terms of revenue and profits. Thus the acquisition shall be completed as a mixture of equity and debt.
  6. This shall see debt levels rise in the company balance sheet which has been debt free for some time now.
  7. The Sugar Free brand maintains its market leader position in its segment with more than 94% market share currently. New products Sugar Green and Sugar Lite launched under this brand are expected to reinforce its position.
  8. The Nutralite brand is expanding into the mayonnaise market which has been growing above 20% per year and is currently estimated to be at Rs 700 Cr.
  9. The Everyuth brand is outpacing the segment market growth and is growing at more than 10%. Growth is mainly driven by dominant market share in the peel-offs and scrubs sub-segments in the facial cleansing category.

Investor Conference Call Highlights

  1. The company has successfully completed Heinz acquisition
  2. UAE, Behrain, Qatar and Oman have been new market where Everyuth brand products have been introduced.
  3. Both Heinz and Zydus are profitable businesses so they would not require further capital for further running of the combined entity. The company expects a lot of synergistic benefits arising from the acquisition.
  4. The company will be issuing Rs 1500 cr NCD, interest payable is 9%, for buying Heinz business. The rest of the transaction will be completed through cash and internal accruals.
  5. Management guides that the acquisition would be margin accretive, however the company’s presentation shows data which suggest that initially margins may go down.

Analyst’s View

Zydus Wellness has long been a consistent wealth creator and have been at the forefront of the health and wellness industry in India for a long time. In their current product categories, they already have a significant standing in India and are also trying to expand their resident portfolio to overseas markets. Now with the acquisition of Heinz India, they have acquired a number of sector leading brands in other categories than their own, thus significantly expanding their product portfolio. This also signals the great ambition the firm and its management possess, and their willingness to take bold steps to go further ahead on their mission path. It remains to be seen whether the benefits from the acquisition will be as good as promised, but there is a high chance of a good integration given that both operate in different categories, thus reducing chances of market share cannibalization. All in all, Zydus Wellness looks like a good investment option given their soon to be expanded portfolio, especially to those investors seeking to invest in the theme of increasing consumption and in the health and well ness industry. However, extremely high valuation (more than 50 times P/E) creates a dilemma.

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