Godrej Consumer Products trades in green on plans to divest in East Africa Holdings

Shares of Godrej Consumer Products traded higher on February 20 morning following news that it will divest in Godrej East Africa Holdings, Mauritius, for $3.5 million.

At 9.55 am, shares of the company were trading at Rs 1,241.75, up 1 percent from the last closing price.

After the completion of the deal, Godrej East Africa Holdings, along with its step-down subsidiaries DGH Tanzania, Mauritius, Charm Industries Kenya, and Sigma Hair Industries Tanzania, will cease to be subsidiaries of the company.

Domestic broking firm Emkay Global maintained its positive stance on the FMCG major as the current divestment is in-line with the management strategy of restructuring East Africa operations, where it has relatively low profitability. The brokerage had a share price target of Rs 1,325 per share.

The FMCG player wants to improve profitability in the GAUM cluster (Godrej Africa, USA, Middle East). To realign focus towards enhancing growth potential and profitability in the GAUM cluster, GCPL has announced divestment of its Tanzania operations (shift to franchisee model).

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“This will lead to a negative revenue impact of ~Rs 70 crore for Q4FY24. With this, GCPL has reorganized operations in Uganda, Angola, and Tanzania; the company now has to effect reorganization of its Kenya business,” added the brokerage.

With its Kenya business yet to be reorganised, GCPL will shift its overall revenue of Rs 500 crore to the franchisee model, which will drive ~Rs 50 crore in annual profit. Management sees cluster margin expansion to over 15 percent in the next couple of years, per Emkay Global.

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