‘FMCG firms to continue acquisition spree’

The agency said homegrown players will continue to scout for small to medium-sized acquisitions,mostly in populated developing nations where the targets are attractively priced.

“The overseas acquisitions by CRISIL-rated FMCG players,such as Dabur India and Marico in the recent past,have strengthened the acquirers’ business risk profiles by enhancing their product offerings and geographical reach,” RISIL Ratings Director Nagarajan Narasimhan said. Moreover,prudent funding of acquisitions has helped the acquiring companies maintain stable financial risk profiles and credit quality,he said.

The agency also said Indian subsidiaries of global FMCG majors may pursue domestic targets as the size and cost of acquisition targets are unlikely to be constraining factors

for these players.

Last year,there were 13 major acquisitions at an estimated cost of over Rs 5,000 crore that involved Indian firms,including inbound takeover by MNCs.

Most of these acquisitions were global and helped firms to expand their international businesses,particularly in markets such as Africa,Latin America and South Asia. Crisil said several players will maintain stable credit quality over the medium term,given their strong business and financial risk profiles,and the expected prudent funding of acquisitions.

For global FMCG majors,India remains an attractive market,with its growing economy,large population that offers considerable scope for additional geographic penetration in the rural areas,and low per-capita consumption.

“The Indian subsidiaries of global majors have maintained healthy credit quality despite large acquisitions or capital-spending,driven by their strong cash flows and support from the parent,” Narasimhan said.