FMCG major, city pharma co in race for Dumex

NEW DELHI: Dumex India, the company that owns Farex and Protinex brands in the country, is on the block. The company has given a sell mandate to an investment banker. An FMCG major as well as a leading Mumbai-based pharmaceutical company are learnt to be in the race for acquiring the company.

Dumex’s move to exit India comes less than a year after it acquired Farex from Heinz and at a time when the company was setting up a Rs 100-crore plus state-of-the-art manufacturing facility for nutritional supplement products.

According to sources, the exit strategy has been drawn up by Dumex’s new owner, Royal Numico, Europe’s largest baby food maker. Numico acquired Dumex’s parent company late last year and it has decided to focus on China, Asia’s largest nutrition market, for the time being, rather than on India.

An e-mail sent by ET to Dumex India MD Arun Singhal elicited the following response from the company spokesperson: “We expect to be in the position to do an announcement on the operation in India at the publication of Q2 results. These results are published on August 3. We have nothing to add at this moment.”

Dumex was in its investment phase in India and was said to have aggressive growth plans but change in ownership has resulted in a total change in strategy. For the buyer, the acquisition will bring the Farex and Protinex brands into its portfolio and also enable it to consolidate its presence in the baby food and nutritional supplement segment by giving it access to a modern plant.

A big attraction may be Farex, a Rs 75 crore brand, and it could be the key driver of valuation. If the sale happens, this will be the second time in the past year that the ownership of Farex will change hands. Prior to Heinz, Farex was owned by Glaxo in India.

Numico acquired EAC’s nutrition business for E1.2bn in November ’05, and by virtue of this acquisition the Dumex brands and Protinex came into its fold. Dumex’s new parent had made it clear at the time of acquisition that EAC’s India and Philippines businesses would be put ‘under consideration’. Even though Dumex has outperformed all of Numico divisions worldwide in the last quarter with sales growth of 28.3% to E95m, the Indian operation had made losses.

In India, the infant food category had been stagnant and under pressure for a while. To add to its woes, the government slapped a ban on advertisement of baby foods after it realised that mothers were getting influenced by these ads and turning to tinned baby food instead of breast feeding their babies. Nestle’s Cerelac and Amul’s Amulspray are the leading brands in this segment and together the two companies control almost 90% of the baby food market.