CLSA raises red flag on Colgate after group arm’s India investment

MUMBAI: CLSA has raised red flag on Colgate-Palmolive Asia Pacific’s stake purchase in Bombay Shaving Company as it believes the move does not bode well for the Indian subsidiary’s shareholders. Shares of Colgate-Palmolive (India) came under pressure on Friday, ending down 1.8% at ₹1,168.95 on the BSE.

Colgate-Palmolive NSE Asia Pacific Ltd, a subsidiary of the global consumer behemoth, has made its debut in the Indian consumer brand space with an investment in men’s grooming firm Bombay Shaving Company.

The primary investment is pegged at about ₹18 crore ($2.6 million), with the Hong Kong arm of the global consumer company leading the round and picking up a 14% minority stake in Bombay Shaving Company, according to documents filed with the Registrar of Companies and accessed from data research platform Tofler. Existing investor Fireside Ventures also participated, the documents showed.



CLSA said the acquisition is small but it raises concerns on governance due to category overlap. Given Colgate-Palmolive (India)’s local understanding and strong distribution, it would have made more sense if the acquisition was done by a listed company, said CLSA.

“While the business is small today and only a minority stake was acquired, we still see this as a conflict of interest for Colgate India’s minority shareholders given BSC also operates in the personal care and grooming segments... If the business format ramps up over time, Colgate India shareholders would be devoid of any upside from this,” said CLSA in a note.

The brokerage said it is not sure if Bombay Shaving Company will have an alliance with the listed Indian entity and if it does, what would be the potential commercial terms.

Marico, Emami, United Spirits and Titan have acquired stakes in next generation businesses to understand evolving preferences of consumers and channels, said CLSA.