Calcutta-based FMCG major Emami Ltd is set to acquire prickly heat powder brand Dermicool from Reckitt Benckiser Healthcare for Rs 432 crore, signalling the company’s renewed appetite for big-ticket deals.

This is the biggest acquisition by Emami since 2015 when it bought hair oil brand Kesh King for over Rs 1,651 crore — the third largest so far after Zandu Pharmaceuticals in 2008 for Rs 750 crore. The company said the acquisition would be fully funded from internal accruals as it has enough cash on the books.

The brand has about 20 per cent share in the category which is estimated to be Rs 750 crore. Before the pandemic, which hit outdoor activities and the consumption of prickly heat powders, the brand was growing at 11-12 per cent annually.

“Now that the pandemic is waning, we feel the demand for the prickly heat powder is going to grow again. We expect the acquisition to be EBIDTA accretive from the first year itself,” said Harsh Agarwal, director of Emami.

Combined with Navaratna Cool Talc, the acquisition will make Emami the number one player in the category.

Abneesh Roy of Edelweiss Securities in a note said it liked Emami’s strategy of acquiring brands in the core area, apart from picking up strategic stakes in D2C (direct to consumer) brands. He maintained a buy on the stock. The revenue of Dermicool was Rs 113 crore in 2021, while the EBIDTA margin was 35 per cent since advertisement spends were low, Roy added.

The acquisition comes days before a top level management change in Emami where the founders are taking a backseat and putting the next generation at the helm. From April 1, Harsh Agarwal will be vice-chairman and managing director while Mohan Goenka will be vice-chairman and whole time director, while their fathers will be in non-executive roles.

Asked if the company has now managed to put the promoter level debt issue behind it — which weighed on it for a few years — and was now hungry for big acquisitions, Agarwal maintained that the appetite was always there.

“It is a matter of getting the right opportunity at the right price. The promoter level debt issues had nothing to do with it,” he insisted, reminding the company did a buyback of shares worth Rs 170 crore and announced two interim dividends. Emami has managed to bring down pledged shares to 29 per cent, especially after the promoters sold their cement business and retired loans against shares.

Agarwal reiterated promoter level commitment to bring down the pledge to zero going forward.