Mumbai, May 24: The Unilever group's plans to hive off the speciality chemicals business in India will soon gain momentum now that the merger of the Chennai-based Pond's India Ltd with Hindustan Lever Ltd (HLL) has achieved near conclusion following the crucial shareholders' ratification last week.This is because Quest, the speciality chemicals division of Pond's which contributes nearly 25 per cent to its net profit (around Rs 15 crore out of total profit after tax of Rs 61 crore), would now come under fast-moving consumer goods major Hindustan Lever's fold. It would have been difficult for Hindustan Lever to hive off the speciality chemicals business into separate joint ventures, as was the plan, without taking into consideration the business of Quest.
Hindustan Lever was planning to hive off its speciality chemicals business into separate joint ventures following the sale by its parent company Unilever Plc of its world-wide non-core speciality chemicals business to ICI Plc.
While there was nocompulsion on HLL to follow suit and sell off the business in India too, HLL is said to have received feelers for possible joint ventures. It has been almost a year since Unilever announced its decision to sell-off the non-core business. HLL has, however, been dragging its feet on the issue and was not in a hurry to strike a deal. Reportedly ICI India was interested in picking up the speciality chemicals business of the Levers in India.
The business is well-integrated in its system in India, which thus made the task of hiving it off difficult for Levers.
In fact, observers had earlier pointed out, that the plan will materialise only after the merger with Pond's comes through. Following the merger of Ponds' into Hindustan Lever, the size of the company's speciality chemicals business will be around Rs 300 crore.
Unilever's decision to sell off its speciality chemicals business stems from the fact that this is a highly technologically-driven industry where technology is traditionally closelyguarded.
Thus expansion in this business, which would require enormous technological inputs, was not feasible as the company which supplies the technology would seek an equity participation.
To avoid dilution of its stake, hiving off the business was the right thing for HLL to do, say analysts.
Further, speciality chemicals did not fit into Unilever's core areas of businesses comprising foods, soaps & detergents and personal products.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
