Related to the group’s restructuring (ending family feud) in March, is the acquisition of Vadilal Brand from a promoter entity for Rs 1,000 cr.
(The ‘Vadilal’ brand is a strategic element of the group’s restructuring plan that was arrived at after the fourth generation of the promoter family reached a truce in March. Three promoter entities, including Vadilal International Pvt. Ltd that owns the trademark, are to be merged under Vadilal Industries and the brand brought under its direct ownership)
The steep valuation has irked the shareholders due to multiple reasons.
- Brand valuation of Rs 1,000 cr seems significant when seen in the context of financials of Vadilal Industries (VIL).
- VIL reported EBITDA of Rs 245 cr for TTM ended December 31, 2024 and PAT of Rs 156. VIL’s current mcap is Rs 4,400 cr.
- Independent valuers assessing the valuation have assumed a 5% royalty payment once the current agreement between VIL and Vadilal International expires in 2028.
- Current royalty payment is just 0.5% and a 10x increase needs to get through a detailed shareholders clearance process. It can’t be presumed by valuers for their calculations.
- For ease of reference, Grant Thornton assessed the ‘Vadilal’ trademark to be worth Rs 990 cr and PricewaterhouseCoopers at Rs 974 crore.
- Acquisition is from a promoter entity benefiting the promoter family.
- As per the merger terms, the promoters will be awarded shares of VIL in lieu of their stake in the three privately held companies. Promoter shareholding in Vadilal Industries will increase to 72.34% post amalgamation from 64.73% at present.
As per sources, some shareholders have written to the SEBI, the Ministry of Corporate Affairs, and India’s two leading bourses requesting intervention. They have also written to VIL’s newly appointed independent directors to oppose the transaction.
Personally, I believe 0.5% royalty is not as per market norms. Given that the group is going under a family settlement and restructuring process, independent valuers may not be wrong in assuming a normal 5% royalty payout.
Yes, shareholders have reasons to raise alarm, but hopefully the matter will settle without any major push backs.