Godrej Consumer Products shares rise after FMCG giant announces East Africa divestment; what should investors do?
Godrej Consumer Products news: Godrej Consumer Products, along with a wholly-owned subsidiary, inked an agreement to sell its entire stake in wholly-owned subsidiary Godrej East Africa Holdings, Mauritius, to HKG Africa Weave Ltd for $3.5 million (Rs 29.1 crore at $1 = Rs 83).
Godrej Consumer Products share price BSE, Godrej Consumer Products share price target: Godrej Consumer Products Ltd (GCPL) shares rose on Tuesday, February 20, after the consumer goods company, along with a wholly-owned subsidiary, inked an agreement to sell its entire stake in wholly-owned subsidiary Godrej East Africa Holdings, Mauritius, to HKG Africa Weave Ltd for $3.5 million (Rs 29.1 crore at $1 = Rs 83). The Godrej Consumer Products stock gained as much as Rs 1.5 per cent to Rs 1,248.5 apiece on BSE to trade within Rs 51 of an all-time high registered on February 1.
After the transaction, subject to regulatory approvals in the respective countries, Godrej East Africa Holdings Ltd along with its step down subsidiaries DGH Tanzania Ltd, Mauritius, Charm Industries Ltd, Kenya, and Sigma Hair Industries Ltd, Tanzania, will cease to be subsidiaries of Godrej Consumer Products, according to a regulatory filing post-market hours on Monday.
The deal is expected to be completed between the March and June quarters, according to the filing.
Godrej Consumer Products said the simplification actions will improve its Africa, US and Middle East margins by 200 basis points in the next two years, a period in which the company aims to take its EBITDA margin beyond 15 per cent from the record 9 per cent.
Godrej Consumer share price target: Macquarie maintains ‘neutral’
Macquarie maintained a ‘neutral’ rating on Godrej Consumer Products after the development with a target price of Rs 1,150 per share.
While mentioning that the consumer products company’s divestment of its East Africa subsidiary was along expected lines, the brokerage is positive on Godrej Consumer Products’ focus on the simplification of operations.
The transaction is likely to strengthen the fiscal shape for Godrej Consumer, and will result in an impact to the tune of Rs 500 crore on its sales, according to the brokerage.
In addition, Zee Business Managing Editor Anil Singhvi recommended a buy on Godrej Consumer futures with a stop loss at Rs 1,220 for targets of Rs 1,243, Rs 1,250 and Rs 1,260
- Company sells East Africa business
- Positive impact on profit and cash flow
- Market likes proper capital allocation
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