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Hindustan Unilever has forayed into the health and wellbeing segment through two strategic investments. The health and wellbeing market in India has a total potential market size of Rs 30,000 crore, according to the company.
The FMCG major will acquire 100 percent stake in OZiva, a leading plant-based consumer wellness brand focused on the need spaces like lifestyle protein, hair & beauty supplements and women's health.
OZiva is a digital-first brand with an omnichannel approach across its website, digital market places and offline stores.
The OZiva acquisition will be done in two tranches wherein HUL will acquire 51 percent stake through a combination of primary infusion and secondary buyouts. The remaining 49 percent will be acquired at the end of 36 months based on a pre-agreed valuation criteria.
Financial considerations for the acquisition remain undisclosed.
In its second acquisition, HUL will acquire a 19.8 percent stake in Wellbeing Nutrition through primary infusion and secondary buyouts for Rs 70 crore. The company's products like oral thin strips, slow-release capsules and marine collagen powder focus on areas like beauty, everyday health, gut health and sleep.
The managements of both target companies will continue to run day-to-day operations even after the acquisition, which are likely to be completed in the next 1-3 months, subject to closing conditions.
Brokerage firm CLSA believes that HUL is looking to participate in high growth segments through these investments. Morgan Stanley said in a note that while these deals are not material in terms of the company's revenue and cash balance, but it does give the company an entry into a nascent, but fast-growing premium health and wellbeing category.
Nomura expects these acquisitions to be margin-accretive for HUL on a gross level while on an operating profit margin level, it remains at a nascent stage.
Jefferies does not rule out further M&A activity from HUL's stable, adding that the company intends to bring global brands, seven of which were acquired by the parent Unilever PLC, in the coming years.
Citi also likes HUL's strategic intent to target bolt-on acquisitions to drive growth in new-age categories and digital-first channels. It maintained its buy rating on the stock with a price target of Rs 3,050.