P&G India fund to invest in Indian start-ups

Source: LiveMint.com, Oct 11, 2018

Mumbai: Procter & Gamble India (P&G India) said Wednesday it has established a multimillion-dollar fund to invest in Indian start-ups and pursue a collaborative growth strategy. The company, however, did not disclose the size of the so-called Innovation Sourcing Fund.

P&G has also launched a first-of-its-kind programme, vGrow, which will identify and collaborate with small businesses, individuals and large organizations, and offer innovative industry-leading solutions.

“The Indian market has been at the forefront of innovation and continues to be a priority for the company, globally. We are confident that through vGrow and Innovation Sourcing Fund, we will be able to identify and implement cutting-edge solutions that are a strategic fit for us on our journey to grow sustainably,” said Madhusudan Gopalan, managing director and chief executive officer, P&G India sub-continent.

The company held a two-day summit to connect with its vGrow external partners across functions—from supply chain and raw material vendors to brand and marketing agencies, and packaging companies—to pitch and share their ideas.

P&G is also launching an online platform, P&G Hackathon, to enable start-ups, small businesses and large organizations offer innovative solutions and secure business opportunities with the company.

In the past couple of years P&G’s global peers, including Unilever Plc, Colgate-Palmolive (India) Ltd, Diageo Plc and Coca-Cola Co. have also set up their own venture funds.

“In our view, it makes a lot of sense for large, incumbent industry leaders to set aside some capital to be deployed in start-ups,” said Vivek Soni, partner and leader of private equity advisory, at consulting firm EY India.

He said organizational inertia inhibits large corporates from demonstrating the level of nimbleness that start-ups have. “The choice is clear, be disrupted or be with the disruptor.”

In August, Colgate-Palmolive picked up a 14% stake in male-grooming start-up Bombay Shaving Company.

Earlier, Diageo-owned United Spirits Ltd invested $4 million in HipBar, a Bengaluru-based online drinks-ordering and payments platform.

In India, companies such as Marico Ltd and Future Group, parent of listed Future Retail Ltd and Future Lifestyle Fashions Ltd, have also been investing in start-ups.

On Wednesday, Future Enterprises Ltd acquired a 55% stake in fintech startup LivQuik, and announced its intent to pick up the remaining stake in the next two years for ₹ 20 crore, and pay ₹ 5 crore additionally, if required.

Marico also made a couple of acquisitions and is actively looking to invest in three to four start-ups.

The emerging trend takes root in the fact that between 2012 and 2017, eight of India’s top 12 brands have lost 0.4-2% market share to newer entrants in the home care, packaged foods and beverages categories, according to research firm Euromonitor, Mint reported in April.

Market share is calculated based on volume and value.

P&G has three entities in India. While P&G Hygiene and Healthcare Ltd ended 2017-18 with net profit of ₹ 374.59 crore on revenue of ₹ 2,320.40 crore, Gillette India Ltd’s net profit was at ₹ 229.05 crore on revenue of ₹ 1,676.85 crore.

According to available documents, P&G Home Products Ltd, the privately held entity, had reported net profit of ₹ 71.84 crore on revenues of ₹ 5,711.26 crore in 2015-16, according to financial data provider Capitaline. The three companies grew at an average rate of 32.45% in fiscal 2018 over the year-ago period.

On Wednesday, P&G’s two listed entities Procter & Gamble Hygiene & Health Care Ltd and Gillette India Ltd’s stock lost 0.81% and 0.43% to close at ₹ 8,939.20 and ₹ 6,390.25, respectively. The Sensex was up 1.35% to close at 34,760.89 points.

In the past 12 months, PGHH’s share price has fallen 18.73%. The company had hit a 52-week high on 23 July to ₹ 11,000. Gillette India’s share price fell 11.21% from its 52-week high of ₹ 7,196.90 on 8 December 2017.

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