Monthly Newsletter

India I Consumer

Investment Banking April 2020

Consumer Newsletter

Ashish Bagadia Shivang Ghai Tarun Sanghvi

Ashish.Bagadia@centrum.co.in Shivang.Ghai@centrum.co.in Tarun.Sanghvi@centrum.co.in
Centrum Investment Banking Consumer Newsletter

Disclaimer & Risk Factors

This newsletter is for private circulation only. This newsletter has been prepared exclusively for the intended recipient and does not carry
any right of reproduction or disclosure. Neither this newsletter nor its content may be used for any other purpose without the prior
written consent of Centrum Capital Limited.

These disclaimers and risk factors govern the use of our newsletters. By using this newsletter, you accept these disclaimers and risk factors
in full.

We, Centrum Capital Limited, a Public Limited Company incorporated under the Companies Act, 1956 having registered office at Bombay
Mutual Bldg, 2nd Floor, DR. D. N. Road Fort, Mumbai – 400001, provide a series of information, through our newsletters.

This newsletter (including market views expressed herein) has been prepared by Centrum Capital Limited (“Centrum”/ “CCL”) and is for
general information only. It does not have regard to specific objectives, financial situation and the particular needs of any specific person
who may receive this information. This newsletter contains information about trends, transactions and events in Indian consumer space. The
information provided herein is not a professional or an investment advice, and should not be treated as such.

The information contained in this newsletter is selective and is subject to updates, expansions, revisions and amendments. It does not purport
to contain all the information that the recipients may require. Expressions of opinion, if any, contained herein are those of Centrum only and
are subject to change without notice. Centrum Capital Limited and its subsidiaries / associates / group entities do not accept any obligation
to provide the recipients with access to any additional information or to correct any inaccuracies, which may become apparent. Neither
Centrum, nor any of its subsidiaries, associates, group entities, directors, shareholders, managers, employees or agents of any of them, makes
any representation or warranty, express or implied, as to the accuracy, reasonableness, completeness or reliability of the information
contained in the newsletter.

The information contained in this newsletter is sourced from public sources and is not independently verified by Centrum. Centrum has
provided, to the extent possible, due credit to the source of such information. All product names, trademarks, logos and brand names
mentioned herein are property of their respective owners. All company, brand, product and service names used in this newsletter are for
identification purposes or used as examples only. Mention of these names, trademarks and brands does not imply endorsement or criticism
of the same.

The information provided in this newsletter is not intended for solicitation to, invitation to, or offer to, any person in any jurisdiction or
country where such solicitation, invitation or offer would be contrary to law or regulation or which would subject CCL or its affiliates/ group
entities to any registration requirement within such jurisdiction or country. It shall be the sole responsibility of any such persons to inform
themselves about and to observe any such restrictions. It shall be the sole responsibility of any such persons to inform themselves about and
to observe any such restrictions. Neither this material nor CCL is registered in any jurisdiction.

Dealing in markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient of
this newsletter should understand that statements made herein regarding future prospects (if any) may not be realized. Any reference/s to
the securities/ instruments/ sectors/ scrips etc in the newsletter is only for illustration purpose and are NOT recommendations from CCL or
any of its group entities. Any performance information shown refers to the past should not be seen as an indication of future returns. These
views/ outlook/ information alone are not sufficient and should not be used for the development or implementation of any strategy. This
newsletter is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

All parties and entities expressly disclaim any and all liability whether arising out of any information contained in, or errors in or omissions
from, this newsletter or the recipients’ use of this newsletter. Accordingly, recipients are advised to independently conduct their own
evaluation and analysis of the information contained in the newsletter and should also seek their own professional advice. Neither Centrum
nor its directors, employees, associates, agents or representatives shall be liable for any damages whatsoever, whether direct or indirect,
incidental, special or consequential, including lost revenue or lost profits that may arise from or in connection with the use of the information.

The recipients of this newsletter shall not be deemed to be clients of Centrum and accordingly, Centrum shall not be liable to provide such
recipients with the protection afforded to its own clients or any advice in relation to any transaction or arrangement referred to herein.

For Private Circulation 2

Centrum Investment Banking Consumer Newsletter

Index
Cover Story ..................................................................................................................................................................................... 4
Leader Interview ............................................................................................................................................................................ 8
Industry Happenings .................................................................................................................................................................... 10
Covid-19 lockdown is the best time to quit tobacco ................................................................................................................. 10
FMCG companies launch special insurance schemes for 'frontline' workers amid Covid-19 crisis........................................... 10
Government to build e-commerce platform for small shopkeepers, preparations to add 7 crore retailers to the portal ....... 10
With Ambani by his side, Zuckerberg has finally made his Mark in India’s telecom space ....................................................... 11
Robust demand for smartphone likely after lockdown in India: Canalys .................................................................................. 11
Unilever withdraws growth outlook; says India business impacted by slowing market, coronavirus-forced lockdown .......... 11
Covid-19: Lockdown in India impacts Coca-Cola global volumes .............................................................................................. 11
Only half of India’s household consumption will come through post covid ............................................................................. 12
Brands use chatbots to find a direct channel to consumers ..................................................................................................... 12
Kirana stores come to rescue of consumers ............................................................................................................................. 12
Lockdown impact: Imported raw material scarcity hits FMCG goods production .................................................................... 13
Top 12 FMCG companies sign up with govt’s Suraksha Stores ................................................................................................. 13
HUL enters global top-15 FMCG league .................................................................................................................................... 13
Deal Tracker ................................................................................................................................................................................. 14
Valuation Tracker ......................................................................................................................................................................... 15
About Centrum ............................................................................................................................................................................. 16

For Private Circulation 3

Centrum Investment Banking Consumer Newsletter

Cover Story
Emergence of Alternative FMCG Distribution Channels

In this edition of our consumer newsletter, we analyse some of the developments in the industry that are expected
to create a significant impact on the distribution channels of larger FMCG players over a medium-term horizon.
Given recent disruptions due to the lockdown, FMCG businesses are in the limelight, with a focus on their
distribution network. Several players have struggled to make their products available to the consumers. This has
rekindled the discussion on the need to develop alternative channels to enhance consumer experience and
connect better with the consumers.

FMCG Industry Overview

FMCG Breakup
The FMCG market in India is the fourth largest sector in the economy and is Food & Beverages
19%
pegged at over INR 4 trillion. Within FMCG industry, Home & Personal Care (HPC) Consumer Health
50%
and Consumer Health (OTC) have a very high level of brand penetration. 31% Household & Personal Care

Due to higher disposable income and propensity to spend, urban centres

contribute a larger share into FMCG sales, at ~65%. In addition, due to lower Rural Urban Breakup
volumes and more scattered geographies, it is more expensive for FMCG players
to maintain their rural distribution network. 35% Rural

65% Urban
HPC segment in India has been dominated by the foreign players until now. For
example: HUL commands ~15% market share in overall HPC market in India.
Branded Penetration
Having said that, the HPC segment has also witnessed an increasing participation
Consumer Health 90%
from regional players and new-age start-ups, especially in segments which are
Home & Personal Care 82%
evolving rapidly in India, such as male grooming, baby care etc. Beverages 86%

Packaged Foods 76%

Since food tastes in India are very culture & region specific, Indian players, Edible Oils 13%

including both national and regional, dominate the food segment. Pulses & Cereals 8%

*Source: Research Reports

Rapidly evolving market dynamics for FMCG Companies

Although the industry is growing at a fast pace, large FMCG companies are continuously fighting the battle to maintain their
dominance. A few reasons for the same are the increased competition from regional players, who enjoy brand loyalty and have
better consumer insights into their pockets of focus, and new-age start-ups, which are increasingly using technology to connect
better with the consumers and gain market share. A couple of years back, large scale marketing of Ayurveda/ natural products
by Indian players also posed a significant challenge for a brief span of time, but leading players managed to catch-up and added
similar products to their portfolio.

There are a few important factors that are in play over the last decade or so, and will pose challenges for large FMCG companies
in the medium term.

Growth of Modern Retail: Urban India contributes ~65% to overall FMCG sales. Clearly, it is an important market for any
national player. Recent past has witnessed an impressive growth in the market share of modern retailers, especially in urban
areas. Big chains such as D-Mart, Reliance Retail, More, Big Bazaar have come to dominate the urban FMCG retail market.
Some estimates state that modern trade accounts for ~15% of FMCG sales in India and more than 30% in top metro cities.

Until a few years ago, the rise of organised retail was celebrated by the FMCG sector which benefited significantly from the
same. It became relatively easier for the FMCG companies to target their consumers in a focused manner. Special discounts
and offers got them higher visibility for their brands and prime shelf space. Modern trade also allowed large FMCG players to
induce impulse purchases by the shoppers. However, in recent years, organized retailers have gained significant bargaining

For Private Circulation 4

Centrum Investment Banking Consumer Newsletter

power vis-a-vis the brands. This is evident from the differential pricing they are offered in comparison to the traditional
network. The most noticeable development is modern retailers’ increasing push for their own private label brands. These
retailers have also started reserving the prime shelf space in their stores for their own brands, since they see private labels as
a major growth driver for themselves. These factors have led to several conflicts between modern retailers and large FMCG
companies. One such example is the conflict between Future Group and FMCG majors such as HUL which started due to
reduced margins for Future Retail for stocking HUL products, post GST implementation. This conflict got intensified when
Future reserved the prime shelf space in its stores for its private label brands in several categories.

Growth of Online Retailers: The recent lockdown has brought online retailers in the limelight and given a big boost to their
sales. Out of the total FMCG pie, the online retailers still command a very small portion but they have begun to enjoy a very
significant share in the urban centres, especially in localities that are populated by salaried professionals. Two major players,
namely BigBasket & Grofers, are currently dominating the online grocery market. At the same time, some of the other e-
commerce players like Amazon (Amazon Pantry) are also trying to build a meaningful presence in FMCG retailing space. The
impact of this trend has been felt so much so that even some of the brick-and-mortar modern retailers have also launched
online deliveries. It is estimated that in some segments such as skincare, e-commerce could attain a market share of up to 15%
by 2025. This will result into online retailers gaining a significant bargaining power against national FMCG brands.

Additionally, even online retailers have launched their own private label brands to take away a piece of the FMCG pie. For
example, private label accounts for almost 45% of sales for Grofers and the company has recently announced an investment
plan of USD 50 mn over the next 2 years to strengthen its supply chain and private labels business.

Distributor Network Shrinking: Factors such as growing aspirations of traditional distributors, growing importance of modern
trade, differential pricing offered by brands to traditional distributors v/s modern retailers have led to an increase in distributor
churn. Some estimates suggest this churn might be in the range of 15-30% annually. It is becoming increasingly difficult for
FMCG companies to find replacements for an exiting distributor as the pool continues to shrink. This trend will add to challenges
in the traditional distribution network.

Covid-19 – The Trigger

The above mentioned factors have been brewing for a couple of years and FMCG majors have been trying to find solutions to
the given problems. They had realised the need for creating more channels to reach to their consumers directly. However, the
real trigger for substantial actions by FMCG majors in India may turn out to be the lockdown. Several companies witnessed a
significant erosion of their brands’ equity and a breakdown in their connect with the consumers for no fault of theirs.

Covid-19 has shifted a large part of the urban population to online grocery shopping. Although in some of the metros, like in
Mumbai, online platforms struggled to cope up with this surge in demand. We expect a good percentage of these new
customers to continue with this practice which will in turn prove to be a boon for the growth of online grocery retail.

The consumers are accepting whatever brand is available in the neighbourhood store or with the online retailers, frequently
compromising on their loyal go-to brand and experimenting with new ones. In the last 45 days, given the low availability of
products, there has been a massive increase in demand for private labels and regional brands. Such a shift in consumer buying
habits has created the risk of consumers permanently shifting to the brands they experimented with and the established FMCG
brands are at the risk of losing market share.

All these developments have forced FMCG brands to explore alternative channels.

Alternative Channels

The FMCG market dynamics in India has always been unique in many ways. For example, top five players in Indian HPC space
command disproportionately high market share as compared to most of the large markets worldwide. Furthermore, in UK &
other European countries, a major chunk of FMCG sales happens through large supermarket chains. Brands have always fought
for shelf space and have been at the mercy of these large retailers. India, on the other hand, operates through its extensive
network of kirana stores. Here, large brands have had more bargaining power and have been able to dictate terms.

For Private Circulation 5

Centrum Investment Banking Consumer Newsletter

Digitalisation of Kirana Store Network

The Kirana store network is still the backbone of the Indian FMCG industry. However, this network is still very traditional and
has not changed much in several decades. Several initiatives have been undertaken in the recent past to modernize this
network with the use of technology.

One such initiative is HUL’s Humarashop.com (launched in 2015 and relaunched in 2019), where consumers can order online
from the nearest local retailer. HUL is providing the online infrastructure and pushing its own products through it. However,
the consumer is allowed to order other brands as well which might be available at the specific store. The advantage for HUL is
twofold - firstly, this provides a higher visibility for its brands and secondly, real time insights into customer buying behaviour
and retailers’ inventory. With this platform, HUL will be able to use advance analytics to study its consumers’ habits at a
hyperlocal level and provide them with more suitable products.

There have been several other ongoing attempts of capitalising on this traditional network mainly by technology start-ups such
as MyKirana and most recently by Reliance Jio through the launch of JioMart. Walmart and Amazon are also working on scaling
up similar models. The overhaul of Kirana store network in India is inevitable.

Digitalization of Kirana store network by FMCG companies for establishing a direct link to the consumers is the least disruptive
option for their distribution network. It keeps the existing network intact and builds on top of the same. The thing to watch-
out for is whether entry of JioMart, especially along with its loan products, will take this option away from the national brand
owners.

Tie-ups with Hyper-Local Delivery Partners Company Delivery partner

Swiggy, Domino’s, Zomato, Dunzo
Off late, all major FMCG players have tied up with food delivery
companies such as Zomato, Swiggy, etc to ensure smooth Dunzo
delivery of products. This tie up seems mutually beneficial. On
one hand, these delivery players have been able to monetize Swiggy, Zomato
the unused capacity of delivery executives. Whereas, on the
other hand, FMCG players are able to cater to consumers Zomato, Shop Kirana and Zoomcar
directly from their distribution centres.
Flipkart
This alternative came up as a direct response to the lockdown
in India. As reported by Times of India, a senior ITC executive
Swiggy
was quoted as saying that they expect these tie-ups to
continue in the long run. This model is a moderately disruptive
*Source: News Articles & Company Statements
option since it allows the FMCG brand to circumvent the
retailer and fulfil the orders directly from the distribution centre. There are some internal debates going on within large FMCG
companies about establishing Dark Stores, similar to Dark Kitchen concept, that could be used specifically for servicing online
orders.

On a different note, the food delivery platforms like Swiggy and Zomato have also adopted the strategy of independently tying
up with select local retailers to deliver groceries to a particular PIN code. It would be interesting to see whether these food
delivery companies keep online grocery ordering as a part of their offerings and evolve as hyperlocal delivery businesses, even
after the lockdown ends and volume of food orders come back to normalcy.

Subscription Models by FMCG Brands

Several companies, in the past, have followed a subscription model as an alternative channel to reach out to their customers.
Select examples of evolving subscription model are:

 Procter & Gamble has an on-demand razor subscription service for its Gillette brand in US, which it recently expanded
to Canada where subscribers can text when they want their next shipment.

For Private Circulation 6

Centrum Investment Banking Consumer Newsletter

 Another example is Unilever, which operates the Dollar Shave Club subscription razor service.
 Swiss FMCG giant Nestlé recently launched a subscription service for nutritional drinks in Japan and expanded its
ReadyRefresh online bottled water service in the US.

Subscription model can be classified as the most aggressive form of Direct-to-Consumer (D2C) models since it is possible to set
it up as a completely separate network and move a part of the business away from the traditional channels. Having said that,
FMCG brands in India might want to keep the traditional network (up to distributors’ level) in the loop for this model, in order
to avoid a turf fight.

Several majors have tried the subscription model and had to cancel it later. These include Mondelez International which
suspended its Oreo Cookie Club in the US, since it was finding it difficult to deliver mass market snacks at an affordable rate.
General Mills also ended its Nibblr subscription snack enterprise in the US in 2015. Globally, subscription models have been
launched selectively in niche categories. Companies have to be careful about their logistics and marketing costs while launching
such offerings. Evidence suggests that it might be more viable to launch a subscription model in the HPC space as compared to
food & beverages. This bodes well with the market structure in India – large HPC pie, with majority sales from urban centres.
Furthermore, Indian consumers are used to the subscription model. The daily milk supply at their doorstep is a classic example
of the subscription model.

A subscription model, involving distributors and hyperlocal delivery companies, would allow Indian FMCG companies to create
customer lock-in, get access to customer data and reduce their dependence on modern trade and e-commerce channels.

Few Indian brands are already experimenting with the subscription model, but currently it seems to be limited to the new-age
start-ups such as Bombay Shaving Company, Moja Club etc. Bombay Shaving Company follows a similar model to Dollar Shave
Club and has received investments from Colgate-Palmolive. A direct competitor of Bombay Shaving Company is Beardo, which
was recently acquired by Marico. One has to still see how aggressively Marico pushes for D2C subscription model. Similarly, in
2019, ITC launched its own e-commerce portal to sell its premium and niche range of products including premium skincare
range Dermafique, Sunbean Gourmet Coffee etc. Being recent launches, these services are still in their infancy in India and
whether they will become a mass market phenomena is yet to be seen.

Conclusion

As India prepares to gradually lift the lockdown, FMCG firms are expected to evaluate their D2C strategies more carefully.
During the lockdown, most of them have taken some aggressive and much appreciated steps to ensure that the supply of their
products is not hindered and reach wherever they are demanded. It will be interesting to see how many of these steps will
become permanent and get implemented PAN India.

One thing is clear that all FMCG players are now looking at alternative channels of distribution. The most obvious beneficiaries
of their current steps are the hyperlocal delivery businesses, who have found another source of income, and the consumers.

Companies need to be very selective about which segments they shortlist to focus their D2C efforts on. On the whole, there
have only been a handful of hits and many misses among FMCG companies’ forays into D2C across the globe. Indian FMCG
companies should not look at the D2C efforts as a mere marketing tool through Instagram advertising and influencer
campaigns. In the Indian context, it is an equally important tool to understand the consumer trends and changes in relative
positioning of the brand in a particular micro geography in a much faster manner. The FMCG majors will also need to execute
their D2C efforts according to the preparedness of their existing distribution channels. They will need to strike a balance
between keeping their existing network happy and gradually increasing their D2C business.

New-age disruptor D2C brands are one of the major reasons why large FMCG brands are losing market share. Many FMCG
majors have found it more efficient to acquire the challenger D2C brand and use its network to grow the rest of their portfolio.
The advantage of this strategy is two-fold, one they get entry into a niche market with a disruptor and second they get access
to a new distribution channel without disrupting their existing network. We can foresee that large FMCG players will continue
to acquire new D2C brands which are operating in niche markets.

For Private Circulation 7

Centrum Investment Banking Consumer Newsletter

Leader Interview: Mr. Mayank Jalan, MD of Keventer Agro Limited

About Keventer Agro Limited
Incorporated in 1986, Keventer Agro is one of the fastest growing Food Company in Eastern India. It is present across categories
like dairy, bananas, frozen foods, export of food commodities. The company has a robust distribution network of 2,300
distributors, 35 super C/F agents and 150,000 retail outlets across the Eastern region of India. Keventer Agro Ltd bagged the
`Significant Achievement’ Award in Cold Chain Management at the National Cold Chain Summit organized by CII in 2016 and
2017.

About Mr. Mayank Jalan, Managing Director

Mr. Mayank Jalan, Chairman and Managing Director, Keventer Agro Ltd (KAL) joined the company in
April 2004. Within a span of one year, Mayank was handed over the baton to run the company as the
Managing Director. His core strength area is managing strategic growth while ensuring a level of
profitability essential for generation of internal funds that fuel rapid growth. Under his stewardship,
Keventer Agro Ltd. has diversified into multiple sectors like Hospitality, Exports, Realty while
consolidating itself in the food business through introduction of Frozen Foods and Bananas.
A first-class degree holder in Mechanical Engineering from University College of London, Mayank also
has a degree in Business Finance from the prestigious London School of Economics.

Q1.In your views, what would be the extent of Covid-19 impact on the consumer segment and do you expect some
permanent changes in consumer behaviour in this country?

A1.The outbreak of COVID-19 promises to radically change the way business is done in the Food & Beverages space. The virus
has led to a drastic change in the consumer’s purchasing pattern – what she buys, where she buys, when she buys – and it
seems that trends which were already in play – digitization & e-commerce, for example – will accelerate further.

Q2.What would be your word of advice to fellow entrepreneurs in order to sail through this environment of uncertainty?
A2.Fellow entrepreneurs should be flexible in their approach in terms of adopting new business models. It seems clear that a
number of industries – airlines, hotels, etc. – will change for good, and new opportunities are sure to emerge in these spaces.
Entrepreneurs must be quick to adapt to new technologies. For example, we are using Zoom in a big way internally and my
plan is to expand its usage to cover training and HR development going forward.

A common joke you hear is -” There’s an app for that”. Well, the time has come to digitize internal processes massively and
bring technology at the forefront of business. It seems that Work for Home is going to be a new reality going forward and
entrepreneurs must be at the forefront of devising rules which balance the needs of the company and the needs of its
employees

Q3.Given our young population base, there is a hope that the consumption demand in India will return faster to pre-Covid
levels as compared to a lot of other countries. Would you like to share your perspective on the same?

A3.I think that, despite the current gloom & doom, consumption will bounce back much faster than people realize. We are
already seeing it in China where consumers have gone on a “buying binge” of sorts to make up for lost time. However, it is
important to ensure that your brand means something to consumers and the connection is not broken during the lock-down
period. You must stay relevant to the consumer to the maximum extent possible.

Q4.It seems that having a multifaceted product portfolio helped Keventer tremendously during this period. Considering this,
what would be your suggestion to other entrepreneurs in terms of business risk management and diversification?

For Private Circulation 8

Centrum Investment Banking Consumer Newsletter

A4.That is probably true, but having a multi-faceted portfolio also requires large swathes of capital and many years of business
experience where these products have proven themselves, both on the shelves and in consumers’ minds. Newer
entrepreneurs are probably better served by finding the new niches which are going to open up – in online training, process
re-engineering etc. – and create new business models to exploit these opportunities

Q5.This pandemic has brought hygiene in the forefront for the Indian consumers which will significantly benefit packaged
food and packaged staples companies. Do you see Keventer benefitting from the same? Also, is there any other silver lining
to Covid-19 for Keventer?

A5.Food Safety and Good Manufacturing Practices are core competencies at Keventer, and it is our commitment to these ideas
that have allowed us to earn the trust of our consumers. We are seeing an uptick in many categories such as Dairy and Frozen
Foods in the current scenario. Our bananas, too, continue to be in high demand as people look for nutritious food.

We are hopeful that this difficult period will end soon for everybody, and we can all get on with our daily lives. I am happy that
Keventer has been a source of “wholesome goodness” for consumers in the current scenario and am sure that this will get
further reinforced once things normalize.

Q6.Where do you see Keventer in 4-5 years from now? What are your focus areas for growth?
A6.I am sure that we will be doing the exact same things – bring quality food & beverage products to Indian consumers – that
we are doing today. I am very bullish on the Indian domestic consumption story and am sure that the economy will rebound
and grow manifold in the next 4-5 years. Our focus areas for growth will continue to be Dairy & Dairy Products, Bananas, Frozen
Foods, and we will also continue to partner & grow with Parle Agro as it powers ahead as India’s favourite beverage company.

For Private Circulation 9

Centrum Investment Banking Consumer Newsletter

Industry Happenings

Covid-19 lockdown is the best time to quit tobacco

IndiaSpend ǀ April 27, 2020

The temporary ban on the sale of tobacco products during the ongoing lockdown to curb the spread of COVID-19 is an
opportunity to reduce tobacco consumption in India, the world’s second biggest consumer, experts say. Forced to go without
tobacco for over six weeks and isolated from social circles where tobacco use is common, users will find it easier to quit.
Nearly 267 million, or 29% Indians aged 15 and above, currently use tobacco in some form, as per the Global Adult Tobacco
Survey (GATS): India 2016-17 Report. Up to 199 million tobacco users in India either chew it or apply it on their gums and teeth
in various forms; half that number (99 million) smoke, as per available data. During the ongoing pandemic, a government
directive on April 15, 2020, asked for a “strict ban” on the sale of “liquor, gutka, tobacco etc.” for health reasons.
About 55% of smokers and nearly 50% of smokeless tobacco users are interested in quitting the habit or plan to do so, as per
the GATS report.

FMCG companies launch special insurance schemes for 'frontline' workers am id Covid-19
crisis
The Times of India ǀ April 27, 2020

Leading FMCG companies as Nestle India, Godrej Consumers Products Ltd and Dabur are providing special insurance covers to
their 'frontline' workforce, including those of distributors, who are engaged in supply and distribution of their products during
the coronavirus pandemic.
FMCG makers, which have witnessed a huge disruption in their supply chain during the lockdown, are empowering their
frontline workforce in their ecosystem with medical insurance scheme covering risk against any possible fallout from COVID-
19, which includes cashless treatment to reimbursement of medical expenses, in case of any eventualities during their work.
FMCG makers, which have witnessed a huge disruption in their supply chain during the lockdown, are empowering their
frontline workforce in their ecosystem with medical insurance scheme covering risk against any possible fallout from COVID-
19, which includes cashless treatment to reimbursement of medical expenses, in case of any eventualities during their work.
Godrej Consumers Products Ltd (GCPL) on Monday said it has insured over 4,000 extended workforce part of the supply and
distribution chain in India.

Government to build e-commerce platform for small shopkeepers, preparations to add 7

crore retailers to the portal
Inventiva ǀ April 26, 2020

Between the corona crisis and the lockdown, the government is set to create an e-commerce portal to maintain the supply of
goods across the country. Under the scheme of the Department of Industrial Policy and Promotion (DPIIT), the Ministry of
Commerce and the Confederation of All India Traders (CAT), the target is to connect around 7 crore, retail traders, across the
country with the help of this portal.
CAT mentioned that the portal will be launched in collaboration with companies and startups working in DPIIT’s supply chain.
On this, the local grocery stores will take orders online and deliver the goods to the customers. This national campaign includes
Startup India, Invest India, All India Consumer Product Distributors Federation and Avana Capital.
The aim shall be on placing orders together with product manufacturers, distributors, wholesalers, retailers and consumers on
the portal. CAT General Secretary, Praveen Khandelwal, said that currently there are many challenges in the supply of goods
in Tier 2 and 3 cities of the country. The government has taken this step only to reach these consumers dependent on local
grocery stores.

For Private Circulation 10

Centrum Investment Banking Consumer Newsletter

With Ambani by his side, Zuckerberg has finally made his Mark in India’s telecom space
ThePrint ǀ April 25, 2020

When Covid-19 has brought to a halt almost all deal activity across the world, the $5.7 billion equity deal between Reliance’s
Jio Platforms and tech giant Facebook has sent shockwaves through India’s e-commerce and telecom industry. The deal, which
gives Mark Zuckerberg’s Facebook a 9.99 per cent stake in Mukesh Ambani-led Jio Platforms, was announced Wednesday and
is likely to face the scrutiny of fair trade regulator Competition Commission of India and telecom watchdog Trai.
The largest FDI in India’s tech space by the Menlo Park, California-based social media behemoth makes Reliance chairman
Mukesh Ambani the richest man in Asia, surpassing Alibaba co-founder Jack Ma.

Robust demand for smartphone likely after lockdown in India: Canalys

The Economic Times ǀ April 25, 2020

India’s smartphone shipments grew 12% to 33.5 million units in the January-March quarter, despite the impact of a nationwide
lockdown in the final week of March due to the coronavirus pandemic, Canalys said. The market research agency said that
smartphone shipments in India will plunge in Q2 2020, as the lockdown remains in force up to May 3 and vendors grapple with
both supply and demand side issues in the immediate future.
“All eyes are glued to the TV sets in hopes of returning to normal. While parts of India emerge out of the lockdown and the
government works out an exit strategy, worker availability, which depends heavily on opening state borders and allowing public
transport, will be a key issue for vendors and ODMs,” said Canalys Analyst Madhumita Chaudhary. Additional manpower
regulations due to COVID-19, like in China, is likely to slow down resumption activities in factories across India, directly
impacting production capacity, she said.

Unilever withdraws growth outlook; says India business impacted by slowing market,
coronavirus-forced lockdown
Firstpost. ǀ April 24, 2020

Global FMCG major Unilever on Thursday said its growth in India has been hit by both slowing market and the coronavirus-
forced lockdown that led to a halt in production and shipping activities for a number of days. The Anglo-Dutch firm has also
withdrawn its growth and margin outlook for 2020, citing the impact of the pandemic and subsequent containment measures
taken by authorities and a shift in demand patterns of the geographies where it operates.
Though the FMCG major has witnessed upswings in sales of hygiene and in-home food products, the crisis has affected
particularly its food service and ice cream business, Unilever said in its trading statement for the first quarter ended 31 March.
Unilever also witnessed a major impact on the businesses in China and India, two of its major markets where restrictions were
imposed by the respective governments to contain the spread of COVID-19.

Covid-19: Lockdown in India impacts Coca-Cola global volumes

Livemint ǀ April 21, 2020

Beverage maker Coca-Cola on Tuesday said that a lockdown in India drove a steep unit case volume decline in the beverage
maker’s bottling investment group—that are the company’s owned bottling operations across markets. As a result, in its
bottling investment ecosystem “unit case volume declined 5% driven by India, due to the impact from the coronavirus,” the
company said in its earning for the three months ended March 27. To be sure, India announced a strict lockdown on March
24th to contain the spread of covid-19.
The pandemic has dented sales for the beverage maker across markets due to lockdown measures, and reduced business from
restaurants, movie halls etc. “Since the beginning of April, the company has experienced a volume decline globally of
approximately 25%,” the company said in its earnings release on Tuesday. In India, the company said that consumers made
fewer trips to retail stores that “negatively impacted" consumption of its brands.
For Private Circulation 11
Centrum Investment Banking Consumer Newsletter

Only half of India’s household consumption will come through post covid
Livemint ǀ April 20, 2020

India’s household consumer demand, the jewel in its gross domestic product (GDP) crown, is vulnerable and skittish because
of dismal occupation demographics, lowly paid and uncertain livelihoods for most; and because most Indian households have
very little “surplus income”, money remaining after covering their routine expenditure, leave alone their non-routine
requirements and emergencies. Consumer demand commentators have been generally reluctant to link the dismal occupation
demographics to consumer demand, beyond monsoon-dependent agriculture and, after demonetization, small business
owners and their employees.
The covid-19 pandemic has forced us to acknowledge the universe of migrant — daily-wage workers — individual service
providers who hunt for their daily bread, 32% of Indian households who contribute about 24% to India’s household
expenditure. By contrast, the so-called middle class, which is actually India’s richest 20% of households, accounts for 36% of
consumption expenditure.

Brands use chatbots to find a direct channel to consumers

Livemint ǀ April 19, 2020

Coronavirus is inducing changes in consumer behaviour and business models that may well persist after the crisis abates. One
of these is the way we order food and other goods from brands. A large FMCG brand in India, which did not want to be named,
has just signed a deal with Bengaluru startup Yellow Messenger to use its AI chatbots to sell products directly to consumers on
WhatsApp. This would reduce dependence on ecommerce platforms whose deliveries are down to bare essentials during the
lockdown.
Yellow Messenger announced a $20 million series B round led by the US fund of Lightspeed Venture Partners on Friday. This
makes it one of the best-funded startups in the space in the APAC region. Its conversational AI platform is used by over 100
enterprises for customer and employee engagement. Thus it has proven capability to interact with consumers and close
transactions.
Retail chain Spencer’s has also signed a deal with Yellow Messenger to use chatbots to sell to consumers because footfalls have
dwindled in retail outlets.

Kirana stores come to rescue of consumers

The Times of India ǀ April 19, 2020

Consumers are at their wits’ end. They wholeheartedly endorsed e-commerce as a new medium of ordering anything and
everything including grocery in the pre-Covid days, and now when they’ve got used to a new digital lifestyle, the new medium
is struggling to keep pace with deliveries.
On the other hand, the friendly neighbourhood kiranawalla has come to the rescue of many. Not only are the local kirana store
owners going the extra mile to ensure consumers get their daily essentials, they are also turning out to be more innovative
than their digital counterparts.
“Online players need manpower for packaging and delivery. Their warehouses are scattered. There is a problem in movement
everywhere. But we are locals and know every alley and backroads, therefore we can manage to deliver goods to consumers.
They got trapped in their own processes,” said Ramesh Lahoti, a wholesaler and distributor in Bengaluru.

For Private Circulation 12

Centrum Investment Banking Consumer Newsletter

Lockdown impact: Imported raw material scarcity hits FMCG goods production
Business Standard ǀ April 19, 2020

While the Centre has kept the major ports and the airports in the country open to allow freight movement in times of the
ongoing lockdown, limited evacuation of imported raw material to factories is creating production hurdles for FMCG
companies. All FMCG firms are already reeling under the pressure of manpower curbs at the plants and shortage of trucks to
ferry goods. On top of it, they now have to deal with raw material scarcity.
ITC has been focussing solely on the production and supply of essential items like foodstuff and sanitisation products after
scaling down operations. Its factories have stopped making cigarettes for the time being. HUL’s sales have dropped to 40 per
cent of the usual daily run rate, after scaling up from low single digits in the last week of March. HUL’s factories are operating
at about 40 per cent of the required output.

Top 12 FMCG companies sign up with govt’s Suraksha Stores

Livemint ǀ April 16, 2020

India’s top 12 packaged consumer goods makers have signed up to work with the government for Suraksha Stores—an initiative
in which companies will help neighbourhood stores ensure safety and hygiene practices. Nestle India, Britannia Industries Ltd,
Marico Ltd, J&J Consumer, Dabur India Ltd, Tata Consumer Products, Procter and Gamble Hygiene and Health Care Ltd,
Mondelez India, Hindustan Unilever Ltd, Godrej Consumer Products Ltd, ITC Ltd, Colgate-Palmolive Co. (India) Ltd are on the
initial list, said industry executives aware of the government’s plans. Initially, one million stores will be covered, as per the
plans of the Union consumer affairs ministry.
The companies will adopt neighbourhood stores and help them with education and certification on safety and hygiene
standards. They will do so by working through their network of distributors. Later, 40-50 more companies will join the initiative.

HUL enters global top-15 FMCG league

The Economic Times ǀ April 9, 2020

A sharp rise in the stock price in 2020 so far has helped Hindustan Unilever (HUL) enter the list of top 15 global consumer staple
stocks by market capitalisation as flight to safety prompts investors to scout for defensive bets. HUL, India’s largest consumer
company, has surpassed the market cap of global peers like Altria Group, Colgate-Palmolive and Reckitt Benckiser, according
to data from Bloomberg.
At $71 billion, HUL’s market capitalisation is more than half of its parent Unilever’s market value. Their market cap ratio of 0.54
is at a record high.
HUL’s stock has gained 33 per cent since the beginning of the current year, making it the second-best performing consumer
staple stock after China’s Muyuan Foodstuff. With a trailing price-earnings (P/E) ratio of 90, HUL is the most richly-valued stock
in the category globally. Based on one-year forward earnings, the stock trades at a record 258 per cent and 384 per cent
premium to the PEs of its parent and that of the Nifty 50, respectively.

For Private Circulation 13

Centrum Investment Banking
Deal Tracker
Target Investor/ Acquirer Deal Type
Supermarket Grocery CDC Group,
Supplies Pvt. Ltd. Alibaba.com India E-
(BigBasket) Commerce Pvt. Ltd.
Coatue Management
Rebel Foods Pvt. Ltd.
LLC
Alpha Wave Ventures,
Verse Innovation Advent International,
Pvt. Ltd. Bytedance, Goldman
Sachs, Sofina SA
Sixth Sense Ventures,
B9 Beverages Pvt. Sofina SA, Sequoia
Ltd. (Bira 91) Capital, Neoplux Co.
Ltd.
Home Interior Madhumala Ventures
Designs E-commerce Pvt. Ltd. (subsidiary of
Pvt. Ltd. (Livspace) Pidilite Industries Ltd.)
GUVI Geek Network Education Catalyst
Angel/Seed
Pvt. Ltd. Fund
Eros International Plc
STX Filmworks Inc. (subsidiary of Ajay
Enterprises Ltd.)
Rich Graviss Products
Rich Products Corp.
Pvt. Ltd.
Sequoia Capital, First
Cheque LLP, Abhishek
Goyal, Ankit Agarwal,
Waterwala Labs Pvt.
Harpreet Singh Angel/Seed
Ltd. (Drink Prime)
Grover, Sanjay Sunku,
Kunal Bahl, Rohit
Kumar Bansal
N.D. – Not Disclosed
For Private Circulation
Consumer Newsletter
Investment
Overview
Value ($ mn)
Supermarket Grocery which offers grocery items through its
online portal 'Bigbasket.com' has raised $51.78mn (INR 3.87
bn) in a bridge round of funding. The proceeds will help in
VC 51.78
strengthening its operations to handle the demand surge for
grocery delivery because of the lockdown and will also help
to compete against Zomato, Swiggy and other new entrants.
Rebel Foods which owns and operates an online food
ordering platforms 'Rebelfoods.co' has raised $50.14 mn
VC 50.14
(INR 3.79 bn) in its series E round of funding. The latest
infusion has valued Rebel Foods at over $700 mn.
Verse which owns and operates a mobile applications
'Dailyhunt' and 'Ipayy' has raised $30.24 mn (INR 2.18 bn) in
VC 28.54
a Series G round of funding. The proceeds would be used to
meet the general corporate needs of the Company.
B9 Beverages, engaged in the manufacturing of craft beer
under the brand name of 'Bira 91' has raised $20 mn (INR
1.5 bn) in its bridge round of funding. The proceeds will be
VC 20.00
used to expand the India business, expand its India footprint
and consolidate its leadership position in the premium beer
market in India.
Home Interior Designs, which offers a personalized home
design and decor marketplace through its online portal
'Livspace' was acquired by Madhumala Ventures.
M&A 2.46
Madhumala Ventures acquired an undisclosed stake for
USD 2.46 mn. The proceeds will be used to meet its growth
objectives and to strengthen its financial position.
GUVI Geek engaged in sharing technical learnings in
vernacular languages through its online skilled acceleration
and activity platform 'Guvi' has raised $784,980 (INR 60 mn)
0.78 in a pre-Series A funding round. The proceeds would be used
to scale up its operations, introduce newer courses and
expand its geographical presence for its offline and online
courses.
STX Filmworks Inc., California based media and
entertainment company was acquired by Eros International.
Eros International acquired 100% stake for an undisclosed
M&A N.D. consideration. The deal will develop the first publicly traded,
independent content and distribution company with global
reach and unique positions in the United States, India and
China.
Rich Graviss, engaged in manufacturing of confectionery
products under the brand name Rich's was acquired by Rich
Products. Rich Products acquired the remaining 50% stake
M&A N.D.
for an undisclosed consideration. The transaction would
provide impetus to the consumer practice meant for blue-
chip clients in the food landscape.
Waterwala Labs, engaged in manufacturing water purifiers
under the brand name 'Drink Prime' has raised an
undisclosed amount in its seed round of funding. The
proceeds would be used to further improve its services and
N.D.
strengthen growth across Bangalore and to develop better
ways of serving its growing clientele through its state-of-
the-art technology, and best-in-class self-monitoring water
purifying devices.
14
Centrum Investment Banking Consumer Newsletter

Valuation Tracker
Market Enterprise LTM LTM EV/ 1 month
Company Segment LTM P/E
Capitalization Valuation EV/Revenue EBITDA stock return
Page Industries Apparels 202.8 201.4 6.7x 34.9x 52.4x 9.4%
Dollar Industries Apparels 7.5 9.8 0.9x 8.4x 11.1x 20.2%
Kewal Kiran Apparels 9.8 8.6 1.6x 8.4x 12.6x 23.4%
Wonderla Holidays Amusement parks 7.3 5.8 2.0x 5.0x 10.4x -3.3%
Radico Khaitan Breweries & Distilleries 39.3 43.0 1.8x 11.9x 16.6x 9.9%
Delta Corp Gaming 18.7 13.1 1.7x 4.3x 8.8x 0.3%
Jyothi Labs Household Products 42.6 42.4 2.3x 14.6x 20.3x 23.4%
Inox Leisure Multiplex chain 20.9 44.6 2.2x 9.4x 14.4x -21.4%
PVR Ltd Multiplex chain 52.0 96.5 2.7x 11.7x 34.2x -4.1%
Britannia Packaged Foods 761.0 764.2 6.6x 42.1x 57.4x 23.6%
DFM Foods Packaged Foods 10.6 11.2 2.1x 19.8x 29.9x 22.3%
Bajaj Consumer Care Personal Products 21.4 18.4 2.0x 7.1x 9.7x 8.2%
Marico Personal Products 370.2 361.0 4.9x 25.2x 30.1x 8.2%
Emami Personal Products 88.5 87.8 3.2x 11.7x 26.3x 13.5%
Godrej Consumer Personal Products 554.9 559.4 5.5x 25.1x 25.2x -1.1%
Jubilant FoodWorks QSR 212.6 197.4 5.1x 28.2x 65.1x 16.2%
Westlife Development QSR 49.1 48.0 3.1x 27.6x 129.4x -5.0%
V-Mart Retail Retail 31.3 35.4 2.1x 22.5x 55.1x 17.4%
Shopper’s Stop Retail 16.5 34.9 1.0x 10.4x NM -3.3%
Trent Retail 179.5 166.9 5.0x 47.0x 163.4x 8.5%
Aditya Birla Fashion Retail 89.4 129.2 1.5x 17.7x 47.9x -23.3%
Raymond Textiles 16.0 36.0 0.5x 5.8x 4.5x 7.2%
Figures in INR Billions, where applicable; Source: Yahoo Finance (as on 30thApril 2020)

For Private Circulation 15

Centrum Investment Banking Consumer Newsletter

About Centrum

Founded in 1997, Centrum is a well-respected Financial Services Group, with diversified fee businesses and a rapidly growing
lending platform.

Our Investment Banking team provides institutions, entrepreneurs and investors with high quality, independent financial advice
and meticulous execution of deals. Our range of expertise spans from private placements of equity, capital raising in public
markets, mezzanine and convertible instruments to debt syndication, mergers & acquisitions and restructuring advisory. We
enjoy strong relationships with public & private funds, domestic & foreign institutional investors, leading commercial banks,
and financial institutions. Our robust client relationships, world-class human capital, innovation and ethical business practices,
have helped us execute transactions across various sectors.

Besides Investment Banking, we also have a robust institutional broking desk catering to FIIs, Pension Funds, Indian Mutual
Funds, Domestic Institutions and HNIs with widespread coverage on niche midcap and large cap companies. Our lending
platform includes supply chain financing, SME & MSME loans and MFI.

We also provide comprehensive Wealth Management Services to HNIs and Family Offices, Affordable Housing Finance in tier 2
& 3 cities and Insurance plans across Life, General & Health Insurance. Our Asset Management business offers funds across
private debt, public equity, venture capital and real estate.

Our global footprint through affiliations with International Investment Banks gives us coverage across North America, Europe
& Asia, enabling us to provide companies in India with the finest investment banking products and services.

We have a strong leadership team comprising of industry veterans and experts with a successful track record. We operate out
of 56 cities PAN India and have an international presence in Singapore.

For Private Circulation 16