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Wky Kaya Skin Clinic Acquired Derma Rx of Singapore ?

May 26, 2010


Kaya Skin Clinic’s Parent Company Marico has acquired the aesthetics business (essentially skin care products and services business) of Singapore-based Derma Rx for a purchase consideration slightly above Rs1bn.

Derma Rx has well balanced revenue mix — Products constitute >50% of Derma RX’s revenues of around Rs500m. PAT margins of ~20% imply that Marico’s FY11E PAT will rise by ~3.5%, before adjusting for interest costs. Marico management notes that Derma’s products retail at around SGD 60-250 and are focused in areas like anti ageing, anti acne and pigmentation. The products retail though four clinics and also via medical channels.

Kaya is essentially a service model where mgmt hopes to increase contribution from products to ~20% of revenues from ~13% currently. Mgmt notes that Derma’s product formulations might require slight modification to suit Indians. We note consumer acceptance on product and pricing will be critical before Kaya’s revenue mix adjusts shifts in a meaningful and sustainable fashion.

Current Kaya revenue estimates are ~Rs2.4bn in FY11E (i.e. ~8% of Marico’s consolidated revenues), growing at ~30% over the medium term. Derma Rx’s inclusion could add ~20-25% to Kaya’s revenues.

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