FMCG firm Emami Ltd, maker of personal and healthcare products, is set to reap the benefits of softening crude oil prices from which some of its key raw materials are derived. But the fall in oil prices may not bring immediate cheer to the company.
Brent crude price falling below the $60-mark to $59.63 a barrel, nearly half of what it was ruling in June, is indeed good news for personal care product makers like Emami as some of the raw materials are derived from petroleum.
"We use 4-5 derivatives of crude oil including LLP (light liquid paraffin). So, fall in crude oil prices is definitely a good thing for us," Sushil Goenka, managing director of Emami Ltd, told dna.
But any immediate benefit to the FMCG player like higher margins is not being factored in, as most of the raw materials are imported and the depreciating rupee has been pushing up their import costs.
"While crude oil prices are coming down, rupee is also depreciating thereby negating the impact. Also, as these products are imported every player maintain stocks, which would have to be consumed first," Goenka said indicating that reaping benefits of lower raw material prices isn't going to flow in soon.
"We need to monitor prices for at least three months," Goenka said on the sidelines of a media meet.
Light Liquid Paraffin, popularly called mineral oil is a purified mixture of liquid saturated hydrocarbons that are obtained from petroleum and is extensively used by the company as base for hair oils.
Also, microcrystalline wax, produced by de-oiling petrolatum, as part of petroleum refining process is another raw material imported by Emami, and sourced from destinations like China, Malaysia, Hungary, the US, UK and Germany, among others.
Meanwhile, Emami group is planning a foray into homoeopathic medicine, after it acquired two regional pharmacy companies, said RK Jatia, MD of Emami FrankRoss Ltd, a medicine retail chain.
As part of the strategy, the group on Tuesday signed licensing agreement for manufacturing some of the branded over-the-counter formulations of Hevert of Germany.
FrankRoss is now mulling e-retailing of allopathic drugs, believed to be one of the first such initiatives in the country.
"We are now studying the regulatory framework for this. And would launch the e-commerce initiative under the FrankRoss platform," Jatia said.
Currently, Microsec group, which owns a listed merchant banking and wealth management outfit based out of Kolkata, operates a medicine e-retailing platform called SastaSundar.com.
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