Liberty Shoes, the world's fifth largest footwear manufacturer, is in talks with Hindustan Lever Ltd on acquiring its leather business. HLL has put its leather business on the block, as part of its restructuring strategy.
Confirming the development, Adarsh Gupta, chief operating officer of Liberty Shoes, told Business Standard: "We are not directly involved in the discussions. Our merchant bankers are talking to HLL on our behalf. We are looking at this opportunity as our core competence is leather and this will help us to consolidate our position in the market. Since HLL's leather business is focusing on exports, it will help us to increase our turnover by about Rs 100 crore (Rs 1 billion)."
When contacted, an HLL spokesman said, "The company's policy is not to comment on mergers and acquisitions."
For Hindustan Lever, the leather business is a non-core area. It earns revenues of around Rs 80 crore (Rs 800 million) from the business. In April 2002, HLL hived off the leather exports business to its wholly owned subsidiary, Pond's Exports.
The leather business came into the HLL fold following its merger with Pond's India in 1998. The manufacturing units are located at Mettupalayam, Tindivanam and Pallavaram in Tamil Nadu and Pondicherry. The business' top line and profitability have been under pressure.
Liberty Shoes has three manufacturing plants in Haryana. It is setting up its fourth plant in Uttranchal to raise the total installed capacity to around 12.5 million pairs.
Exports account for around 25 per cent of the Rs 350 crore (Rs 3.5 billion) turnover of Liberty Shoes. The US retail chain Wal-Mart is entering into an arrangement with Liberty Shoes for outsourcing footwear. The company, however, refused to divulge details on the size of the deal.
As part of its objective to reposition itself from being a mere footwear company to a lifestyle brand company, Liberty Shoes is foraying into branded retailing of its own products and other fashion items like watches, artificial jewellery and sunglasses through its Liberty Retail Revolution.