Second innings

With ₹150 crore in hand from a private equity investor, A Mahendran should be relaxed. Instead, after retiring last year as managing director of Godrej Consumer Products (GCPL), the 59-year-old is busier than ever. He’s recently taken over India’s second-largest pest control services company and has ambitious plans for it. Of course, this is nothing new for Mahendran. Hicare is the company he created a decade ago as Godrej Hicare, a JV between Godrej Industries and Mahendran Holdings. In 2009, it was acquired by Danish MNC ISS Global for ₹100 crore. And in January this year, Mahendran joined hands with India Value Fund Advisors (IVFA) to acquire a 100% stake in ISS Hicare, making this the first PE deal in the pest control space in India. “Even during the JV with Godrej, I was holding 20% of the company. I always wanted to return to this business. The potential and opportunity is too big to ignore,” he says. 

He’s already made a start. Now rechristened Hicare Services, the ₹70-crore company reaches out to over 100,000 residential customers and 10,000 commercial establishments. It has strategically priced itself between the unorganised sector and market leader Pest Control India (PCI), and offers annual and multi-year contracts to retail as well as institutional clients. That will go a long way in helping Hicare get to 70 cities by 2016, from the current 30. Currently, the business operates as a combination of company-owned customer service centres coupled with franchises. “We are flexible in our approach. Scaling up will depend on factors such as the markets we want to enter,” says Mahendran, who is also looking at clocking growth of at least 20% each year for the foreseeable future. 

What’s driving his optimism is the size of the potential market. While the organised market for pesticide services is about ₹500 crore and is equally split between the commercial and residential segments, the unorganised part is just as big. And even within the organised space, the limited number of players — including the ₹100-crore PCI and the UK-headquartered Rentokil — will work to Hicare’s advantage. 

“Another growth driver is low penetration, where there are less than 1 million households using pest control services,” says Vengat Krishnaraj, VP, MAPE Advisory Group, the advisors to the transaction. “In the US, the pest control services business is three times larger than pest control products. In India, pest control is only one-fourth of the overall business.” 

Certainly, in big cities, there is already growing demand for pest control services as high-rise apartment complexes and proximity in residences means an ever-present danger of pest invasion. Moreover, there is a visible conversion from unorganised to organised players, as concerns over the safety of chemicals used and follow-up services increases. Now, Mahendran is clearly counting on a similar transformation in tier 2 and 3 cities as well.