Subramaniam Sharma, Bloomberg
New Delhi: Dabur India Ltd, India’s second- biggest maker of toothpastes, shampoos and beverages, plans to buy companies in East Asia as it seeks to sustain sales growth that’s averaged 20% in the last two years.
“We will look at acquisitions in the East Asian region as a means of entering new geographies and gaining access to new capabilities in terms of skincare,” Sunil Duggal, chief executive officer, said in a telephone interview from Ghaziabad, near the capital New Delhi, where the company is based.
Dabur India wants to increase the contribution of its overseas business on sales to 20% in three years from about 13% now as it competes with the Indian units of Unilever and Colgate-Palmolive Co. That will reduce risks of depending on one market for the majority of revenue, Duggal said.
“If you put all your eggs in one geographic basket, your business is at a higher level of risk from any economic slowdown or competitive pressures,” said Duggal. “There is a huge opportunity that lies overseas and we have begun to tap it.”
Dabur India, set up in 1884, has five manufacturing plants overseas, mostly in West Asia and Africa. The company has engaged advisers to scout for potential targets, Duggal said, without naming them.
On 23 March, a daily business paper reported Dabur India is close to buying 60% of Unza Holdings Pte, a Singapore- based maker of toiletries and personal-care products, for as much as Rs6.75 billion. The newspaper didn’t say where it obtained the information. Duggal declined to comment on the report.
Dabur’s overseas sales grew by 32% to Rs2.22 billion in the nine months ended 31 December.
“The growth in revenue of the international business division has emerged from existing markets,” Sameer Deshmukh, an analyst at IL&FS Investsmart Securities Ltd in Mumbai, wrote in a note to clients earlier this month. “Entry in new markets will accelerate growth for the division.” He has a “reduce” rating on the stock.
In July, Dabur India’s board approved a proposal to raise as much as $200 million (Rs867 crore) overseas by selling bonds or shares. The company can exercise this option in addition to the Rs1.5 billion in cash it has to pay for any purchase, Duggal said.
Shares of Dabur India have declined 5% this year, compared with a 3.6% fall in the benchmark 30-stock Sensitive index of the Bombay Stock Exchange.
India’s homegrown consumer companies such as Marico Ltd and Godrej Consumer Products Ltd have made purchases abroad to expand their reach overseas and add more products and brands to the portfolio.
Marico, the country’s biggest maker of coconut hair oil, has made six acquisitions of brands and products in India and overseas in the past two years including brands in neighboring Bangladesh and Egypt.
Godrej Consumer, an Indian maker of personal-care products, has acquired companies in South Africa and the UK.
Dabur India also plans to consider setting up a manufacturing plant in Pakistan. It sells products made at its plant in Dubai in the country.
“The products which we have in India are familiar to the Pakistani consumer,” said Duggal. “Culturally, in terms of consuming habits, there are a lot of similarities. It is a market we can ignore only at our own peril.”
Dabur India also plans to increase the sales of its products in the country’s more than 638,000 villages as incomes rise with increased agricultural production. Rural sales account for about 45% of the total, Duggal said.
Demand for products such as toothpastes and deodorants in the nation’s villages will rise 60% to Rs740.2 billion by 2012, New Delhi-based industry group Associated Chambers of Commerce & Industry of India said in December.
The company is now focused on motivating “the wholesaler to promote our products more than others,” said Duggal. It is also working with village administration bodies, called panchayats, on programs that will help build its brands such as the Amla hair oil, he said.
Dabur India plans to unveil a new brand of skincare products early next year and will be priced aimed at the “mid-segment,” Duggal said, without providing any more details.
“If it will be an ayurvedic product or more in the herbal domain, these are areas we have to think through,” said Duggal.