Dabur India Q2 net profit dips; to acquire 51% stake in Badshah Masala
5 min read . Updated: 26 Oct 2022, 06:31 PM IST
PremiumDabur Q2 profit slips 2.8% to ₹490.86 cr; revenue up 6% at ₹2,986.5 cr
FMCG giant Dabur India Ltd on Wednesday reported a 2.85 per cent YoY decline in its consolidated net profit to ₹490.86 crore for the second quarter ended September 30 from ₹505.31 Cr reported in Q2FY22.
However, its revenue from operations rose 6 per cent to ₹2,986.49 crore during Q2FY23 against ₹2,817.58 crore recorded in Q2FY22. The Q2 revenue growth stood at 8.5% on a constant currency basis. The consolidated revenue for the quarter reported a 3-year CAGR of 10.5%.
The company said in a regulatory filing that it continued to demonstrate agility and resilience to deliver steady organic growth in an environment that remains challenging, marked by unprecedented inflation and consequential impact on consumption.
"While the challenging economic environment continued to be a concern and impacted the purchasing power, we are seeing green shoots of recovery with the onset of festive season. The impact of inflationary pressures was more pronounced in the Rural markets with demand growth in hinterland lagging Urban markets for the first time in five quarters. However, we are hopeful of rural demand reporting a smart recovery in the coming quarters and we are investing ahead of the curve to ride this demand recovery by expanding our rural footprint by adding nearly 9,000 villages in Q2 of 2022-23 to take our total coverage to over 100,000 villages/' Dabur India Ltd Chief Executive Officer Mr. Mohit Malhotra said.
Dabur is focused on creating shared value and is ploughing higher investments in capital expenditure, digitalization and sustainability. Dabur has made rapid strides on the ESG front and have set ambitious targets, going forward. Dabur became the first Indian consumer goods company to become 100% Plastic Waste Neutral in 2021-22. "Not one to rest on our past laurels, this year we have targeted to become Plastic Waste Positive, by collecting, processing and recycling 35,000 MT of post-consumer plastic waste pan-lndia. We are committed to creating circularity in the value chain to achieve a positive balance by 2030, besides becoming Water Positive by 2030 and Carbon Neutral by 2040/' Mr. Malhotra said.
In 95% of its product range, Dabur's brands have increased market shares ahead of the competition. Dabur recorded a 410 bps increase in market share in the category of juices and nectars, while our market share in the category of digestives climbed by 270 bps. The market share for Chyawanprash climbed by 120 basis points, while our market share for shampoo improved by 40 basis points. Dabur's market share for hair oils climbed by 20 basis points. Dabur's strategy continues to be built on innovation, with new releases accounting for about 4% of sales.
The Foods & Beverages division of Dabur recorded a robust 30% growth. While the Foods business recorded a 21% gain, the Beverages business completed the quarter with a spike of over 30%. The Home Care sector saw growth of about 21%, while the Toothpaste sector had over 11% growth for the quarter thanks to the successful performance of our iconic Dabur Red Paste. The Shampoo & Post-Wash business experienced growth of 9% during the quarter. Additionally, Dabur's OTC Ayurvedic division showed a quarter-over-quarter rise of over 9%. Dabur's International Business reported a 12.3% growth in constant currency terms, driven by significant increases in constant currency in Egypt (23%), Turkey (86%), and Nepal (25%).
The Board of Directors of Dabur India Ltd declared an Interim Dividend of 250% for 2022-23. "Continuing with our payout policy, the Board has declared an Interim Dividend of ₹2.50 per share, aggregating to a total payout of ₹442.94 Crore," Dabur India Ltd Chairman Mr. Mohit Burman said.
Dabur India Limited announced that it has signed definitive transaction agreements to acquire 51% shareholding of Badshah Masala Private Limited. The strategic objective of Dabur is to grow its food business to ₹500 crore in three years and develop into new adjacent categories, which is in line with this acquisition. This also signals Dabur's debut into the Indian market for branded spices and seasonings, which is worth over ₹25,000 crore. With the Badshah company valued at ₹1,152 crore, Dabur is acquiring a 51% stake in it for ₹587.52 crore, less proportionate debt as of the closing date. According to the estimated financials for FY2022-23, this amounts to a revenue multiple of around 4.5x and an EBIDTA multiple of roughly 19.6x.
Announcing the acquisition, Dabur India Ltd Chairman Mr. Mohit Burman said: "The Indian spices and seasoning category is a large and attractive market. Badshah Masala is one of the key players in this space. Our investment in Badshah Masala will help expand this business and continue to provide unmatched quality products. This acquisition will accelerate our growth strategy as we continue to build our Foods business. We intend to leverage our international market presence to grow this business globally."
"The transaction is expected to be Cash EPS neutral in the first year and accretive thereafter. The acquisition is expected to be completed within this fiscal. As per our agreement, we will acquire the balance 49% shareholding after 5 years," Dabur India Ltd Group Director Mr. P. D. Narang said.
Dabur India Ltd Chief Executive Officer Mr. Mohit Malhotra said: "Branded Spices market in India is growing at healthy double digits, led by increasing consumption, upgradation from unbrandedto branded and growing preference for regional flavours across states. The market is dominated by regional players and holds significant potential for growth in the future. Dabur has an existing Foods portfolio and views ground and blended spices as a good addition to this portfolio. Badshah portfolio will gain from Dabur's extensive distribution reach. We look forward to unlocking further synergies and market opportunities to capture the full potential of Badshah Masala."
Badshah Masala Private Limited Managing Director Mr. Hemant Jhaveri said: 'We are delighted to enter into a strategic partnership with Dabur. Dabur stands for Trust and Heritage and joining hands with Dabur will help drive the future growth potential of Badshah on a stronger trajectory. Our companies are a great fit. This transaction will enable us to accelerate our growth by adding our products to Dabur's broad portfolio to meet the needs of consumers across geographies."
Mr. Ajay Shah, Advisor to Badshah Masala Private Limited, said: "This strategic investment of Dabur brings together two strong Indian brands. This deal is growth oriented, mutually complementary, value accretive and beneficial for both the companies."
The shares of Dabur India closed on Tuesday at ₹532.50 apiece, down by 0.81% from the previous close of ₹536.85.
