‘I want the family to have a war chest to do things outside Dabur’
1 min read . Updated: 02 Jan 2023, 10:11 PM IST
PremiumThe family’s recent stake sale in Dabur India will go towards funding businesses outside of Dabur, Dabur India chairman Mohit Burman said in an interview.
NEW DELHI : Year 2022 was eventful for fast-moving consumer goods company Dabur India Ltd. It acquired a controlling stake in spices maker Badshah. Dabur’s promoters , the Burmans, also became promoters of dry cell battery maker Eveready Industries, and have plans to overhaul the business, invest in advertising and enter new categories, Dabur India chairman Mohit Burman said. The family’s recent stake sale in Dabur India will go towards funding businesses outside of Dabur, Burman said in an interview. Edited excerpts.
After the Badshah acquisition, are you looking at acquisitions in other segments within this portfolio?
Dabur will always look at acquisitions. Historically, we have done a few which have taken us into new territories and new product segments. Spices is a large market in India—it is unorganized; every state has its own taste. We wanted a stepping stone in this category and Badshah has given us that. Now, we have to understand what type of products we can launch in different states and how to make it a national brand.
Why is the Burman family looking at inorganic opportunities, especially distressed assets?
We are a 135-year-old business family, and have historically invested in many businesses outside Dabur India. As we have separated our ownership from management in Dabur, this is a logical step. Dabur is a pure FMCG (fast moving consumer goods) company and very focussed in its approach and business.
As for whether we like distress or good businesses, I’d say we look at business more from a potential approach and sectors we understand—such as consumer, healthcare and financial services.
Why are Eveready Industries and Religare Enterprises of interest?
Both businesses have a brand and legacy and are ably run by professional and sensible managements; we believe there can be substantial growth and value creation. The businesses were dragged down by erstwhile promoter-related issues and if we put the right strategy and an able team to execute the strategy, both companies can give substantial shareholder returns.
How do you monitor distressed investments?
We have been investing in distressed assets for over 20 years. For instance, we acquired a company called Punjab Tractors alongside private equity firm Actis (in 2006) which we sold off to the Mahindras after turning it around.
We focus on businesses where we can turn around the asset, where we believe we have the management depth to add value.
In terms of how we add value, we use the model that we use for all of our businesses where we hire a team, we incentivize the team and we get one of the best consultants to do a five-year strategy. That’s how it has been for all of our businesses including Dabur.
Eveready Industries has hired Bain & Co. How is that going? Are you looking at entering into new categories?
We are focussing on growing our existing categories where we are market leaders. We are market leaders in zinc batteries, Duracell is (market leader) in alkaline. We are putting up a plant to fight Duracell in the alkaline space. We will be spending money in advertising for the lighting businesses and we are looking to grow the third category—which is flashlights and rechargeable torches. For the next 12 months, we are going to focus on that. Bain will advise us on the new categories we should get into. We’ve already spent close to ₹ 1,000 crore on acquiring the company; so, we will be investing whatever the business needs. We believe that in three years’ time, it will be a very profitable business.
What are the monetization opportunities the family is looking at over the next 12 months?
At this point of time, monetization opportunities are limited. We’ve just spent a lot of time and money on acquiring businesses. Within Dabur, we did Badshah.
We (The Burman family) also acquired Eveready business. At this point of time, we are more focused on growing these businesses and actually scaling it up before we can think of monetization.
Is the family likely to sell more stake in Dabur over the next one year?
No. So, that stake sale was done because we wanted some firepower to do businesses outside of Dabur. Dabur believes in the highest of corporate governance. If it’s unrelated businesses, the family does it on its own.
So, as you know, Dabur has a huge war chest of ₹5,000 crore for its acquisitions. I wanted the family to have a similar war chest to do things outside of Dabur. That’s why this was done.
What is the war chest now?
We just did about ₹1,200 crore i.e. what we just got (through a block deal in December). We would have at least ₹ 2,000-2,500 crore of cash to look at opportunities.
So essentially outside of Dabur, Eveready, to a certain extent, most of your investments are financial in nature?
I’m personally involved in six businesses—Dabur, Eveready, two insurance companies (Aviva Life Insurance, Universal Sompo General Insurance), but we also have a large QSR (Quick Service Business) business under Taco Bell. So, Yum! globally owns three brands KFC, Pizza Hut and Taco Bell. Taco Bell is with me and my brother, Gaurav—we have the master franchise in India.
We have ambitions (for Taco Bell)—we are at 120 or 130 outlets. We have ambitions to be 300 in two years’ time. We are opening one (restaurant) a week.
There’s been some shakeup in the FMCG space—Reliance has entered the FMCG market. Will that disrupt the market?
Globally, there’s always evolution in terms of FMCG and retail. There will always be general trade move towards modern trade and e-commerce. This happens globally and businesses have to be ready to be able to face that. We’re getting ready—although most of our business will still come from general trade, but we’re moving towards having the right product portfolio to get into modern trade, to have a portfolio for e-commerce. We understand that a shift is happening.
Are you looking at investing in D2C brands or other new-age brands?
We look at these quite often; we had looked at Oziva as well (where HUL acquired a 51% stake in December). The problem with these new D2C (Direct to Consumer) brands is that we’re still so old-fashioned, brick and mortar, it’s very difficult to justify the valuations that these businesses have. So, when these D2C brands do come to us, after evaluating, it is just very difficult for us to be able to justify the valuations but now we’re becoming a little bit more flexible. So let’s see, maybe soon. Again, these (potential acquisitions) will be only in the consumer segment—health and beauty.
What is the family office looking at?
We had the concept of a family office many years ago; we don’t really have a family office anymore. Because historically, in the fourth generation, members of the Burman family were actively involved in working at Dabur. So, we used to have a family office that used to take care of all the investments centrally. Now, no family member is working in Dabur. So, each family kind of looks after their own investments. So, we don’t have a centralized family office.
Are you worried how demand will pan out next year given resurgence of covid and even overall high inflation?
Yes, there is high inflation—but there’s also good growth in India. Of course, in the last couple of quarters, inflation and commodity pricing pieces have hit our margins, and since we are in the mass market FMCG business, we can’t pass on those price rises to the customer all in one go. We have been taking a couple of price rises, we have been trying to mitigate the margin pressure, but if you look at the growth India is seeing and we’re seeing—I don’t foresee any long-term problem. I think these are short term hiccups and we’ll get over it in the next few quarters.
Is Kings Punjab, the IPL franchise co-owned by you, looking at an IPO?
The business is at a stage where value unlocking is possible but we have not decided what route to take.
Why is that?
At this point of time, the new media rights have just clocked in. This is going to be the first year on media rights. After many years, we are back and playing in this home-and-away format in India. So, we just really want to see how this season goes before we do something.
