Dabur Q2 profit dips 3%; to acquire majority stake in Badshah Masala

Homegrown FMCG major Dabur India on Wednesday released its second quarter earnings reports, which showed that its top and bottom line growth were impacted by inflationary pressures. The company also announced the acquisition of a majority stake in Badshah Masala, marking its entry into the over ₹25,000 crore branded spices and seasoning market in India.

The company, engaged in manufacturing of personal care, healthcare, and food products, registered a 2.85% decline in its consolidated net profit to ₹490.86 crore for the second quarter ended September 30, 2022, compared with ₹505.31 crore in the same quarter a year ago. The bottom line growth was impacted by inflationary pressures and the consequential impact on consumption.

Despite the strong headwinds, the consolidated revenue from operations rose 6% to ₹2,986.49 crore in Q2FY23, against ₹2,817.58 crore in the corresponding quarter of the previous fiscal, Dabur said in a BSE filing.

"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,” said Mohit Malhotra, chief executive officer, Dabur India.

“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,” Malhotra added.

During the quarter under review, Dabur's foods & beverages business reported a strong 30% growth. The beverages segment delivered a growth of over 30%, while the foods business was up 21%.

Among others, the home care business grew nearly 21%, while the toothpaste category, riding on the strong performance of our flagship Dabur red paste, ended the quarter with an over 11% growth. The shampoo & post-wash business rose by 9%. Dabur's Ayurvedic OTC business also reported a growth of over 9% during the quarter.

The revenue from international business climbed 12.3% in constant currency terms, led by strong constant currency growths in Turkey (86%), Nepal (25%), and Egypt (23%).

The board of directors of Dabur India also declared an interim dividend of 250% for the financial year 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," Burman said.

In a separate development, Dabur India has signed definitive transaction agreements to acquire 51% stake in Badshah Masala, which is engaged in the business of manufacturing, marketing and export of ground spices, blended spices and seasonings.

As per the company, the acquisition is in line with Dabur's strategic intent to expand its foods business to ₹500 crore in 3 years and expand into new adjacent categories.

Dabur will acquire 51% stake in Badshah for ₹587.52 crore, less proportionate debt as on the closing date, with the Badshah enterprise being valued at ₹1,152 crore. This translates to a revenue multiple of around 4.5x and an EBIDTA multiple of around 19.6x of FY2022-23 estimated financials, it said. 

Commenting on the acquisition, Mohit Burman said: "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."