| Bajaj Consumer Care Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the commercial paper programme of Bajaj Consumer Care Limited (BCCL; formerly Bajaj Corp Ltd).
The rating continues to reflect the company’s leading market position in the niche light hair oil (LHO) segment, strong operating efficiency and healthy financial risk profile driven by low debt. These strengths are partially offset by high dependence on Bajaj Almond Drops Hair Oil (BADHO) and exposure to intense completion in the fast-moving consumer goods (FMCG) industry.
Despite Covid-19 related disruptions in the first half of the fiscal, BCCL recorded a revenue growth of 10% in fiscal 2021 supported by focus on overall hair oil category, increased media presence and better distribution. Revenue growth for BCCL in fiscal 2022 is likely to be supported by launches in Amla and Coconut hair oil category, foray into South and west India, sustained performance of BADHO and better distribution strategy. Operating margin is expected to remain stable at 25-26% in current fiscal despite raw material cost inflation and higher ad spends however below historical levels of 30-33%.
The company’s cash-generating ability has led to strong internal accruals, negative working cycle and negligible debt over the years. BCCL’s strong financial risk profile is likely to sustain over the medium term. Liquid surplus was Rs 594 crore as on March 31, 2021. |
Analytical Approach For arriving at the rating, CRISIL has combined the business and financial risk profiles of BCCL and its wholly owned subsidiaries, Bajaj Bangladesh Ltd, Bajaj Corp International FZE and Uptown Properties and Leasing Pvt Ltd.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: • Leading market position in the niche LHO segment: BCCL is a market leader with BADHO commanding 62.5% market share (value terms) as of March 31, 2021. BADHO’s brand positioning is strengthened by high entry barriers given the strong brand loyalty among customers. The company has wide geographical presence and a distribution network covering more than 42.6 lakh retail outlets. BCCL has also added two new products to its portfolio: Bajaj Amla Aloe Vera Hair Oil and Bajaj Pure Coconut Hair Oil. In terms of market position, BCCL’s market share in Amla category rose to 2.5% (value terms) in Q4 as against 1.6% in Q2 of FY21. In total hair oil category, BCCL has maintained its market share at 10.4% (value terms) as of March 31, 2021. Company has also launched Bajaj Zero Grey primarily for e-commerce and is planning to launch more premium products on e-commerce platform. The company spends vigorously on advertising to increase its reach and has undertaken various initiatives to improve direct reach to consumers. Strong brand recall value of ‘Bajaj’ further aids in retaining dominance in the market.
Expanded product portfolio, strong distribution reach and focus on e-commerce is likely to support sustained growth of 10-15% in medium term
The dividend payout for fiscal 2021 was ~ 52% as compared to 100-105% in earlier years. Going further, the dividend payout is likely to remain at 40-50% of the overall profits. BCCL has healthy cash balances and funds operations mainly through internal accrual. BCCL has a comfortable capital structure and strong debt protection metrics.
Furthermore, pledge of promoter stake has reduced to zero and is likely to remain nil in the medium term. The company had nil exposure to group companies and the same is expected to continue in the future. BCCL is likely to maintain strong credit metrics over the medium term.
Weaknesses:
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Liquidity: Strong Liquidity remains strong, supported by the company's cash generating ability, though most of the profit is paid out as dividend. Liquid surplus of Rs 594 crore as on March 31, 2021, is expected to sustain over the medium term. The company has negligible debt and does not utilise its bank lines. Liquidity is likely to remain strong, supported by healthy cash generation, substantial cash and marketable securities and nil large capex plans, over the medium term. |
Rating Sensitivity factors Downward factors
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About the Company Incorporated in 2006 and part of the Shishir Bajaj Group of companies, BCCL is a leading manufacturer of LHO in consumer packs under the BADHO brand. The company also has presence in other hair oil categories through Bajaj Brahmi Amla, Bajaj Coco Jasmine and Bajaj Kailash Parbat brands. It purchased the Nomarks brand in fiscal 2014 to enter the skin care category. The manufacturing facilities are in Himachal Pradesh, Uttarakhand and Assam.
BCCL is listed on the Bombay Stock Exchange and the National Stock Exchange. As on September 30, 2020, 38% stake was held by the promoters and promoter group entities, and the remaining with the public. Of the total promoter holding, nothing is pledged.
For the three months ended June 30, 2021, BCCL’s profit after tax (PAT) was Rs 48.90 crore on operating income of Rs 216.7 crore, against PAT of Rs 54.24 crore on operating income of Rs 197.5 crore for the corresponding period of the previous fiscal. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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