| Dabur India Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities and debt programmes of Dabur India Limited (Dabur).
The operating performance is expected to remain healthy, supported by the strong market position of Dabur, calibrated price hikes and market share gains. Operating income grew 5.7% year-on-year in the first nine months of fiscal 2023, driven by growth in the food and beverage segment followed by home and personal care segment. Increasing inflationary pressure and subdued rural demand are likely to impact volume growth of the industry in the near term. Strong market position in the segments in which Dabur operates and market share gains should support its performance over the medium term. Operating margin for the first nine months of fiscal 2023 contracted 170 basis points (bps) to 19.8% due to input cost inflation. However, the company has been able to maintain healthy operating margin, mainly on account of optimisation of advertising spends and partial price hikes. While the margin can face slight moderation in the near term due to the inflationary pressures, it will continue to remain healthy, over the medium term, considering moderation in inflation in the fourth quarter of fiscal 2023.
The financial risk profile is expected to remain strong, supported by healthy liquid surplus (investments and cash equivalents) of over Rs 5,000 crore as on September 30, 2022, with low dependence on external borrowing and sufficient accrual of Rs 1,100-1,300 crore against capital expenditure (capex) of Rs 300-500 crore per annum over the medium term. Any large capex or acquisition will be a key monitorable.
The ratings continue to reflect the company’s strong position in India's fast-moving consumer goods (FMCG) industry and healthy financial risk profile. These strengths are partially offset by exposure to intense competition. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Dabur and its direct and stepdown subsidiaries. This is because all these entities have common management and significant business and financial linkages.
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:
The company has established brands in the natural healthcare, personal care and food products segments. It has ~65% market share in the health supplements segment (Chyawanprash), ~16% in the oral care (toothpaste) segment and ~15% in the hair oil segment. It is the market leader (around 62% share) in the fruit juice segment, with its Real and Active brands. It is also the leader in herbal digestives and is one of the largest producers of ayurvedic drugs in India.
The company continues to focus on its brands - Dabur Amla, Red, Vatika, Real, Chyawanprash, Honey, Pudin Hara, Lal Tail and Honitus. Strong market position, diverse product offerings and healthy investments in new products will drive growth over the medium term. With acquisition of Badshah Masala, Dabur is set to enter the branded spices market and increase its portfolio of offerings.
The financial risk profile is supported healthy cash accrual of Rs 1,100-1,300 crore, robust capital structure supported by gearing of 0.1 time, and reported healthy networth of over Rs 8,800 crore as of September 2022. Liquidity is likely to remain robust, as indicated by over Rs 5,000 crore of cash equivalents and investments as on September 30, 2022. The financial risk profile is expected to remain healthy over the medium term. Any large capex/acquisition will remain a monitorable.
Weakness:
The company faces competition from players in organised and unorganised sectors. Because of the growing popularity of herbal and natural products, other established FMCG players are launching similar products, putting pressure on the company’s market position and operating efficiency. |
Liquidity: Superior The company had investments and cash equivalents of over Rs 5,000 crore as of September 2022. Expected cash accrual of Rs 1,100-1,300 crore per fiscal will sufficiently cover yearly capex of Rs 300-500 crore over the medium term. The company pays ~50% of consolidated profit as dividends.
ESG Profile
CRISIL Ratings believes Dabur’s ESG profile supports its strong credit risk profile.
The FMCG sector has a moderate environmental and social impact, primarily driven by its raw material sourcing strategies, waste intensive processes, and its direct impact on the health and wellbeing of its customers.
Key ESG highlights
There is growing importance of ESG among investors and lenders. Dabur’s continued commitment to ESG principles will play a key role in enhancing stakeholder confidence. |
Outlook: Stable CRISIL Ratings believes Dabur will continue to benefit from its strong market position in various product categories and maintain healthy financial risk profile. |
Rating Sensitivity factors Downward factors
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About the Company Dabur was established by Dr S K Burman in 1884 in Kolkata. Incorporated in 1936, the company manufactures personal care, healthcare and food products. It has over 20 brands with sales of over Rs 100 crore each. It acquired three companies of the Balsara group for Rs 143 crore in 2005, along with the brands Promise, Babool and Meswak (oral care); and Odomos, Odonil, and Odopic (home care). In 2009, Dabur acquired Fem Care Pharma Ltd (FCPL) for Rs 260 crore. FCPL manufactured consumer products: bleach, liquid soaps and hair removing creams under the Fem brand, and fabric softeners and stain removers under Bambi. In fiscal 2011, Dabur completed its overseas acquisitions—Hobi (acquired in October 2010), which manufactures haircare and skincare products in Turkey, and Namaste Labs (acquired in January 2011), which focuses on hair-care products and has presence in the US, Africa, the Middle East, Europe and the Caribbean region.
In April 2018, Dabur completed the acquisition of the African brand, Long and Lasting, from D&A Cosmetics Proprietary Ltd and Atlanta Body and Health Products Proprietary Ltd, for Rs 24 crore. Dabur has entered into an agreement with the CTL group of companies (for Rs 9.4 crore) for certain assets (including proprietary rights of sale of personal care products).
In August 2019, Dabur International Ltd acquired management control of Excel Investment (FZE) which holds 99.99% stake in Dabur Pakistan and Asian Consumer Care Pakistan (both are step-down subsidiaries of Dabur India).
In January 2023, Dabur completed acquisition of 51% stake in Badshah Masala Pvt Ltd for Rs 587 crore and balance 49% will be acquired after a period of five years. With this acquisition, Dabur will gain entry in India’s branded spices market. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
@Yet to be placed *Interchangeable with cash credit, cash credit (book debt), drawee bill, packing credit, bill discounting and post-shipment credit facilities ^Interchangeable with letter of credit |
Annexure – List of entities consolidated
*Dabur has acquired the balance stake of ~24% in Asian Consumer Care Pvt Ltd w.e.f. November 24, 2022, taking total shareholding to 100%. The name of the step down wholly owned subsidiary was changed to “Dabur Bangladesh Private Limited" w.e.f. February 16, 2023. **Dabur Tunisie is under process of liquidation. ***Dabur has acquired 51% stake in “Badshah Masala Pvt Ltd” w.e.f. January 2, 2023. ****subsidiary through control by management *****Herbodynamic India Ltd (HIL) was dissolved on January 11, 2023. |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 04-Apr-23 in line with the lender-wise facility details as on 30-Jul-21 received from the rated entity.
*Interchangeable with cash credit, cash credit (book debt), drawee bill, packing credit, bill discounting and post-shipment credit facilities
^Interchangeable with letter of credit
Criteria Details
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