| 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 of Dabur is expected to remain healthy, supported by its strong market position, calibrated price hikes and market share gains. Operating income grew 9% on-year in the first six months of fiscal 2024, driven by steady performance in the healthcare, food and beverages, and home and personal care segment (HP&C). The healthcare segment saw high double-digit growth in the digestives portfolio, supported by new product launches. HP&C was propelled by continued double-digit growth of Odonil and Odomos, and the food and beverages category was driven by strong performance of the foods portfolio and Badshah spices. Moderating inflation and uptick in rural demand have aided volume growth in fiscal 2024. Strong market position in the segments in which Dabur operates and market share gains should support its performance over the medium term. Despite rise in marketing spends, operating margin for the first six months of fiscal 2024 improved by ~30 basis points (bps) to 20%, led by moderating input cost inflation. The company continues to focus on increasing its advertising spends and maintaining operating margin at 19-21%.
The financial risk profile should remain strong, supported by healthy liquid surplus (investments and cash equivalents) of over Rs 5,000 crore as on September 30, 2023, 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.
In October 2023, Dabur announced pending litigation in the US against its three subsidiaries — Namaste Laboratories LLC (Namaste), Dermoviva Skin Essentials Inc (Dermoviva) and Dabur International Ltd (DINTL) — on allegations that the usage of hair relaxer products led to ovarian cancer, uterine cancer and other health issues among users. As per the announcement on November 15, 2023 by Dabur, two of the subsidiaries viz. DINTL and Dermoviva had been dismissed as defendants, the third entity (Namaste), however, would continue to face charges along with other industry players. CRISIL Ratings understands that at this juncture, the outcome of this litigation is unlikely to have any material financial implications and should not have any material impact on the credit risk profile of the company as the hair relaxer portfolio of Namaste accounts for less than 1% of the consolidated revenue of Dabur. That said, any significant liability arising out of the issue will be monitorable.
Also, on October 17, 2023, Dabur had announced the receipt of intimation of GST ascertained as being payable amounting to Rs 320 crore along with interest and penalty, which the company refutes and is challenging. Strong liquidity position with cash and equivalent of over Rs 5,000 crore as on September 30, 2023, will help fund potential liabilities.
The ratings continue to reflect the strong position of Dabur in India's fast-moving consumer goods (FMCG) industry and its 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, as all the 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: Strong position in India’s FMCG industryThe company has established brands in the natural healthcare, personal care and food products segments. It has ~63% market share in the health supplements segment (Chyawanprash), ~16% in the oral care (toothpaste) segment and ~17% in the hair oil segment. It is the market leader (around 61% 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. Around 90% of its product portfolio gained market share in fiscal 2023.
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 the acquisition of Badshah Masala Pvt Ltd, Dabur has entered the branded spices market and increase its portfolio of offerings.
Healthy financial risk profileThe financial risk profile is supported by healthy cash accrual of Rs 1,100-1,300 crore, and robust capital structure reflected in gearing of 0.14 time and healthy networth of over Rs 9,000 crore as on September 30, 2023. Liquidity is likely to remain robust, as indicated by over Rs 5,000 crore of cash equivalents and investments as on September 30, 2023. Additionally, Dabur has investments in NCDs and bonds worth Rs ~1,780 crore as on March 31, 2023. The financial risk profile will likely remain healthy. Any large capex/acquisition, sizeable payout as settlement, and means of funding will be monitorable.
Weakness: Exposure to intense competitionThe 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 market position and operating efficiency of Dabur |
Liquidity: Superior The company had investments and cash equivalent of over Rs 5,000 crore as of September 2023. Additionally, it has investments in NCDs and bonds worth Rs ~1,780 crore. 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, 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 * Erosion in market share in key business segments, leading to lower cash accrual * Large, debt-funded capex or acquisition weakening the financial risk profile, with gearing increasing to significantly above 0.5 time on a sustained basis |
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 23 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); Odomos (personal care); and 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 (in October 2010), which manufactures haircare and skincare products in Turkey, and Namaste Labs (January 2011), which focuses on hair-care products and has presence in the US, Africa, the Middle East, Europe and the Caribbean.
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 the acquisition of 51% stake in Badshah Masala Pvt Ltd for Rs 587 crore. The balance 49% will be acquired after five years. This acquisition gives Dabur entry into India’s branded spices market. |
Key Financial Indicators*
*CRISIL Ratings adjusted numbers |
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
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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*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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