Rating Rationale
May 19, 2020 | Mumbai
Dabur India Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.157.5 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
 
Rs.20 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
Rs.200 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities and debt programmes of Dabur India Limited (Dabur).

Operating performance of Dabur was impacted from March 2020 due to measures taken by the Centre and various state governments towards containment of Covid-19, which included temporary closure of non-critical establishments and inter-state transportation along-with advisory against travel and visiting areas of mass gatherings. These measures have impacted the sales of the company as they come under non-essential goods. While, most of the measures are applicable till May 31, 2020, prolonged closures can significantly weaken the credit profiles of firms. On the other hand, a faster return to normalcy may contain the extent of deterioration likely. That said, the market position of Dabur is healthy to revert to operational stability due to wide direct and indirect reach.

Revenue is estimated to have grown at just 4-5% year-on-year in fiscal 2020 being impacted by the measures taken to contain the pandemic in the fourth quarter of the year. Operating profitability, which is estimated to have remained healthy at ~20% in fiscal 2020 is likely to moderate slightly due to lower volumes and high fixed expenses amid impact on sales due to lockdown during fiscal 2021. Benign raw material prices and cost cutting measures will partially offset the impact of these measures.

Financial risk profile continues to be moderate due to healthy liquid surplus of Rs ~3300 crore as on September 30, 2019, minimal dependence on external debt and sufficient accruals of Rs 700-1000 crore against capital expenditure (capex) of Rs 200-400 crore per annum over the medium term. The liquid surplus is expected to remain healthy over the medium term.

The ratings continue to reflect the company's strong market position in India's fast-moving consumer goods (FMCG) industry, particularly in the natural and herbal products segment, and its healthy financial risk profile. These strengths are partially offset by the intensifying competition in the industry.

Analytical Approach

The business and financial risk profiles of Dabur; its direct and wholly-owned subsidiaries, H&B Stores Ltd and Dabur International Ltd; and its 23 step-down subsidiaries have been combined. Goodwill on Dabur's overseas acquisitions in fiscal 2011 was amortised over five years beginning fiscal 2012.

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
* Established market position in India's FMCG industry
The strong market position of Dabur is backed by its established brands in the natural healthcare, personal care, and food products segments. Some of its brands enjoy market leadership - in fiscal 2020, ~62% market share in the health-supplements segments (Chyawanprash), 15.4% in the oral care (toothpaste) segment, and ~15% in the hair oil segment. Dabur is also the market leader (~60% share) in the fruit juice segment, with its Real and Active brands. It is also a leader in herbal digestives, and one of the largest producers of ayurvedic drugs in India, a niche segment that has a few national and numerous unorganised players. Strong market position and diverse product offerings have helped the company maintain healthy scale of operations in the domestic FMCG business despite intense competition.

The company is expected to focus on its power brands Dabur Amla, Red, Vatika, Real, Chyawanprash, Honey, Pudin Hara, Lal Tail and Honitus with higher investments to drive growth in the medium term.
 
* Healthy financial risk profile
Financial risk profile is supported by consistent revenue growth, steady profitability and cash generation, robust capital structure, comfortable networth, strong debt protection metrics, and ample liquidity.
 
Despite the impact on income in fiscal 2021, significantly higher in the first quarter, revenue growth will continue to be driven by a mix of organic and inorganic growth. Liquidity is likely to remain robust, with ~Rs 3300 crore of cash and equivalents and marketable securities as on September 30, 2019. The liquid surplus is expected to remain healthy over the medium term.
 
Weakness
* Exposure to intense competition
The Indian FMCG industry has both organised and unorganised players across segments. Furthermore, the growing popularity of herbal and natural products has led to other established FMCG players launching products with a similar positioning in these segments. Intense competition especially from small and regional players will continue to lead to moderate pressure on market position and operating efficiency of players.
Liquidity Superior

Liquidity is superior with Rs 3300 crore in the form of investment and cash equivalents, Rs 2800 crore in debt mutual funds and government bonds and over Rs 300 crore in short-term liquid funds. Annual cash accruals of Rs 700-1000 crore should comfortably cover yearly capex of Rs 200-400 crore over the medium term. Dividend pay-out is expected to remain in-line with previous year at ~40% of consolidated profit over the medium term.

Outlook: Stable

CRISIL believes that Dabur will maintain its robust business risk profile, supported by its strong market position in various product categories. The company is also expected to maintain its healthy financial risk profile. Impact of Covid 19 on revenue and operating margin will remain a key monitorable.

Rating Sensitivity factors
Downward Factor
* A double-digit erosion in market share in key business segments impacts cash generation.
* Any large debt-funded capex or acquisition weakens the capital structure.
About the Company

Established by Dr S K Burman in 1884 at Kolkata and incorporated in 1936, Dabur manufactures personal-care, healthcare, and food products. The company has over 18 brands with sales of over Rs 100 crore each. Dabur 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 (homecare). In 2009, Dabur acquired Fem Care Pharma Ltd (FCPL) for Rs 260 crore. FCPL manufactures 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 two overseas acquisitions'Hobi (acquired in October 2010) is a leading manufacturer and marketer of hair-care and skin-care products in Turkey, while Namaste Labs (acquired in January 2011) 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 acquisition of African brand, Long and Lasting, from D&A Cosmetics Proprietary Ltd and Atlanta Body and Health Products Proprietary Ltd for Rs 24 crore. Dabur also entered into an agreement with CTL Group of Companies (for Rs 9.4 crore) to acquire certain assets (including proprietary rights of sale of personal care products).

In August 2019, Dabur International acquired management control of a new company Excel Investment. Further, Excel Investments (FZE) had acquired 99.99% shareholding stake of Dabur Pakistan and Asian Consumer Care Pakistan (both being step down subsidiaries of Dabur India) from Dabur International (wholly owned subsidiary of Dabur India).

For the nine months through December 2019, company reported Rs 6838 crore in revenue (Rs 6405 for the corresponding period previous year) and a profit after tax of Rs 1166 crore (Rs 1075 crore).

Key Financial Indicators
As on/for the period ended March 31 2019 2018
Operating income Rs.Crore 8533 7748
Adjusted profit after tax Rs.Crore 1459 1358
PAT margin % 17.1 17.6
Adjusted debt/Adjusted networth Times 0.10 0.18
Interest coverage Times 34.40 36.57

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs.Crore) Rating assigned with outlook
NA Bank Guarantee^ NA NA NA 32.5 CRISIL A1+
NA Long Term Bank Facility* NA NA NA 125.0 CRISIL AAA/Stable
NA Non-Convertible Debentures@ NA NA NA 20 CRISIL AAA/Stable
NA Commercial Paper NA NA 7-365 Days 200 CRISIL A1+
@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 
Name of companies Type of consolidation Rationale for consolidation
H & B Stores Ltd., India Subsidiary Business and financial linkages
Dermoviva Skin Essentials Inc., USA Subsidiary Business and financial linkages
Urban Lab International LLC, USA Subsidiary Business and financial linkages
Namaste Laboratories LLC, USA Subsidiary Business and financial linkages
Hair Rejuvenation & Revitalization Nigeria Ltd., Nigeria Subsidiary Business and financial linkages
Healing Hair Lab International LLC, USA Subsidiary Business and financial linkages
Dabur (UK) Ltd Subsidiary Business and financial linkages
Dabur International Ltd Subsidiary Business and financial linkages
Naturelle LLC, UAE Subsidiary Business and financial linkages
African Consumer Care Ltd, Nigeria Subsidiary Business and financial linkages
Dabur Egypt Ltd, Egypt Subsidiary Business and financial linkages
Dabur Nepal Pvt Ltd, Nepal Subsidiary Business and financial linkages
Asian Consumer Care Pakistan Pvt Ltd, Pakistan Subsidiary Business and financial linkages
Hobi Kozmetik Imalat Sanayi ve Ticaret Anonim Sirketi, Turkey Subsidiary Business and financial linkages
Dabur Pakistan (Pvt.) Ltd, Pakistan Subsidiary Business and financial linkages
Ra Pazarlama Ltd irketi, Turkey Subsidiary Business and financial linkages
Asian Consumer Care Pvt Ltd, Bangladesh Subsidiary Business and financial linkages
Dabur Lanka Pvt Ltd, Sri Lanka Subsidiary Business and financial linkages
Dabur Consumer Care Pvt Ltd, Sri Lanka Subsidiary Business and financial linkages
Dabur Tunisie, Tunisia Subsidiary Business and financial linkages
Dabur Pars, Iran Subsidiary Business and financial linkages
Dabur South Africa (Pty) Ltd Subsidiary Business and financial linkages
Forum 1 Aviation Pvt Ltd, India Joint venture Business and financial linkages
Excel Investments (FZE) Subsidiary Business and financial linkages

Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  200.00  CRISIL A1+      30-05-19  CRISIL A1+  22-06-18  CRISIL A1+  23-06-17  CRISIL A1+  CRISIL A1+ 
Non Convertible Debentures  LT  0.00
19-05-20  		CRISIL AAA/Stable      30-05-19  CRISIL AAA/Stable  22-06-18  CRISIL AAA/Stable  23-06-17  CRISIL AAA/Stable  CRISIL AAA/Stable 
Fund-based Bank Facilities  LT/ST  125.00  CRISIL AAA/Stable      30-05-19  CRISIL AAA/Stable  22-06-18  CRISIL AAA/Stable  23-06-17  CRISIL AAA/Stable  CRISIL AAA/Stable 
Non Fund-based Bank Facilities  LT/ST  32.50  CRISIL A1+      30-05-19  CRISIL A1+  22-06-18  CRISIL A1+  23-06-17  CRISIL A1+  CRISIL A1+ 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee^ 32.5 CRISIL A1+ Bank Guarantee^ 32.5 CRISIL A1+
Long Term Bank Facility* 125 CRISIL AAA/Stable Long Term Bank Facility* 125 CRISIL AAA/Stable
Total 157.5 -- Total 157.5 --
*Interchangeable with cash credit, cash credit (book debt), drawee bill, packing credit, bill discounting, and post-shipment credit facilities.
^Interchangeable with letter of credit.
Links to related criteria
CRISILs Approach to Financial Ratios
Rating Criteria for Fast Moving Consumer Goods Industry
CRISILs Approach to Recognising Default
CRISILs Criteria for Consolidation

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

 Anuj Sethi
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 44 6656 3100
anuj.sethi@crisil.com

Gautam Shahi
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
gautam.shahi@crisil.com

Siddharth Gandhi
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 8414
Siddharth.Gandhi@crisil.com 		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL