Dabur posted a net profit of ₹490.86 crore in the September quarter, down 3% from a year ago.
Dabur India on Wednesday bought 51 per cent stake in Badshah Masala Pvt Ltd. Ltd. for ₹587.52 crore, forays into the branded spices market through its first acquisition in the packaged food space
New Delhi: Packaged consumer goods company Dabur India Limited on Wednesday bought 51% stake in Badshah Masala Pvt. Ltd. entered the branded spices market through its first acquisition in the packaged food space, for ₹587.52 crore.
The company said the acquisition is in line with its strategic intention to grow its food business to Rs 500 crore in three years and enter adjacent categories.
The company said in a filing to the exchanges that the market value of branded spices and spices in India is more than Rs 25,000 crore.
The transaction, which valued Mumbai-based Badshah Masala at ₹1,152 crore, is expected to be completed in this financial year.
"As per our agreement, we will acquire the remaining 49% shareholding after five years," said PD Narang, group director, Dabur India.
Dabur's move has further strengthened the branded spices market, with several acquisitions including ITC Ltd's investment in Kolkata-based spice maker Sunrise Foods.
In 2020, Norway's Orkla took a 67.8% stake in Kochi-based Eastern Condiments, which sells mixed and single spices.
According to a 2021 report by investment bank Avendus Capital, India's branded spices market will double to Rs 50,000 crore by 2025. By then, half of the spices sold in the country will be branded spices.
The shift from open-branded spices, the growing demand for spice blends (or blends) to simplify the cooking process, and the emphasis on distribution by regional companies are driving this growth in a market dominated by regional brands.
Dabur said it sees ground and blended spices as a good addition to its existing food portfolio.
“The Indian Spices and Spices category is a large and lucrative market. Badshah Masala is one of the major players in this sector. Mohit Burman, Chairman, Dabur India said, "This acquisition will accelerate our growth strategy as we continue to build our food business.
Burman said the company will leverage its international presence to grow the business globally.
Badshah sells over 50 products in India and overseas markets; It has two manufacturing facilities, both located at Umargam in Gujarat.
“Dabur is acquiring 51% stake in Badshah for ₹587.52 crore, less proportionate debt as on closing date, valuing Badshah Enterprises at ₹1,152 crore. This translates into a revenue multiple of approximately 4.5X and an EBITDA multiple of approximately 19.6X of FY23 estimated financials,” the company said.
Badshah Masala reported sales of ₹189 crore in FY22.
Dabur CEO Mohit Malhotra said the company's appetite for acquisitions continues.
“We are already looking for; We have a war chest of ₹5,500 crore. So, that money has been kept only for the purpose of acquisition," he said.
However, he added that in the short term, the company will focus on strengthening this business.
On Wednesday, Dabur also said that it reported a net profit of ₹490.86 crore, down 3% from ₹505.31 crore a year ago.
Consolidated revenue grew 6% to Rs 2,986.5 crore in the second quarter, mainly due to price increases.
The company reported 1% growth in quarterly volumes. Its prices had increased by 6% in the September quarter.
Last week, Hindustan Unilever Ltd reported 4% growth in domestic volumes.
Both companies flagged high inflation.
Malhotra said inflation has been "unprecedented", while the demand environment remains "dull".
"We've seen inflation of around 10% in our domestic business and around 30% in international trade, so it hasn't come down at all. We think it could moderate going forward."
He said the company has reported a 300 basis points reduction in gross margin due to this inflation.
Meanwhile, higher commodity prices also impacted consumption - this was more pronounced in rural markets, with demand increasing in urban markets for the first time in five quarters, the company said.
In the September quarter, Dabur's food and beverage business grew 30 per cent over the previous year, while the home care business grew nearly 21 per cent.
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