Dabur India Ltd:Annual Report 2023-24 Analysis

Dabur India Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Dabur India Ltd. was founded in 1884 by Dr. S. K. Burman, a physician, in Kolkata, West Bengal. Initially, it started as a small pharmacy dispensing medicines based on traditional Ayurvedic formulations.

Headquarters Location and Global Presence:

The company’s corporate headquarters is located in Ghaziabad, Uttar Pradesh, India. Dabur has a significant global presence, with operations and distribution networks spanning across Asia, Africa, the Middle East, Europe, and North America. They have manufacturing facilities in India, Nepal, Bangladesh, Dubai, and Egypt.

Company Vision and Mission:

• Vision: To be the world’s most trusted and preferred provider of healthcare and personal care products.
• Mission: Dedicated to health & well-being of every household.

Key Milestones in Their Growth Journey:

• 1884: Founded by Dr. S.K. Burman as a small Ayurvedic pharmacy.
• Early 20th Century: Began mass production of Ayurvedic medicines.
• 1972: Established a factory at Faridabad, Haryana.
• 1979: Dabur Research Foundation (DRF) established to focus on Ayurvedic research.
• 1986: Dabur listed on the Bombay Stock Exchange (BSE).
• 1994: Launched Vatika hair care range.
• 1996: Launched Real fruit juice range.
• 2000s: Expansion into new categories like foods and home care. Continued global expansion.
• Present: Remains a leading FMCG company with a diversified portfolio.

Stock Exchange Listing Details and Market Capitalization:

Dabur India Ltd. is listed on the Bombay Stock Exchange (BSE: 500096) and the National Stock Exchange (NSE: DABUR). As of October 26, 2023, the company’s market capitalization is approximately ₹1,079.73 billion INR.

Recent Financial Performance Highlights:

Dabur has consistently demonstrated revenue growth in recent years. The company has also focused on improving profitability through cost optimization and strategic pricing. The details would be in the annual reports.

Management Team and Leadership Structure:

• Chairman: Mohit Burman
• Vice Chairman: Amit Burman
• CEO: Mohit Malhotra

The company has a well-defined leadership structure with experienced professionals heading various departments.

Notable Awards or Recognitions:

Dabur has received numerous awards and recognitions for its business performance, sustainability initiatives, and product quality.

Their Products #

Complete Product Portfolio with Categories:

Dabur’s product portfolio is diverse, encompassing various categories:

• Healthcare: Chyawanprash, Honey, Ayurvedic medicines, cough syrups, digestive products, oral care products (toothpastes, mouthwashes).
• Personal Care: Hair care (shampoos, oils, conditioners), skin care (creams, lotions, soaps).
• Home Care: Air fresheners, sanitizers, surface cleaners.
• Foods: Fruit juices (Real), culinary pastes, cooking sauces.

Flagship or Signature Product Lines:

• Dabur Chyawanprash: A traditional Ayurvedic health supplement.
• Dabur Honey: A leading honey brand in India.
• Dabur Amla Hair Oil: A popular hair oil for promoting hair growth and health.
• Real Fruit Juices: A wide range of fruit juices in various flavors.
• Vatika: Hair care brand offering shampoos, conditioners, and hair oils.
• Meswak: Herbal toothpaste.

Quality Certifications and Standards:

Dabur adheres to stringent quality standards and has certifications such as ISO 9001, ISO 14001, and OHSAS 18001. It also complies with relevant regulatory requirements in each of the countries where it operates.

Recent Product Launches or R&D Initiatives:

Dabur regularly launches new products and undertakes R&D initiatives to cater to evolving consumer needs and market trends. The focus is also on natural and herbal products.

Primary Customers #

Geographic Markets (Domestic vs. International):

Dabur has a strong presence in the Indian domestic market, which contributes a significant portion of its revenue. However, it also has a growing international presence, with key markets in the Middle East, Africa, and Southeast Asia.

Distribution Network and Sales Channels:

Dabur has a wide distribution network comprising distributors, retailers, modern trade outlets, and e-commerce platforms.

Major Competitors #

Direct Competitors in India and Globally:

• Hindustan Unilever Limited (HUL)
• Procter & Gamble (P&G)
• Colgate-Palmolive
• Godrej Consumer Products Limited (GCPL)
• Emami
• Marico

How They Differentiate from Competitors:

• Ayurvedic Heritage: Leverages its strong foundation in Ayurveda to offer natural and herbal products.
• Strong Brand Equity: Dabur enjoys high brand recognition and trust among consumers.
• Extensive Distribution Network: Has a well-established distribution network across India and select international markets.
• Diversified Product Portfolio: Offers a wide range of products across various categories.

Industry Challenges and Opportunities:

• Challenges: Intense competition, changing consumer preferences, increasing raw material costs, and regulatory complexities.
• Opportunities: Growing demand for natural and herbal products, rising disposable incomes, increasing urbanization, and expanding e-commerce channels.

Market Positioning Strategy:

Dabur positions itself as a leading FMCG company offering high-quality, natural, and Ayurvedic products at affordable prices.

Future Outlook #

Expansion Plans or Growth Strategy:

Dabur aims to expand its product portfolio, strengthen its distribution network, and increase its market share in both domestic and international markets. This includes expanding into new geographies and product categories.

Sustainability Initiatives or ESG Commitments:

Dabur is committed to sustainable business practices and has undertaken various initiatives in areas such as water conservation, waste management, and community development.

Industry Trends Affecting Their Business:

• Increasing Demand for Natural and Organic Products: Consumers are increasingly seeking natural and organic alternatives to conventional products.
• Growing E-commerce Channel: E-commerce is becoming an increasingly important channel for FMCG companies.
• Focus on Health and Wellness: Consumers are becoming more health-conscious and are seeking products that promote health and wellness.

Long-Term Vision and Strategic Goals:

Dabur’s long-term vision is to be a leading global FMCG company offering a wide range of high-quality, natural, and sustainable products. Their strategic goals include driving revenue growth, improving profitability, and enhancing shareholder value.

Financial Performance Analysis #

3-Year Trend Analysis of Key Financial Metrics #

• Consolidated Revenue from Operations grew from ₹10,888.7 crore (FY2021-22) to ₹11,529.9 crore (FY2022-23) and reached ₹12,404 crore in FY2023-24, indicating a sustained upward trajectory.
• Net Profit increased from ₹1,707.15 crore (FY2022-23) to ₹1,842.68 crore (FY2023-24).
• Operating Profit Margins improved, rising from 18.8% (FY2022-23) to 19.4% (FY2023-24).
• Earnings Per Share (Basic) showed improvement, moving from ₹9.6 to ₹10.4.
• Return on Net Worth (RoNW) has improved from 18% to 18.6%.
• The Company’s working capital cycle improved from 21.7 days in 2022-23, to 13.2 days in 2023-24.
• Debt-equity ratio during FY2023-24, remained low at 0.14.

Business Segment Performance #

• The Consumer Care Business accounted for 55.8% of consolidated sales, demonstrating a major revenue portion.
• Food & Beverages Business comprised 16.2% of consolidated sales.
• International Business represented 24.8% of consolidated revenue, with a constant currency growth of 16.4%.
• Within India FMCG, Health Care contributed 31.4%, Home & Personal Care 48.6%, and Food & Beverages 20%.
• The Health Care business reported 4.2% growth, while the Home & Personal Care segment grew by 8.1%.
• The Digestives business reported 15.8% growth.
• Oral care and home care had double-digit growth.
• The newly established Therapeutics Division reached out to 110,000 medical professionals.

Major Strategic Initiatives and Their Progress #

• Power Brand Strategy: Focus and investment behind key brands, with 23 brands now exceeding ₹100 crore in turnover.
• Expanded Distribution: Direct reach expanded to 1.42 million retail outlets, covering over 7.9 million outlets in total, and increased rural presence to 122,000 villages.
• New Product Development: Launched 14 new products, signifying entry into emerging categories. New product contribution to sales was 3.4%.
• Digital-First Brands: These brands collectively grossed over ₹100 crore in turnover.
• Badshah Masala Acquisition: The acquired business showed a 21% growth, driven by brand rejuvenation and distribution enhancement.
• The all-women production line in Indore has resulted in a 10% enhancement in the factory’s overall productivity.

Risk Landscape Changes #

• Increased regulatory scrutiny around corporate governance, tax laws, material sourcing, emissions, waste generation, and quality of finished goods has posed regulatory risks.
• Inflationary Risk are caused due to international conflict, market uncertainty and currency devaluation.
• Data privacy, protection and IT security is a significant risk.

ESG Initiatives and Metrics #

• Committed to becoming a Net Zero Emissions Enterprise by FY2045.
• Eliminated 100% coal usage across operations in FY2023-24.
• 51% of energy is now sourced from renewable and cleaner sources.
• Reduced Water Intensity by 29% and Energy Intensity by 16%.
• Maintained Plastic Waste Positivity by collecting, recycling, and co-processing 103% of the plastic waste generated by product packaging.
• Positively impacted 3.05 million lives through CSR initiatives.
• Increased gender diversity target at managerial level to 21% by FY2027-28; achieved 13% in FY2023-24.
• 86% sustainable sourcing of high deforestation risk materials.
• 10,145 acres of land brought under cultivation of medicinal plants.
• 140% increase in S&P Global 2023 Corporate Sustainability Assessment (CSA) Score.

Management Outlook #

• The company is preparing roadmap to achieve net zero emissions by FY 2045.
• Optimistic about a gradual recovery in rural consumption in the current year (FY 2024-25), supported by expected normal monsoon and government focus on infrastructure.
• Continued focus on Power Brands, expanding Total Addressable Market (TAM), driving innovation, and expanding distribution.
• Strategies are in place to capture opportunities in Quick Commerce.
• Gradual improvement in margins is the overall objective, coupled with growing profits ahead of revenue.
• Dabur aims to be the first Indian FMCG Cloud-Only enterprise.
• The company plans to increase renewable energy usage in its manufacturing sites to >60% by FY2025-26.

Detailed Analysis #

Financial Analysis of Dabur India Limited #

Balance Sheet Analysis (3-Year Comparative) #

(All amounts in ’ crores, unless otherwise stated)

Significant Changes in Major Line Items (>10% YoY) #

FY 2023-24 vs. FY 2022-23: #

• Capital work-in-progress: Increased by 22.18% due to ongoing projects.
• Other intangible assets: Decreased by 9.6% due to amortisation.
• Other Investments: Decreased by 4.93%.
• Current Investments: Increased by 126.16%, indicating a shift towards short-term, liquid investments.
• Cash and cash equivalents: Increased by 68.68%.
• Bank balances other than cash and cash equivalents: Increased by 133.73%
• Other current assets: Increased by 64.79%
• Non-current Borrowings: Increased by 79.35%
• Lease Liabilities (Non-Current): Increased by 17.93%
• Current Borrowings: Decreased by 11.14%.
• Other Current Liabilities: Increased by 68.44%.
• Current Tax Liabilities: Increased by 32.92%.
• Deferred Tax Liabilities: Increased by 19.83%.

FY 2022-23 vs. FY 2021-22: #

• Capital work-in-progress: Increased by 2.37%
• Intangible assets under development: Increased by 1017.65%
• Other investments: Decreased by 7.63%.
• Current Investments: Increased by 45.34%
• Trade Receivables: Increased by 9.88%
• Cash and cash equivalents: Increased by 845.41%
• Bank balances other than cash and cash equivalents: Increased by 1993.75%
• Other current assets: Increased by 46.51%
• Non-current Borrowings: Increased by 19.35%.
• Non-current Lease Liabilities: Decreased by 44.03%.
• Current Borrowings: Increased by 13.44%
• Other Current Liabilities: Decreased by 32.52%
• Provisions (current): Increased by 22.47%
• Current Tax Liabilities: Increased by 91.28%

Working Capital Trends #

Analysis:

Working capital has increased significantly in FY 2023-24 compared to FY 2022-23. This indicates the company has increased the difference between its liquid assets and liabilities.

Asset Quality Metrics #

Analysis: The ratio had remained stable, indicating consistent usage of assets.

Debt Structure and Maturity Profile #

Analysis:

• Non-current borrowings have increased, primarily due to unsecured NCDs.
• Current borrowings have decreased, with variations across different types of borrowings.
• The maturity profile cannot be fully determined without specific repayment schedules for each loan/NCD.

Off-Balance Sheet Items #

Analysis:

• Contingent liabilities primarily consist of claims against the company not acknowledged as debt. These have decreased by 11% approximately between March 31, 2023, and March 31, 2024.

Dabur India Limited Financial Analysis (FY23-24) #

Revenue Breakdown #

• Consolidated Revenue Growth: 7.6% (₹12,404 crore). Constant Currency Growth: 10.1%.
• India Business Growth (including Badshah): 7.7%, Volume Growth: 5.5%.
• International Business Growth: 16.4% (Constant Currency).

Segment Breakdown #

• Consumer Care: 55.8% of Consolidated Sales.
  • Healthcare: Grew by 4.2%, 4-year CAGR of 7.6%.
  • HPC: Grew by 8.1%.
  • Oral Care & Home Care: Double-digit growth.
• Food & Beverages: 16.2% of Consolidated Sales.
  • Flat year, but 4-year CAGR of 15%.
  • Badshah Business: Grew by 21%.
• International Business: 24.8% of Consolidated Sales.
  • Middle East: 24% of International Business.
  • Africa: 24% of International Business (Egypt and Nigeria key markets).
  • Turkey: Grew by 52.3% (Constant Currency).

Cost Structure #

• Material Cost: Deflation of 2.25%.
• Employee Expense: Increased by 9.0% (Standalone).
• Advertising & Publicity: Increased by 32.6%.

Margin Analysis #

• Gross Margin: Improved by 240 bps.
• Operating Margin: Expanded by 60 bps to 19.4% (Consolidated).
• Net Profit Margin: 14.6% (Consolidated).

Operating Leverage #

• Operating profit increased by 11%, outpacing revenue.

Non-Recurring Items #

• Exceptional Item: None for the period under review in consolidated statement of profit and loss, while standalone income statement reports exceptional item of (`29.65) cr. in FY 2022-23.

EPS Analysis #

• Basic EPS: ₹10.4 (Consolidated), ₹8.52 (Standalone)
• Diluted EPS: ₹10.38 (Consolidated), ₹8.50 (Standalone)

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components (Consolidated) #

Operating Cash Flow (OCF) #

• Increased to ₹2,013.47 crores in FY2023-24 from ₹1,488.43 crores in FY2022-23.
• Net Profit before tax: Increased from previous year.

Investing Cash Flow (ICF) #

• Net cash used in investing activities: ₹(971.74) crores in FY2023-24, compared to ₹(586.54) crores in FY2022-23.
• Major components included Purchase of investments, Proceeds from sales of investments.

Financing Cash Flow (FCF) #

• Net cash used in financing activities: ₹(1,161.18) crores in FY2023-24, compared to ₹(1,035.24) crores in FY2022-23.
• Includes Proceeds from borrowing, and repayments.

Working Capital Management Efficiency #

• Working Capital Days: Reduced to 13.2 days in FY2023-24 from 21.7 days in FY2022-23.
• Receivable Days: Remained stable at approximately 27 days.
• Inventory Days: Decreased to 57.3 days from 64.1 days.
• Payable Days: Stood at 71.6 days.

Capex Analysis by Segment (Consolidated) #

• Consumer Care Business: ₹266.93 crores in FY2023-24, up from ₹256.78 crores in FY2022-23.
• Food Business: ₹151.90 crores in FY2023-24, up from ₹102.23 crores in FY2022-23.
• Other Segments: ₹1.66 crores in FY2023-24, up from ₹1.25 crores in FY2022-23.
• Unallocated: ₹81.66 Cr.
• Total : ₹502.15 Cr.

Dividend and Share Buyback Trends #

Dividend #

• Interim dividend of ₹2.75 per share paid in FY2023-24.
• Final dividend of ₹2.75 per share proposed for FY2023-24.
• Total dividend for FY2023-24: ₹5.50 per share, up from ₹5.20 in FY2022-23.
• Dividend payout ratio for FY2023-24: 53.81%.

Share Buyback #

• No share buyback activity reported during FY2023-24 or the previous year.

Debt Service Coverage #

• Interest Service Coverage Ratio: 23.2 for FY 2023-24, and 33.3 previous year.

Liquidity Position and Cash Conversion Cycle #

• Current Ratio: 1.45 for FY2023-24, up from 1.18 in FY2022-23.
• Net Cash Position: ₹6,447 crores as of March 31, 2024.
• Cash and Cash Equivalents: ₹247.60 crores at the end of FY2023-24.
• Cash Conversion Cycle: Not directly provided, but improvements in working capital days (reduction from 21.7 to 13.2) suggest a more efficient cycle.

Financial Analysis: Key Metrics and Trends #

Profitability Ratios (3-Year Trends) #

Return on Net Worth (RoNW) / Return on Equity (ROE) #

• FY2023-24: 18.60% (Consolidated), 22.86% (Standalone)
• FY2022-23: 18% (Consolidated), 22.60%(Standalone)
• FY2021-22: Trend indicates an increase.

Return on Invested Capital (ROIC) #

• FY2023-24: 37.8% (Standalone)
• FY2022-23: 35.3%(Standalone)

Operating Profit Margin #

• FY2023-24: 19.4% (Consolidated and Standalone)
• FY2022-23: 18.8%(Consolidated)

Net Profit Margin #

• FY2023-24: 14.9% (Consolidated)
• FY2022-23: 14.8% (Consolidated)

Liquidity Metrics #

Current Ratio #

• FY2023-24: 1.45 (Standalone)
• FY2022-23: 1.18 (Standalone)

Efficiency Ratios #

Receivables Turnover Ratio #

• FY2023-24: 14.03 (Standalone)
• FY2022-23: 15.29 (Standalone)

Leverage Metrics #

Debt/Equity Ratio #

• FY2023-24: 0.14 (Consolidated), 0.11(Standalone)
• FY2022-23: 0.13(Consolidated), 0.10(Standalone)

Interest Service Coverage Ratio #

• FY2023-24: 23.2 (Consolidated)
• FY2022-23: 33.3 (Consolidated)

Working Capital Ratios (Standalone) #

Working Capital Days #

• FY2023-24: 13.2 days
• FY2022-23: 21.7 days

Receivable Days #

• FY2023-24: 27.5 days
• FY2022-23: 26.9 days

Inventory Days #

• FY2023-24: 57.3 days
• FY2022-23: 64.1 days

Payable Days #

• FY2023-24: 71.6 days
• FY2022-23: 69.2 days

Key Trend Observations #

• Decrease in the Interest Coverage Ratio from 33.3 to 23.2.
• Decrease in inventory days, coupled with a slight increase in payable days, contribute to lower working capital days, down from 21.7 days to 13.2 days.
• The current ratio has increased from 1.18 to 1.45.

Business Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Consumer Care Business: Revenue of ₹9,942.20 crore in FY2023-24, a growth of 7.7%, and a contribution of 55.8% of total revenue.
• Home & Personal Care (HPC): Reported 8.1% growth, contributing 48.6% of India FMCG business. Within HPC, Oral Care and Home Care demonstrated double-digit growth.
• Health Care: Grew by 4.2% during FY2023-24, with OTC Digestives posting double-digit growth, and contributed 31.4% of India business. Health Supplements business saw slow growth.
• Food & Beverages (F&B) Business: Accounted for 16.2% of Consolidated Sales. F&B segment contributed 20% of India’s FMCG Business during 2023-24. Beverages business recorded a 4 year CAGR of 15%.
• International Business: Represented 24.8% of consolidated sales for FY 2023-24, with 16.4% constant currency growth. The Middle East is the largest region, comprising 24% of the international business. Egypt witnessed high double-digit inflation. Hobi Kozmetik in Turkey saw strong revenue growth of 52.3% in constant currency terms.

Market Share and Competitive Position #

• Dabur gained market share across 95% of its portfolio.
• Hair Oil: Highest-ever market share at 17.2%.
• Shampoo: Market share gain to 7.2%.
• Dabur Red Paste: The brand continues to lead the market.
• Dabur Honey gained market share.
• Hajmola: Market share increased by 200 bps to 54.8%.
• Odomos: Market share increased by 600 bps in the personal application mosquito repellent category.
• Dabur Herb’l and Dabur Red Paste: Number two player in the toothpaste category.
• Dabur Amla Hair Oil: No. 1 position in Hair Oils in the Middle East.
• Vatika Shampoo: #1 position in the natural shampoo segment in the Middle East.
• Vatika Hair Cream: No.1 position in UAE and KSA.
• Vatika Hair Gel: maintained its top market share in KSA.
• Hobby: Leading brand in economy shampoos in Turkey, with a market share increase in hair styling, reaching 13.8%.
• Dabur is the only Indian FMCG company to become a “Cloud Only Enterprise.”
• ORS Haircare, is at number 7 in the haircare brand in the US.
• Honitus: Ranks as the No. 2 OTC brand in the cough syrup market.

Key Products/Services Performance #

• Dabur Chyawanprash: Launched the “Exam Time, Dabur Chyawanprash Time” campaign. Focused on premium variants (Sugar-free Chyawanprakash, Chyawanprash Gur, Kesarprash), with these variants now contributing around 13% to the portfolio.
• Dabur Honey: Launched “Dabur Organic Honey” and “Dabur Sundarbans Forest Honey” and has seen 2x growth in these segments over the previous year.
• Dabur Red Paste: Rolled out a “Parampara Mazboot Iraadon Ki” initiative.
• Hajmola: Launched Mr. Aam variant.
• Pudin Hara Fizz: Created a massive installation at Nauchandi Mela, Meerut.
• Odomos: Launched Odomos Universal Mosquito Liquid Vaporizer and a #SurakshaKaBandhan campaign for Raksha Bandhan.
• Dabur Vatika: Added Vatika Rosemary Hair Growth Oil with Hibiscus and Coconut Oil.
• Dabur Vedic Tea: Expansion to adjacent category.
• Badshah Masala: The acquired business has seen strong growth of around 21%.
• Real Activ: 100% Juice portfolio reported strong, double digit growth.
• Dabur Herb’l Black: Launched the “for White” campaign.
• New Product contribution to sales: NPDs contributed 3.4% to the total sales
• Digital-first brands collectively grossed a turnover of over ₹100 crore.

Geographic Distribution and Market Penetration #

• India: 7.9 million retail outlets covered, reaching 122,000 villages, added 2,00,000 outlets during the year.
• Rural Expansion: Added 22,000 villages to the network, reaching a total of 123,000 villages. Targeted to reach 130,000 villages by the end of FY 2024-25.
• Middle East: The largest international region, contributing 24% of international business, with focus on key brands like Vatika and Dabur Amla.
• Africa: Represents 24% of the International Business, with Egypt, Nigeria, South Africa, and Kenya as key markets.
• Other International Markets: Presence in South Asia, USA, and Europe.

Segment-wise CAPEX and ROIC #

• Capex for FY 2023-24: ’ 563.86 crores.
• Consolidated Return on Invested Capital (ROIC) for FY 2023-24: 37.8%.
• Investment in South India: ’ 135 crore for a new multi-category manufacturing facility.

Operational Efficiency Metrics #

• Working Capital: Reduced to 13.2 days in FY 2023-24, down from 21.7 days in 2022-23.
• Receivable Days stable at around 27 days
• Inventory Days: Reduced to 57.3 days vs 64.1.
• Payable Days: 71.6
• Overall Equipment Effectiveness(OEE): 77.4%
• Cost Saving Initiatives: Project Samriddhi, delivered savings and operating leverage.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Focus on Power Brands to drive growth.
  • Expansion of rural footprint.
  • Expansion of product offerings by entering new product categories like liquid vaporizers, cooling hair oils, gel toothpastes.
  • Investment in technology and digitalization.
  • Focus on organized channels (modern trade, e-commerce, quick commerce).
• Challenges:
  • Subdued growth in the domestic FMCG sector due to factors like softening inflation, lower wage growth in rural India, and uneven weather patterns.
  • Geopolitical instability and currency devaluation in overseas markets.
• Net Zero Emissions commitment for FY 2045
• Coal-free operations Achieved from August 2023.

Risk Assessment #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Power Brand strategy, expansion into adjacent categories, rural expansion, and digital-first brands.
• Control Effectiveness: Partially effective
• Potential Financial Impact: Revenue and profitability fluctuations. FY 2023-24 saw consolidated revenue grow by 7.6% (10.1% in constant currency), but the beverage business was flat.

Operational Risks #

• Severity: Medium to High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Multi-location production facilities, multiple supplier chains, technology adoption (e.g., automation, IoT), and a Business Continuity Plan (BCP). Eliminated coal usage a year ahead of target.
• Control Effectiveness: Relatively high
• Potential Financial Impact: Increased operational costs, production disruptions, and inventory holding costs. FY 2023-24 Capex of ` 563.86 Crore invested in upgrading capabilities.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Potentially improving
• Mitigation Strategies: Strategic buying, selective price increases, cost-saving initiatives (Project Samriddhi), import substitution, hedging of foreign currency exposure.
• Control Effectiveness: Mixed
• Potential Financial Impact: Fluctuations in profit margins, revenue, and cash flows. Operating margin was 19.4%, net profit was ` 1,843 Crore.

Compliance/Regulatory Risks #

• Severity: Medium to High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Close engagement with industry bodies and regulatory authorities, implementation of sugar reduction phases in juices (20.95% reduction achieved), compliance with Plastic Waste Management rules.
• Control Effectiveness: High
• Potential Financial Impact: Increased operating costs, litigation, and reputational damage.

Emerging Risks #

Cybersecurity #

• Severity: High
• Likelihood: Medium to High
• Trend: Increasing
• Mitigation Strategies: Data Privacy Framework, Privacy Champions, Internal Global Privacy Policy, Data Retention & Disposal.
• Control Effectiveness: High
• Potential Financial Impact: Significant financial losses due to data breaches, reputational damage.

Future Outlook #

Management Guidance and Assumptions #

• Overall: Dabur’s management is guiding for profitable, sustainable growth driven by its power brands, with a focus on rural expansion and entry into adjacent categories. Margin improvement is projected through cost efficiencies, premiumization, and capturing operating leverage.
• Consumer Care Business: Softening inflation and improving consumer sentiments are assumed, but recovery is expected only in H2 FY24-25.
• Food & Beverages Business: A normal monsoon is expected to provide support.
• International Business: The company expects a strong recovery in rural consumption during the fiscal year 2024-25.

Market Growth Forecasts #

• India FMCG: Subdued growth was observed in FY 2023-24, with a gradual recovery anticipated. Rural demand is expected to improve in FY 2024-25, particularly in the second half.
• Beverages: Market growth was impacted by unseasonal rains, but is now back on track.
• Oral Care (India): Growth is driven by the increased use of natural and ayurvedic products.
• Digestives: Strong double-digit growth in the OTC Digestives category.

Planned Strategic Initiatives #

• Overall:
  • Focus on growing Power Brands and expanding their Total Addressable Market (TAM).
  • Driving innovation and expanding distribution networks.
  • Implementing channel-focused strategies, particularly for modern trade, e-commerce, and quick commerce.
  • Sustainability initiatives aimed at achieving Net Zero Emissions by 2045.
  • Targeting 1.3 lakh villages by end of FY 2024-25.
• International Business
  • Dabur has plans to further grow its International Business.
• Therapeutics Division: Scaling up coverage to reach more medical professionals.

Capital Expenditure Plans #

• Overall:
  • INR 135 Crore investment approved for a new multi-category manufacturing facility in South India.
  • FY 2023-24 Capex of INR 563.86 Crores towards upgrading manufacturing capabilities and setting up new production lines.
  • INR 66.8 Crores invested in imported technologies during FY 2023-24.
• Manufacturing:
  • Focus on setting up multi-phase and multi-location production facilities.
  • Continue investing in upgrading the existing infrastructure.

Efficiency Improvement Targets #

• Overall: Project Samriddhi is aimed at cost-saving initiatives.
• Operations: Driving “Kaizen” mindset, with a focus on reducing energy and water intensity. Aiming for >60% energy from renewable and cleaner sources by FY 2025-26 in all manufacturing sites.
• Supply Chain: Digitization is the core lever, encompassing demand, supply, inventory, production, and materials planning.
• Water Usage: Targeting 30% reduction in water intensity by FY 2025-26.
• Logistics: Optimization of truckloads and routes, with GPS tracking for transport, and exploring vehicles using alternative fuels.

Potential Challenges and Opportunities #

• Challenges:
  • Subdued rural demand due to high food inflation and erratic rainfall.
  • Impact of unseasonal rains and weak/delayed winter on specific product categories.
  • Geopolitical instability and currency devaluations in international markets.
  • Presence of counterfeit products in the FMCG industry.
• Opportunities:
  • Potential for increased rural consumption with a normal monsoon and improved macro-economic indicators.
  • Growth in organized channels (modern trade, e-commerce, quick commerce).
  • Entry into adjacent categories and expansion of product portfolio.
  • Expansion of the distribution network.
  • Premiumization of the product portfolio.

Scenario Analysis and Sensitivity to Key Assumptions #

Sensitivity to key assumptions:

• A 1% increase in the USD exchange rate will have a .09 cr impact and a 1% decrease will have a (.09) cr impact.
• A 1% increase in the EUR exchange rate will have a (.17) cr impact and a 1% decrease will have a (.17) cr impact.
• Sensitivity analysis for change in prices of instrument on companies profit for the year for price increases/decreases of 5% shows changes as a result.