Dabur drafts new prescription for healthcare products

Fast-moving consumer goods major Dabur India Ltd is crafting a new growth strategy for its healthcare products. The plan includes launch of new products or variants of existing ones under the portfolio.

“We are looking at a new strategy in healthcare, which is a very large segment. We are going to address that now,” chief financial officer Rajan Varma said in an interview.
“The implementation of the strategy will either be in the first or second quarter of 2010,” Varma said.

Dabur’s business is divided into three strategic business units — consumer care, consumer health and international business. The consumer care division comprises healthcare, personal care, home care, and foods segments. With 44% of the consumer care division’s topline coming from healthcare products, the segment continues to be the biggest growth driver.

The company sells health supplements such as Dabur Chyawanprash, Dabur Honey and Hajmola tablets under the healthcare portfolio. Hair care is another segment Dabur continues to focus on. “There will be new variants of hair oil and shampoos that will be launched this year. There will certainly be more than five variants of hair oils and shampoos by March,” Varma said.

In 2008-09 financial year, the hair care segment recorded a 23% growth. The segment reported better-than-expected performance in April-June despite the economic meltdown and cut in consumer spending, clocking 22.5% growth.

Dabur sells hair oils and shampoos under the Dabur Amla and Vatika brands. Dabur Amla hair oil, the star performer in the hair care segment, is the oldest and largest brand with a turnover of more than Rs 300 crore.

Having completed the acquisition of Fem Care Pharma Ltd in June, Dabur is aggressively looking at the skincare products segment. “Fem will get a lot of attention,” Varma said.

In November, Dabur had acquired 72.15% stake in the skincare product maker for Rs 203 crore in an all-cash deal. Thereafter, it had acquired additional 20% stake in Fem Care for Rs 54 crore through an open offer.

Dabur is also looking to beef up its Gulabari range. “We are planning new products under the Gulabari range,” Varma said, without giving any further details on when the products will be launched. The Gulabari brand has already clocked a turnover of over Rs 40 crore.

Acknowledging that monsoons have been deficient in some parts of the country, Varma said it could impact raw material costs and the company’s earnings before interest, taxes, depreciation and amortisation margins. “As of now, we have not seen any impact (on margins). The impact is likely in the coming quarters,” he said.

According to Indian Meterological Department data, India’s average rains for the year had been recorded at 21% below normal between June 1 and September 6. Varma, however, is confident that Dabur will be able to maintain its earnings before interest, taxes, depreciation and amortisation margins. “We will try to maintain at least 18.3% Ebidta margins,” he said. In 2008-09, Dabur clocked Ebitda margins of 18.3%, down marginally from the previous fiscal.

As for inorganic growth, Varma said “we are always looking at acquisitions. If something comes at the right price, we will certainly look at it.”  He said Dabur has the capacity to spend Rs 500-700 crore on acquisitions.

Hinting that the company may resort to price hikes to cushion the impact of rising raw material costs, he said depending on the situation, Dabur may look at selectively raising product prices.

Asked if the company is planning to hike prices of Dabur Chyawanprash in the wake of spiralling sugar prices, Varma said there are no such plans as of now. Sugar is a major raw material in Chyawanprash. Sugar prices have nearly doubled in the current season, rising from Rs 1,700 rupees per 100 kg to Rs 3,300. Shares of Dabur closed at Rs 129 rupees on the National Stock Exchange on Wednesday, down 2.5% from Tuesday.