Dabur India to acquire majority stake in Badshah Masala for Rs 587 crore

Acquisition in line with its strategic intent to expand its food biz to Rs 500 crore in 3 years

Fast-moving consumer goods major Dabur India is set to enter the branded spices and seasoning category. It has signed an agreement to acquire 51 per cent in Badshah Masala for a cash consideration of Rs 587.52 crore. The acquisition, the company says, is in line with its strategic intent to expand its food biz to Rs 500 crore in three years.

The spice major is engaged in the business of manufacturing, marketing, and export of ground spices, blended spices, and seasoning.

Dabur expects to complete the stake buy on or before March 31, 2023. It has also said it would acquire the residual 49 per cent stake after five years.

“The cost of acquisition of 51 per cent equity shareholding has been agreed at Rs 587.52 crore less proportionate debt as on closing date (100 per cent enterprise valuation being Rs 1,152 crore, which translates into revenue multiple of about 4.5x and earnings before interest, tax, depreciation, and amortisation multiple of about 19.6x of 2022-23 estimated financials),” it said in a release.

“The transaction is expected to be cash earnings per share-neutral in the first year and accretive thereafter. The acquisition is expected to be completed by this financial year. According to our agreement, we will acquire the balance 49 per cent shareholding after five years,” Dabur India Group Director P D Narang said in the release.

Mohit Burman, chairman, Dabur India, said the Indian spices and seasoning category is a large andattractive market.

“Badshah Masala is one of the key players in this space. Our investment in it will help expand this business and continue to provide unmatched quality products. This acquisition will accelerate our growth strategy as we continue to build our food business. We intend to leverage our international market presence to grow this business globally,” said Burman.

In the July-September quarter, Dabur India saw its net profit decline 2.8 per cent, compared with Rs 490 crore in the corresponding quarter a year ago.
 

The ayurveda major’s revenue stood at Rs 2,986 crore, up 6 per cent, compared with last year. Its volume growth stood at 1 per cent in the quarter.

“The impact of inflationary pressures was more pronounced in rural markets, with demand growth in the hinterland lagging behind the urban markets for the first time in five quarters,” said Mohit Malhotra, chief executive officer, Dabur India.

Dabur’s brands gained market share across 95 per cent of the product portfolio. In the juices and nectars category, the company reported a 410-basis point market share gain, digestives category improved 270 basis points (bps). Meanwhile, chyawanprash market share increased 120 bps.

Also, the company’s launches contributed around 4 per cent to total sales.

The spices market in India is  Rs 60,000 crore, in which branded spices is Rs 25,000 crore. The branded spices market is growing at the rate of 15-20 per cent.