Second Quarter - Dabur India Limited

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Dabur India LimitedOctober 28, 2010which we are now following which we believe would be far more suitable for this business interms of risk-reward profile so that has been rolled out quite satisfactorily but reengineering ofthis whole business has taken a little bit of time. It is now almost entirely complete and as far asFem is concerned the 11% odd growth is a little bit below what our internal expectations were.We were looking at more like 15% odd. We believe we can end the year with 15% plus growth.There has been some delay in new product launches etc., but I think overall the Fem portfolioremains highly profitable and will generate steady growth and we have put into play now somenew activation activities which would propel the growth further. So we are pretty happy with theway it is performing and the future outlook for Fem.Anand Mour:But are we not looking at new product white spaces primarily in the skin care portfolio as in theway competition is getting aggressive in the entire portfolio?Sunil Duggal:Not really. I think the job which we have which will be again best in terms of risk-reward wouldbe to deepen the presence of bleaches in the skin care regime of Indian women and we believethere is an incredible amount of headroom here for growth particularly in the smaller towns youknow, we just made a round of semi-urban areas and we were amazed at the number of beautyparlours which were there in a place like Gorakhpur and that would be counted to something like250. Which means that the beauty care regime is getting traction in the smaller towns whereearlier on it was considered to be not very common. And the Fem portfolio is perfectlypositioned to deal with that upsurge in terms of interest and demand. So rather than to spend ourenergies and money in launching new products, I think the smart thing to do is to really deepenpresence in some of these categories like bleach where I think we have barely scratched thesurface.Anand Mour:In terms of priority within this skin care, is Fem going to be the number one priority for us?Sunil Duggal:Fem and Gulabari both have their places. Gulabari has a mass market, retailed through regularoutlets. No fuss affordable skin care. Fem is a skin lightening solution, which is very long lasting,very efficacious, both have their place in the sun, both will get lot of attention, but I think Femwould really be the flagship of our skin care initiatives.Anand Mour:Thanks.Richard Liu from JM FinancialRichard Liu:This is Richard Liu. Thanks for taking my question. Sir, just carrying on Fem on your internalMIS are you breakeven on the acquisition as on date in terms of considering the treasury incomethat you would have lost on the acquisition cost?Sunil Duggal:I think it is accretive in terms of net income or net profit to the businesses if you compareopportunity cost of treasury versus the profitability of Fem. What would be the Fem EBITDA?Page 14 of 25
Dabur India LimitedOctober 28, 2010S Raghunathan:It would be upwards of 33%. There the gross margins are in the mid 60s. The A&P is in the mid20s there is not too much of the cost because the same system carries to the whole base. So Isuspect the EBITDA will be 30%-35% and it is certainly accretive.Richard Liu:Sure nice to hear that, on the net realization basis, have you been able to increase net realizationon the products based on the theory of rationalization of distribution margin that we had spokenabout at the time of the acquisition?Sunil Duggal:Yes we have, I think the gross margins have remained fairly static at around 65% odd. A&P hasbeen actually pushed up that but other costs have come down so our margins have been a little bitahead of what that business was generating, I am talking about the margins before in its SG&A.The SG&A has entirely come out of the Fem system.Gagan Ahluwalia: In fact the EBITDA margin improved by more than 15% odd because it used to be at around 14%before the acquisition.Richard Liu:Great. Just one more Mr. Duggal you mentioned about a disruptive activity in the shampoocategory, which is leading to structural changes in the industry, if you could elaborate a littlemore on that. I heard your point on Clinic Plus giving more ml and etc., and the other thing Inoticed would be Procter doing it with sachets is there anything else other than this that youwould be able to throw some light on?Sunil Duggal:I think what we have seen in shampoo is a consequence of the market leader reengineering thevalue proposition after many, many years of steady erosion of share and so I think somethingsimilar has perhaps happened in the detergent space etc, and then the shampoo I think we haveseen the story played out significantly. I doubt if there can be a further round of disruptivecompetition then there would not be any food on the table for anybody. Now whether the storywill repeat itself in other categories well not to be completely ruled out but at this point in timewe do not see any signs of that happening anywhere else other than shampoos and some othercategories in which we do not play and like soaps and detergents and others.Richard Liu:What do you think of the probability of this happening to skin?Sunil Duggal:I don't think it will happen in skin because people are not that price conscious as far as skin careis concerned. The value proposition in skin care is a little bit different. People are very clear as towhat they want and they are willing to pay a price if it matches those aspirations. So, huge pricewar breaking out in skin care and skin care, let us put this way a little bit more fragmented thanthe shampoos was, so the possibility of that happening is certainly not zero but I would rate itlow.Richard Liu:Thanks for that and wish you all the best.Page 15 of 25
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Second Quarter - Dabur India Limited

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