Second Quarter - Dabur India Limited

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Dabur India LimitedOctober 28, 2010and West Africa and South Asia as well as exploring new markets in these regions. Thisexpansion will further be strengthened with the acquisition of Hobi Group.On the profitability side, Dabur saw a growth of 16.9% in profit after tax during the year and15.4% for the quarter in spite of increased taxation as the minimum alternate tax rate went upfrom 15% to 18%. The consolidated EBITDA margins remained stable at around 19% for thehalf-year and 22% for the quarter. This was despite pressures on gross margin due to inflationwith material cost going up on a Y-o-Y basis.Overall the business has performed well driven by volumes in domestic as well as overseasbusiness. Input cost inflation continues to pose a challenge; however, and this is being metthrough a judicious mix of strategies such as price increases, efficient buying and other costsaving measures.Acquisition of Hobi Group has been completed on October 7, 2010 with acquisition of shares ofthe three entities of the Hobi Group: Hobi Kozmetik, Zeki Plastik and Ra Pazarlama. Postacquisition integration is now underway with initiatives to align the Turkish entity with DaburInternational to yield the envisaged synergies.The Company has proposed an interim dividend of 0.50 paise per share on expanded post bonuscapital.With this I now open the Q&A and invite your questions. Thank you.Abneesh Roy from EdelweissAbneesh Roy: Sir, thanks for the opportunity. My first question is on the hair oils business. We have seen a 7%growth and in some of the other hair oil companies also we have seen some slowdown in thegrowth rates. So do you see this as a structural change or was it more a case of one off because ofthe festive season getting delayed because of higher base or because of maybe some floods insome of the areas. Any structural problem here Sir?Sunil Duggal:I do not think the problem is structural. I see no reason to see this as being a slowdown, I think itis partly on account of like you said the festive season being a little bit later in the year and alsofloods etc., longer than usual monsoon period, which normally shows less consumption of hairoils. I will be surprised if this trend continues and it is expected to reverse in the Q3 and weshould show good growth once again. Structurally there is no reason why there should be anyslowdown, but we have seen that hair oil actually is fairly volatile in terms of growth and we dosee a fair amount of ups and downs here.Abneesh Roy:Overall between urban and rural where do you see the difference in the growth rate and trends inthat and in rural do you think that growth rates are going to go up because of the good monsoonoverall?Page 4 of 25
Dabur India LimitedOctober 28, 2010Sunil Duggal:If you see the trends you see growth rates in rural are a little bit higher than urban even in thefirst six months of this year.Abneesh Roy:How much will be difference in bps growth rate?Sunil Duggal:I will just give you the numbers but they are in fact higher and I expect this trend to continue nowthe Kharif crops entering the markets by the end of this year, we should see more money in thehands of the farmer, which will drive consumption, but just to give you a feel of the numbers.Gagan.Gagan Ahluwalia:The value growth, I will just tell you about some categories. The rural we do not have for hairoils but shampoo category for example the rural growth in the category is around 10%, urban isaround 6%, toothpaste is 7% and 5%, and Chyawanprash is 13% and 7%. So there is a trend ofrural being a little ahead of urban.Abneesh Roy:Sir my second question is on the shampoo business. Two quarters of slightly disappointingnumbers. When can we really see a change happening here and overall in terms of strategy whereexactly Dabur fits in? We have got so many MNCs, ITCs so exactly where do we see a phase outhere?Sunil Duggal:I think lack of growth in shampoo in the first two quarters should be seen in the context of closeto 40% growth in the corresponding period last year. So it is very hard to grow on that base and Ithink there has been a huge amount of flurry of competitive activity, which has been almostdisruptive in nature. I think the whole paradigms in terms of the management of this categoryhave changed and they have been obviously changed by the market leader. So we had to react tothat and there is always a bit of lag in terms of reacting so I think by the end of this year certainlyin the fourth quarter we should have got our act back in place. Now this will mean that we getback on to the growth trajectory but it will be at a cost and therefore we do see good growthgoing forward but lower margins in this category unless this competitive activity were to reverseitself. So there is no free lunch here because you are bound by the fact that the sachet prices arecapped at a rupee and even in the bottles where there is huge amount of competition. So we canregain our position, which has been eroded a little bit in the last couple of quarters but you wouldsee around 500 to 1000 bps contraction in the gross margins in this category. That will be anecessary jump to this move.Abneesh Roy:From what level - from Q2 FY'11 levels or which level is it sir?Sunil Duggal:Say from Q3 and Q4 levels to the corresponding period of last year. By Q4 we would havetotally restaged the shampoo portfolio and obviously we will be offering more value andtherefore there will be some shrinkage in margins. But that is something, which is going up forthe whole category so you cannot get away from this basic paradigm.Abneesh Roy:Sir my last question is on the margins front in the consumer health division some dip in marginsthere so what would be that outlook here?Page 5 of 25
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Second Quarter - Dabur India Limited

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