Understanding Dabur

Of all the cash that Dabur Generates from business, ~30% get used in buying Fixed assets etc., ~30%  get paid to shareholders as dividend and ~30% get invested in NCDs & Bonds of other companies which generally yield around 9-12%. Post tax this would be 6-8%. It seems company is hoarding cash and, in the longer run, it may be looking for some acquisitions or any other such thing.

However, this is dampening the overall ROE tend of the company which is around 30%, which could have been more superior had company paid the maximum dividend. As per FY16 consol Balancesheet, Shareholders  Funds stand at ~Rs 42 bn and Investments at ~Rs 23 bn.

  • 65% of Dabur’s Revenue comes from Domestic Market.
  • Overall volume growth is sliding, since a considerable time. Partly, this could be due to the impact of entry of new players like Patanjali.
  • Around 30% of sales come from traded goods.
  • Its Consumer care business operates at around 25% EBIT margin, and Food segment at 15%.
  • Advertising and sales promotion expenses are around 20% of sales.
  • It has very low debt in its book so interest in not a major cost.
  • After accounting for investment income it makes Net profit margin of  15%, which further translates into  ROE of 30-40% as company makes sales, which is ~2 times of Shareholders fund.

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