Dabur India’s share price rose 4% to Rs 551 per share in Thursday’s intra-day trade, after the company acquired a 51% stake in Badshah Masala Private Limited for Rs 587.5 crore. The remaining 49% stake would be acquired after five years.
“The company has signed definitive transaction agreements to acquire 51 percent shareholding of Badshah Masala Private Limited (Badshah), which is engaged in the business of manufacturing, marketing, and export of ground spices, blended spices, and seasonings,” Dabur India said.
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The acquisition is in line with the company’s plans to expand its food business to Rs 500 crore in three years and into new adjacent categories. It also marks Dabur’s foray into over Rs 25,000 branded spices and seasoning market in India. The deal is expected to be completed before March 31, 2023, Dabur said in its press release.
“The transaction is expected to be Cash EPS neutral in the first year and accretive thereafter. The acquisition is expected to be completed within this fiscal,” the company said.
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The homegrown FMCG major on Wednesday reported a 2.85% decline in its consolidated net profit to Rs 490.86 crore for the July-September quarter of the financial year 2022-23. Revenue from operations grew 6% to Rs 2,986.29 crore against Rs 2,817.58 crore in the corresponding quarter of the previous fiscal year. Dabur’s Food & Beverages business recorded a robust 30% growth.
The company also gained market share across 95% of its portfolio. In addition, the company has announced a capital expenditure (Capex) plan of Rs 325 crore for its Indore project with proposed capacity addition for Red Toothpaste, one-liter juice, and portion packs.
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The board of directors declared an interim dividend of 250% for the financial year 2022-23. “Continuing with our payout policy, the board has declared an interim dividend of Rs 2.50 per share, aggregating to a total payout of Rs 442.94 crore,” Dabur India Chairman, Mohit Burman said.
The acquisition of the spices brand will significantly boost Dabur’s kitchen condiments ambitions, according to global brokerage Goldman Sachs. It has a Buy call on the stock with a target price of Rs 680 per share.
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On the other hand, Morgan Stanley has an Equal-weight call with a target price of Rs 527 per share. “Q2 earnings largely in-line. Market share gains and acquisition to expand the foods business are big positives,” the brokerage said.
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According to analysts, key risks for the company are a sharp decline in rural demand growth in India and increased competitive intensity in healthcare products.