Dabur India picks up 51% stake in Badshah Masala

The company said the acquisition aligns with its strategic intent to expand its foods business to ₹500 crore in three years and enter adjacent categories.

The branded spices and seasoning market in India is worth over ₹25,000 crore, the company said in a filing to the exchanges.

The transaction, which values Mumbai-based Badshah Masala at ₹1,152 crore, is expected to be completed this fiscal year.

“As per our agreement, we will acquire the balance 49% shareholding after five years,” said P.D. Narang, group director, Dabur India.

Dabur’s move marks further consolidation in the branded spices market that has already seen a clutch of acquisitions, including ITC Ltd’s investment in Kolkata-based spice maker Sunrise Foods.

In 2020, Norway’s Orkla picked up a 67.8% stake in Kochi-based Eastern Condiments, which sells blended and single spices.

India’s branded spices market is set to double to ₹50,000 crore by 2025. Branded spices will make up half of the spices sold in the country by then, according to a 2021 report by investment bank Avendus Capital.

Conversion from loose to branded spices, the growing demand for spice mixes (or blends) to ease the cooking process, and a distribution push by regional companies are driving this growth in a market dominated by regional brands.

Dabur said it views ground and blended spices as a good addition to its existing foods portfolio.

“The Indian spices and seasoning category is a large and attractive market. Badshah Masala is one of the key players in this space. This acquisition will accelerate our growth strategy as we continue to build our foods business,” Mohit Burman, chairman of Dabur India, said.

The company will leverage its international market presence to grow this business globally, Burman said.

Badshah sells more than 50 products in India and overseas markets; it has two manufacturing facilities, both located at Umargam in Gujarat.

“Dabur is acquiring a 51% stake in Badshah for ₹587.52 crore, less proportionate debt as of the closing date, with the Badshah enterprise being valued at ₹1,152 crore. This translates to a revenue multiple of around 4.5X and Ebitda multiple of around 19.6X of FY23 estimated financials,” the company said.

Badshah Masala reported sales of ₹189 crore in FY22.

Mohit Malhotra, chief executive officer, Dabur, said the company’s appetite for acquisitions is intact.

“We are already on the lookout; we have a war chest of ₹5,500 crore. So, that money is kept for acquisition purposes only,” he said.

However, he added that in the short term, the company would focus on consolidating this business.

On Wednesday, Dabur also said it recorded a net profit of ₹490.86 crore, down 3% from ₹505.31 crore a year ago.

Consolidated revenue was up 6% during the period to ₹2,986.5 crore in the second quarter, largely led by price hikes.

The company reported a 1% increase in quarterly volumes. It took a price hike of 6% in the September quarter.

Last week, Hindustan Unilever Ltd reported a 4% growth in domestic volumes.

Both companies flagged high inflation.

Malhotra said inflation has been “unprecedented”, while the demand environment remains “tepid”.

“We have seen an inflation of roughly 10% in our domestic business and almost 30% international business, so it hasn’t abated at all. We think going forward, it might soften,” he said.

The company reported gross margin contraction of 300 basis points on account of this inflation, he said.

Meanwhile, high prices of goods also impacted consumption—this was more pronounced in the rural markets, with demand growth in the hinterland lagging urban markets for the first time in five quarters, the company said.

In the September quarter, Dabur’s foods and beverages business grew 30% over the year, while the home care business grew nearly 21%.