INSTITUTE OF MANAGEMENT,

NIRMA UNIVERSITY

iMBA PROGRAMME
Batch 2018-23

Mergers And Acquisitions

Individual Assignment

Topic: “Why Did Dabur Acquire Badshah Masala”

Submitted By:
Ayushi Chhabra 187215

Submitted On: 27th January, 2023

Submitted To: Prof. Rajesh Kikhani
 Acknowledgement
I would like to thank Institute of Management, Nirma University for this wonderful opportunity
and all the learnings that came with it.

I would like to express my sincere gratitude to my Mergers and Acquisitions professor, Rajesh
Kikhani, for providing me with his invaluable guidance, his kind cooperation and suggestions
throughout the project. Also, a project like this comes to us students as one of the best
opportunity to practically apply all the theoretical concepts learnt in our courses. I also express
my gratitude for the same.

I would like to thank all my professors for teaching me what we have displayed as
professionalism during this project and constantly motivating me to work harder.
 Table of Contents
About Dabur .................................................................................................................... 1
Financial Analysis ..................................................................................................................... 3
SWOT Analysis ......................................................................................................................... 4

About Badshah Masala .................................................................................................... 6

Financial Analysis ..................................................................................................................... 6
SWOT Analysis ......................................................................................................................... 7

Why Did Dabur Acquire Badshah Masala?..................................................................... 8

Strategic Rationale Behind The Acquisition ............................................................................. 8
Valuation Rationale Behind The Deal....................................................................................... 9

Learnings ....................................................................................................................... 11

References ...................................................................................................................... 12
About Dabur
With over 500 goods in its product portfolio, Dabur India Limited is a 115-year-old FMCG
company that specialises in natural and ayurvedic products. Its capacity to develop and
commercialise products using herbs and other natural resources is its primary competency.
Major brands like Dabur Chyawanprash (health tonic/anti-infective; 12% of total revenues),
Hajmola (8%) and Pudin Hara (digestives); Lal Dant Manjan (tooth powder; 14% of revenues);
Amla (14% of revenues); and Vatika hair oils; Dabur; are among the company's product
offerings. All of these brands are market leaders in their respective categories in India.

The first business in India to create the anti-cancer intermediate DAB-10 and its companion
medication paclitaxel is Dabur, a major leader in the anti-cancer market (Taxol). Dabur is a
major player in the anti-cancer market and was the first business in India to create the cancer-
fighting intermediate DAB-10 and the medicine it was coupled with, paclitaxel (Taxol).
However, Dabur has low profits compared to other FMCG companies because it outsources
50% of its products.

In India, Dabur has a sizable distribution network that includes over 540,000 shops. Dabur has
also established five joint ventures in India and abroad, as well as manufacturing subsidiaries
in Nepal and Egypt, in an effort to broaden its product line, increase its market reach, and take
advantage of its distribution advantages. The fact that ayurvedic goods are available in a niche
market, that strong brands dominate the market, and that a varied product portfolio is supported
by solid research all act as entry barriers for new entrants.

The business dominates the markets for health supplements, over-the-counter and ethical
goods, as well as for hair oils and juices. Additionally, it keeps expanding its market share in
the oral care sector. The corporation has a total retail distribution reach of 6.9 million locations,
of which 1.3 million are directly accessible. In the following two years, it would expand direct
distribution to 1.5 million outlets. Additionally, Dabur generates 50% of its revenue from rural
areas, where it has a presence in 90,000 villages.

Dabur is currently going through a transitional phase. It is creating separate subsidiaries for
non-core activities. These proposals have resulted in a brand-new professional management
team.

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Dabur's operations were split up into seven SBUs in accordance with the restructuring process
carried out in FY95:
1. Family Brands
2. Medical supplies
3. Prescription drugs
4. Specialty Ayurvedic
5. Medicine Ayurveda
6. Exports
7. Food

Family Products Division (FPD): This is the largest division which accounts for more than
40% of Dabur's sales. This division includes Lal Dant Manjan and Dabur Amla Hair, both of
which have annual total sales of more over Rs 1 billion. Products from FPD include snacks,
herbal powders, oral care items, and hair care items. FPD includes the Rs 300 million brand
Dabur Honey. Amla oil, pure coconut oil, and value-added coconut oils are all produced by
Dabur. In FY 1995, Dabur debuted Vatika hair oil. By FY98, this brand was worth Rs 200 m,
and Dabur uses it as a mother brand because of its tremendous brand value. Recently, the
Vatika line of shampoos was introduced.

Oral-care: This sector is made up of Lal Dant Manjan, a red tooth powder (another millionaire
brand), and Denta Care, a white tooth powder. In April 1999, Dabur plans to reintroduce the
Binaca line of toothpaste, which it purchased from Reckitt & Colman in FY96.

Foods: Included in this category are Sharbat-e-Azam, an Indian beverage, Gulabbari (Rose
water), and Kewra water, all of which are used as culinary flavours. Dabur Honey is a part of
the highly fragmented natural honey market.

Health Care Products Division (HPCD): In terms of income creation, HPCD is Dabur's
second-largest division. Given that this segment adds more value than the Family Products
division, its contributions are typically 9–10% higher on average. Ayurvedics, digestives, and
mother & child products are some of its main offerings. These goods are in the category of
over-the-counter (OTC) goods; they are neither morally upright nor reliant on a prescription.
Ayurvedics are included in these as cough syrups and health tonics.

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Pharmaceutical Division: This is Dabur's allopathic drug division, which accounts for about
8% of its revenue. It produces both branded and generic medications. The anti-cancer, anti-
histamine, anti-fungal, antacid, and anti-bacterial therapeutic segments are those in which
Dabur is active. It creates contrast media as well.

Dabur now prioritises oncology (study of tumours). Even though it only contributes 2% to total
revenue, this company is very successful and has been expanding by 30% YoY since 1995.
Paclitaxel, an anti-cancer medication sold under the trade name Intaxel, is only produced by a
select few businesses worldwide, including Dabur. This medication was created by the
corporation through process re-engineering.

Ayurvedic Specialties Division: This division produces morally sound or prescription-based

medications or formulations, which are mostly distributed by ayurvedic physicians. It
contributes around 6% of Dabur's revenue. The corporation entered this market in FY97 with
branded goods including Stresscom and Rheumatil.

Ayurvet Division: This division, which makes up around 1% of Dabur's revenue, focuses on
ayurvedic veterinary products for livestock and poultry. Under the brand name Ayupet, this
division introduced a selection of pet care items in FY98.

Division of Foods: Currently, the division of foods (1% of revenues) is not profitable. Fruit
juices under the Real brand and a variety of ethnic pastes under the Hommade brand are among
its goods. Under the moniker Samara, Dabur entered the cosmetics market in FY97. (The
management anticipates that by the year 2000, this division will account for 3% of overall
revenues.

Exports Division: Dabur exports bulk medications, guar gum, and personal care and hygiene
items. 37% of exports in FY97 were merchant exports, which were stopped in FY98 in
accordance with McKinsey's recommendations. By FY2000, this will lower the division's
revenue share to 8%.

Financial Analysis
• Dabur reported stable 7.7% pricing led revenue growth

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 • Sales were up 7.7% YoY aided by 5.6% pricing & 2% volumes growth
• EBITDA was at Rs 453.6 crore, up 2.5 YoY, with margins at 18%
• Consequent adjusted PAT was flat at Rs 379.3 crore

Source: Company Website

Future Plans
DIL could profit from significant growth in the agri-economy due to increasing agri exports &
in turn predicted improvement in rural growth, despite commodity inflation having a short-
term negative impact on consumer attitudes & margins. By expanding Chyawanprash and
Honey into new varieties and branching into categories including fruit drinks, health foods
(under the Real brand), herbs, and baby items under the Dabur brand To support emerging and
underserved category sales, there has been a significant rural distribution growth, an increase
in direct distribution reach, and a presence on the internet.
The management of Dabur is eager to execute some changes which are
• Leaving non-core enterprises or separating them into 100 percent subsidiaries
• Introducing fresh ayurvedic brands and goods
• Promoting their goods in the West, where they will command a higher price
• Attempting to enhance its working capital management
• Spending more on advertising for leading brands (Rs 1 bn FY99E)

SWOT Analysis
Strengths
1. Dabur has products present in over 60 countries and distribution through 5000 distributors
and 3 million outlets.
2. Strong brand image and product development strength of Dabur.
3. Strong distribution network and an extensive supply chain.
4. Dabur has welfare activities in health care, education and other socio-economic activities.
5. Has focus markets in GCC, Egypt, Nigeria, US, Nepal and many more countries.
6. It has a strong legacy since its inception in 1884.

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7. Dabur has an excellent product diversification in healthcare, oral care, food, personal care,
home care and many more.

Weaknesses
1. Fake products sold under the name of their brands
2. Dabur products have stiff competition from big domestic players and international brands

Opportunities
1. Tapping rural markets and increase penetration in urban areas can boost Dabur
2. Mergers and acquisitions to strengthen the brand
3. Increasing purchasing power of people thereby increasing demand

Threats
1. Intense and increasing competition amongst other FMCG companies means a burden on
Dabur's market share
2. FDI in retail thereby allowing international brands
3. Competition from unbranded and local products

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About Badshah Masala
India has become a major exporter of spices. Primitive explorers from all over the world came
to the country thanks to the spice trade. The world loves Indian spices because of their
unmatched scent, texture, flavour, and medicinal potential. The largest market for household
spices is in India. In India, small plots of land have traditionally been used to grow spices, with
culinary agriculture gaining popularity. India is currently the world's largest producer,
consumer, and principal supplier of spices. It produces 75 of the 109 types acknowledged by
the ISO and accounts for 50% of the world's spice trade. In a sector where India has historically
excelled, Badshah Masala has been the undisputed leader for the past 60 years. It was
established in 1958 by Mr. Jawaharlal Jamnadas Jhaveri and has since become one of India's
most significant players in the opulent spice trade.
An established manufacturer of Indian spices, Badshah Masala, has been providing the world
for more than 70 years. Over the years, they have remained true to their vision: to offer
distinctive flavours and wonderful smells to local and international households while also
assuring necessary nutritional advantages. Good meal preparation requires excellent additives,
and Indian cuisine places a special emphasis on spices. Indian food is becoming more and more
popular, and millions of people worldwide are discovering the flavour and health benefits of
spicy food. Spices are excellent flavour enhancers and are high in antioxidants.

It chooses flavorful and unique seasonings from India's top-producing fields and blends them
to create a wide array of spice mixes for a variety of cuisines. Their product line includes whole
spices, ground spices, and mixed combination flavours, and they specialise in Indian flavours.
Additionally, they create rapid chai spice blends in a variety of flavours. Quality controls are
the responsibility of the founders. Over 45 different products are offered both in India and
abroad. The business is one of the few Indian spice producers whose goods are sold in the
United States, the United Kingdom, South Africa, the Middle East, Southeast Asia, New
Zealand, and Israel.

Financial Analysis
The label has over 800 distributors, 25 stores, and 450 salespeople working for it, making it
widely accessible. Badshah Masala is unquestionably India's leading spice due to its extensive
availability in both urban and rural areas. Sales total $29 million annually. Each month, it
produces 1532 mt of products. It has won a number of awards. The company was dubbed the

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"finest maker in the spices area" by AMGF Intercorp Ltd in 2004. That year, it was also
recognised as "India's Most Loved Brand." These triumphs also win hearts! Customers have
become much more devoted to the brand over time, and they enjoy its wide range of products.

For the fiscal year that ends on March 31, 2022, the operating revenue range for Badshah
Masala Private Limited is INR 100 cr to 500 cr. Its EBITDA has grown by 298.47% compared
to the prior year. Its book net value has risen by 55.05% at the same time.

SWOT Analysis
Strengths
1. Wide range of products and assortments available
2. Needed less for cooking as they don’t contain fillers
3. Low-Temperature Grinding (LTG) prevents the evaporation of volatile oils and delicate oils
from spices
4. Retains original aroma that gives authentic flavour to the food
5. Good availability at most popular retail chains

Weakness
1. Many similar options are available hence brand switching its high

Opportunity
1. Bashshah is popular in Western and Central India. With its culturally specific new products
like Sambhar Masala, it can establish itself in other parts of the country
2. Export Badshah Masala Spices

Threat
1. Health conscious people prefer less spices
2. Entry of international brands

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Why Did Dabur Acquire Badshah Masala?

Dabur India, a leader in herbal and natural consumer goods, has expanded its portfolio by
acquiring a majority ownership in Badshah Masala. The Ghaziabad-based company purchased
a 51% stake in the manufacturer of spices for 587.52 crore rupees at an enterprise value of
1,152 crore rupees.

According to estimates, Mumbai-based Badshah Masala Pvt. Ltd. will earn Rs 250 crore in
revenue this fiscal year, making its valuation 4.5 times that amount and 19.6% of its earnings
before interest, tax, depreciation, and amortisation (EBITDA). The business generated Rs
189.1 crore in revenue in FY2021-22.

Strategic Rationale Behind The Acquisition

With this agreement, Dabur also entered the nation's branded spice and seasoning business,
which is estimated to be worth Rs 25,000 crore. The reason for this acquisition is that the action
is consistent with Dabur's strategy purpose to grow its food business to Rs 500 Crore in three
years and expand into new adjacent [Link], Dabur will acquire the remaining 49%
ownership in Badshah after 5 years, while the company will now test the waters with its new
portfolio and scale it up to national levels. Despite being a well-known brand in the spice
market, experts claim that Badshah's company is still very reliant on the western region. Now
that Dabur has adopted the brand, it will quickly spread to other areas.

The current promoters and management of Badshah will continue to run the programme as a
stand-alone business while Dabur develops category expertise over the following five years.
With domain professionals from finance, marketing, sales, and distribution, Dabur will have a
majority board representation.

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Through 1) a targeted distribution strategy in the markets of Gujarat, Maharashtra, and
Telangana, followed by expansion into neighbouring areas like Rajasthan and places where
Dabur is present, Dabur will achieve revenue/cost synergies. 2) Boost market share from the
present 4-5% in both core and non-core areas by increasing distribution outlets in rural and
urban markets. 3. Introduce LUPs for markets in rural areas. 4) Increase capacity to meet
demand 5) Strengthen MT presence and optimise channel mix with entry into e-commerce 6)
Take advantage of better systems & processes that increase procurement efficiency. 7) Use
automation in factories and lessen labour force.

Valuation Rationale Behind The Deal

As of the closing date, Badshah Masala was valued at Rs 1,152 crore, less proportionate debt.
The expected financials for FY2022-23 correspond to a revenue multiple of approximately 4.5
times and an EBIDTA multiple of approximately 19.6 times.

In the branded spice sector, which has previously seen a number of acquisitions, including ITC
Ltd.'s investment in Kolkata-based spice manufacturer Sunrise Foods, Dabur's move represents
further consolidation.

By 2025, the market for branded spices in India is expected to treble to 50,000 crore. A forecast
from investment firm Avendus Capital from 2021 predicts that by then, branded spices will
account for half of all spices sold in the nation. The market for branded spices in India is
expanding at a robust double-digit rate, driven by rising consumption, a switch from unbranded
to branded products, and a rise in state-specific preferences for regional flavours. This increase
in a market dominated by regional brands is being driven by the switch from loose to branded
spices, the rising demand for spice mixes (or blends) to speed up the cooking process, and a
distribution push by regional companies. Regional firms currently control a large portion of
the market, which has substantial future growth potential. The enormous distribution network
of Dabur will benefit the Badshah portfolio. To realise Badshah Masala's full potential, we look
forward to identifying additional synergies and market prospects.

Furthermore, Badshah Masala believes that Dabur will help put the brand's potential for future
growth on a greater trajectory. With the addition of their products to Dabur's extensive product
line, Badshah Masala will be able to address the needs of customers worldwide and accelerate

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their growth. Over a 10-year period, the brand will be amortised at a rate of $400–500 million
each year. Fair value will be established after the transaction is complete.

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Learnings
• Learnt how the companies take strategic decisions to before making any deal.
• Applied the practical aspects of what I learnt in class in understanding how the
acquisition makes sense for the company.
• Learnt how all the aspects are taken in consideration when making any decision that
might affect the company.
• Learnt how the companies use such acquisitions to increase their market penetration
and get more customers.
• Learnt how the goodwill of one company can affect the other company.

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References

Retrieved from [Link]

Badshah masala: No.1 spice brand in India since 1958. (2022, June 6). Retrieved from
[Link]

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