ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my project guide Mr. G.S. Radhakrishnan for his exemplary guidance, monitoring and constant encouragement throughout the course of this project. The blessing, help and guidance given by him time to time shall carry me a long way in the journey of life on which I am about to embark. I also take this opportunity to express a deep sense of gratitude to the principal Dr. Minu Thomas for her cordial support and guidance, which helped me in completing this task through various stages. I am obliged to my course coordinator Mrs. Shailashri Uchil, for the valuable information provided by her in respective fields. I am grateful for their cooperation during the period of my assignment. Lastly, I thank almighty, my parents, brother, sisters and friends for their constant encouragement without which this assignment would not be possible.

(Name of the student) (Mudaliyar Vineeth Rajkumar)

INDEX Sr.no Topic Page no.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Introduction to the FMCG sector Dabur History Strategic Intent Financial Perspective Fundamental Analysis PEST Analysis Operations Strategy Porters Five Forces Model SWOT Analysis Future Prospects Bibiliography

3 11 13 14 15 18 25 28 31 32 33 34

INTRODUCTION TO THE FMCG SECTOR

The Fast Moving Consumer Goods (FMCG) sector in India has been growing at a healthy CAGR of 11% over the last decade. Riding on the back of increasing demand and changing consumer preferences, thanks to higher disposable incomes and the retail revolution, the sector has been posting double-digit growth over the past couple of years. The industry is volume driven and is characterized by low margins. The products are branded and backed by skilled marketing, heavy advertising, slick packaging and strong distribution networks. Also, raw material prices play an important role in determining the pricing of the final product. Modern retail formats too have contributed in a major way in pushing the growth in the FMCG sector. With rising income levels and the spread of modern retail, the FMCG industrys future prospects look bright which is expected to further boost sales. Growth in the sector is led by higher urban and rural demand. Going forward, the governments growing support to agriculture will drive long-term growth in consumption from the rural sector. In our view, amongst all the FMCG segments, the food segment will outperform over the coming years. The Indian food industry is a significant part of the Indian economy,(food constitutes about 36% of the consumer wallet). The Indian food industry is poised to grow by a whopping 63.5% from Rs 788,100crs now to Rs.1, 288,900crs in next 5 years and by 137.8% to Rs. 1,874,100crs in next 10 years, throwing up huge opportunities for investments across the entire value chain. India faces contrasting problems of having one of the highest malnutrition cases and also being the diabetes capital of the world. In our view, both of these are an opportunities for Food companies. The Health foods segment is likely to see one of the highest growths in the Food segment. To exploit this trend many companies have launched health based products viz. Britannia launched Nutri-choice biscuits, Danone launching pro-biotic yogurt, Dabur introduced a juice with fiber and HUL introduced Soya and multigrain atta.

Fast Moving Consumer Goods (FMCG) goods, popularly named as consumer packaged goods, play a vital role as a necessity and as an inelastic product. The Indian FMCG sector is the fourth largest sector the economy with a total market size of Rs. 167,100crs. The market is estimated to grow to US$ 100 billion by 2025. In the last decade the FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated to 17%. The FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments.

FMCGs are slowly and gradually positioning and deeply penetrating in the fast growing rural market. The Rural mindset is open to consumption of newer, more contemporary food categories and as a result, drives consistent growth.

Rural India accounts for more than 700 Million consumers or 70% of the Indian population and accounts for 40% of the total FMCG market. The Rural market is a large market space with very low organized player penetration. Across the globe, the Indian rural market is probably the single largest unit of opportunity. Also with changing lifestyle and increasing consumer demand, the Indian FMCG market is expected to cross $80 billion by 2026 in towns with population of up to 10 lakh. The sector has a tremendous opportunity for growth in India, with the growing population, the rising incomes, education and urbanization, the advent of modern retail, and a consumption-driven society.

Evolution of the Indian FMCG Sector

Porters 5 Forces Model

Threat of new entrants: Moderate Low regulatory barriers. High competitive intensity requires large investments in brand building which deters small players.

Threat of Substitutes : High Multiple brands positioned with narrow product differentiation. Companies entering a category / trying to gain market share compete on pricing which increases product substitution.

OVERALL: MODERATELY ATTRACTIVE FMCG INDUSTRY

Bargaining power of Suppliers: Moderate Prices are generally governed by international commodity markets, making most FMCG companies price takers. Due to the long term relationships with suppliers etc., FMCG companies negotiate better rates during times of high input cost inflation.

Bargaining power of consumers: Low High brand loyalty for some products, thereby discouraging customers product shift Low switching costs Aggressive marketing strategies induce customers to switch between products

Rivalry among competitors: High More MNCs entering the country Advertising spends continue to grow and marketing budgets as well as strategies are becoming more aggressive

SWOT Analysis Strengths Moderate operating costs. Presence of established distribution networks in both urban and rural areas. Presence of well-known brands in FMCG sector. Favourable government policies. Weaknesses Lower scope of investing in technology and achieving economies of scale. Low exports levels. Counterfeit Products. Opportunities Untapped rural market. Rising income levels i.e. increase in purchasing power of consumers. Large domestic market- a population of over one billion. Export potential. High consumer goods spending Threats Removal of import restrictions resulting in replacement of domestic brands. Slowdown in rural demand. Tax and regulatory structure.

Key Challenges

Commodity prices

Price of inputs

fluctuate, which make it difficult to finalize raw material prices, affecting the final price of the product. Indian consumers are very price-sensitive and value conscious, making it difficult for FMCG firms to pass on the increased costs.

Emergence of Private Labels

labels serve to lower the consumers price points, particularly at the mass level Conflicts of interest when a retail chain has its own label whose packaging looks like category leaders and stocks brands of other manufacturers, (in terms of display space, promotions etc)
Private

Counterfiet And Pass-offs

These products narrow the scope of FMCG products in rural and semi-urban market The spurious pass off products affect large, high quality brands which have actually invested money in research and development to create their products and build brand equity.

Infrastructural Bottlenecks

Power Costs Transportation Infrastructure Agricultural Infrastructure

Industry Trends Indian FMCG companies are consolidating their existing business portfolios.

Consolidation

Product Innovation

Several companies have started innovating by launching or customizing their existing product portfolios for new consumer segments.

Lifestyle Products

Lifestyle and premium range products are the current hot target product segments among Indian FMCG players

Expanding Horizons

A number of companies are exploring the business potential of overseas markets and several regional markets.

Backward Integration

Backward integration is becoming the preferred strategy for increasing profit margins

Expanding Distribution Networks

Companies are now focused on improving their distribution networks to expand their reach in rural India

Third-party Manufacturing

FMCG players often outsource manufacturing or processing of a certain range of products to small vendors. This approach has helped companies focus on front-end marketing.

Rising importance of smaller-sized Packs

Companies are increasingly introducing smaller stock keeping units at reduced prices. This helps them sustain margins, maintain volumes from price-conscious customers and expand their consumer base

Increased hiring from tier II/III cities

Small towns are emerging as significant hiring zones. FMCG companies are hiring field staff from areas such as Kalpa (Himachal Pradesh), Mangaliya (Madhya Pradesh), Kota (Rajasthan), and Shirdi (Maharashtra) to sell diverse products

Growth Drivers Large Market

Spending Pattern

FDI Support

Growth Driver
Rise of rural Consumers

Increasing per capita income of urban population

Growing Popularity of Organized retail

Changing Profile and Mind Set of Consumer

Government Policies & Regulatory Framework Investment Approval: Automatic investment approval up to 100 per cent foreign equity for NRI and overseas corporate bodies. These investments are allowed in food processing segments such as coffee and tea. FDI in organized retail: India currently allows 100 per cent FDI in Cash & Carry segment and 51% in single-brand retail, which is expected to be further increased to 100%. India is also expected to allow 51% FDI in multi-brand retail, which will boost the nascent organized retail market in the country. Priority Sector: The Government of India recognizes food processing and agro industries as priority sectors. Relaxation of license rules: Industrial licenses are not required for almost all food and agroprocessing industries, barring certain items such as beer, potable alcohol and wines, cane

sugar, and hydrogenated animal fats and oils as well as items reserved for exclusive manufacturing in the small-scale sector. Segment Overview

The food and beverages segment is the highest contributor to the FMCG sector.

The FMCG market has three major segments

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DABUR
Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. Our story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to our partners and stakeholders. The results of our policies and initiatives speak for themselves.

Leading consumer goods company in India with a turnover of Rs. 5,283 Crore (FY12) 2 major strategic business units (SBU) - Consumer Care Business and International Business Division (IBD)

2 Subsidiary Group companies - Dabur International and NewU and several step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer

Care (Nigeria), Naturelle LLC(Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA)

17 ultra-modern manufacturing units spread around the globe Products marketed in over 60 countries Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over3.4 million retail outlets all over India

Consumer Care Business addresses consumer needs across the entire FMCG spectrum through four distinct business portfolios of Personal Care, Health Care, Home Care & Foods

Master brands:

Dabur - Ayurvedic healthcare products Vatika - Premium hair care Hajmola - Tasty digestives Ral - Fruit juices & beverages Fem - Fairness bleaches & skin care products

12 Billion-Rupee brands: Dabur Amla, Dabur Chyawanprash, Vatika, Ral, Dabur Red Toothpaste, Dabur Lal Dant Manjan, Babool, Hajmola, Dabur Honey, Glucose, Fem and Odonil.

Strategic positioning of Honey as food product, leading to market leadership (over 75%) in branded honey market

Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share.

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Vatika has been the fastest growing hair care brand in the Middle East Hajmola tablets in command with 60% market share of digestive tablets category. About 2.5 crore Hajmola tablets are consumed in India every day Leader in herbal digestives with 90% market share Consumer Health Division (CHD) offers a range of classical Ayurvedic medicines and Ayurvedic OTC products that deliver the age-old benefits of Ayurveda in modern ready-touse formats

Has more than 300 products sold through prescriptions as well as over the counter Major categories in traditional formulations include: - Asav Arishtas - Ras Rasayanas - Churnas - Medicated Oils

Proprietary Ayurvedic medicines developed by Dabur include: -Nature Care Isabgol - Madhuvaani - Trifgol

Division also works for promotion of Ayurveda through organised community of traditional practitioners and developing fresh batches of students.

International Business Division (IBD) caters to the health and personal care needs of customers across different international markets, spanning Nepal, Bangladesh, the Middle East, North & West Africa, EU and the US with its brands Dabur & Vatika

Contributes to about 30% of total sales Leveraging the 'Natural' preference among local consumers to increase share in personal care categories

Focus markets: -Egypt -Nigeria -Bangladesh -Nepal and US

High level of localization of manufacturing and sales & marketing

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HISTORY
1884 1896 Early 1900s 1919 1920 1936 1972 1979 1986 1992 1993 1994 1995 1996 1997 1998 2000 2003 2005 2005 2006 2006 2007 2007 2007 2008 2009 2010 2011 2011 Birth of Dabur Setting up a manufacturing plant Ayurvedic medicines Establishment of research laboratories Expands further Dabur India (Dr. S.K. Burman) Pvt. Ltd. Shift to Delhi Sahibabad factory / Dabur Research & Development Centre Public Limited Company Joint venture with Agrolimen of Spain Cancer treatment Public issues Joint Ventures 3 separate divisions Foods Division / Project STARS Professionals to manage the Company Turnover of Rs.1,000 crores Dabur demerges Pharma Business Dabur aquires Balsara Dabur announces Bonus after 12 years Dabur crosses $2 Bin market Cap, adopts US GAAP Approves FCCB/GDR/ADR up to $200 million Celebrating 10 years of Real Foray into organised retail Dabur Foods Merged With Dabur India Acquires Fem Care Pharma Dabur Red Toothpaste joins 'Billion Rupee Brand' club Dabur makes its first overseas acquisition Dabur enters professional skin care market Dabur India acquires 30-Plus from Ajanta Pharma

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2012

Dabur crosses Billion-Dollar Turnover Mark

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STRATEGIC INTENT
We intend to significantly accelerate profitable growth. To do this, we will: Focus on growing our core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology.

Be the preferred company to meet the health and personal grooming needs of our target consumers with safe, efficacious, natural solutions by synthesizing our deep knowledge of ayurveda and herbs with modern science.

Provide our consumers with innovative products within easy reach. Build a platform to enable Dabur to become a global ayurvedic leader. Be a professionally managed employer of choice, attracting, developing and retaining quality personnel.

Be responsible citizens with a commitment to environmental protection. Provide superior returns, relative to our peer group, to our shareholders.

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FINANCIAL PERSPECTIVE
Cost Cutting Measure In 2003-04 Dabur India procured Rs.210 crore of raw materials through e-sourcing which was almost 50 per cent of total raw material expenditure that it incurred. As a result of which Dabur considerably controlled raw material costs which were on a rise. Due to e-procurement it was able to save considerably in raw material costs which in turn, translated into higher operating profit margins for DIL. Daburs net profit during the quarter was up 30% from the year-ago period. The firm registered an operating profit margin of around 19% compared with around 17% a year ago. But, the savings visible on the raw material cost front was also due to the higher inventory base that the company used when the material costs were low. As a result of these savings it was able to spend more on advertisements and new launches. Dabur Pharma Demerger In May 2003, the board of Dabur India demerged the pharmaceuticals business and created a separate entity Dabur Pharma Ltd. At that point of time pharmaceuticals contributed around 15% of total sales. In 2007, the company sold its non-oncology business to Alembic for Rs 159 crore to focus on its oncology segment. In 2008 German major Fresenius Kabi acquired 73% stake in Indias largest anti-cancer drug maker Dabur Pharma for around Rs 872 crore. With this, the Burman family, the promoters of the company and holding 65% stake got around Rs 775 crore and exited the pharmaceutical business so as to focus on its core competence and come out as a pure FMCG player. Oncology (Anti-cancer) is a lucrative segment & requires high-level research and development (R&D) but the parent company DIL long term strategy is to buy brands and aggressively expand its FMCG business. One of the reason they sold the company could be that its unit in Baddi completed its 10-year tax exemption benefit during the quarter ended December 2007.Hence it made economical sense for them not to continue with that and sell it off to a Big Pharma player like Fresenius Kabi as Dabur Pharma also holds a substantial number of drug registrations in Asia, Europe and the US.

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Acquisition of Balsara In Jan 2005, Dabur India Ltd (DIL) acquired three Balsara group companies for Rs143 crore in an all-cash deal. It mopped up Rs. 120 crores through internal accruals and financed the remaining Rs. 23 crores through borrowings. As per the deal it had acquired 99.4 per cent stake in Balsara Hygiene Products, 100 per cent in Balsara Home Products and 97.9 per cent in Besta Cosmetics. The acquisition was part of its inorganic growth strategy which it had planned well in advance and was in line with its plan to expand the company's scale of operations and strengthen its presence in the FMCG sector. As 44 per cent of Balsara's revenue came from home care products and the oral care segment accounted for nearly 56 per cent which had witnessed growth in excess of 15 per cent, also Balsara deal was a strategic fit in both oral and home care market as it acquired the 2nd largest selling toilet cleaner Sanifresh in 2000 Cr. Home care Mkt. Also its market share in tooth paste Industry grew by 6% from 1.8% to 8% which substantially covered the acquisition amount it paid for Balsara. Balsara had sales of Rs 199.6 crore & losses of about Rs 8 crore in the period, But with readjustment in focus, streamlining of distribution and reduction in the wage bill helped Dabur India turn Balsara Home Products around. It reduced the distributors of Balsara from 500 to a few dozens while giving business to its own distributor. This put more bargaining power in Daburs hands in negotiating a reduction in distributors margins as well as in making its purchases. Reduction in no of employee reduced the wage bill by 60% along with substantial reduction in other overheads. Also, Dabur payed 1/5th of what Balsara used to pay for advertisements, hence, increasing its visibility and revenues. In six months of its take over Balsara added about 11% to total revenue and showed great potential in terms of revenue growth and profitability posting 35% growth in sales and a net profit of Rs. 14.8 crores during the year. The Balsara acquisition boosted its revenues and savings in excise duty (due to shifting of manufacturing to tax-free zones) which also enhanced its profit margins as seen in the following tables. We can see that the financial year ending 2005 had shown an increase of 15% in sales which was immediately after the acquisition of Balsara.

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Dabur FEMCARE Deal Dabur acquired Fem care in June 2009 and the result has been phenomenal. The market share in the skin segment increased from 1% to 6.6% within 5 months of this deal, making DIL the second biggest skin-care company in the country behind HUL. The Fem Care brand accounts for half of the skincare segment within the Dabur portfolio and 4.2 per cent of Daburs total revenue. First Dabur India had acquired 72.15% of Fem for Rs203.7 crore in an all-cash deal. Further due to SEBIs guideline (substantial acquisition of shares and takeovers) Regulation,2007. Dabur acquired additional 20% stake for Rs54 crore through an open offer. The deal has been done at more than a 21% premium to the prevailing share price of Rs 656 of Fem Care at Rs 800/share. The deal fetched a very attractive valuation for Fem Care Pharma. With the completion of this transaction, Fem Care Pharma is now a 100% subsidiary of Dabur India. Marico Industries and Godrej were also reported to be in race for Fem Care Pharma but it was eventually won by Dabur which shows its seriousness towards FEM Acquisition.

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FUNDAMENTAL ANALYSIS OF DABUR

QUARTERLY STATEMENT CONSOLIDATED Y/E Mar. Net Sales Growth YoY % Raw Material Consumed Staff Cost Ads & Promotion Cost Other Expenditure Total Expenditure EBITDA EBITDA Margin (%) Interest Depreciation Other Income PBT incl. OI Tax PAT Minority Interest Cons APAT APAT Margin (%) Extraordinary items Cons RPAT 2292 1845 12576 2137 14.5 213 267 263 1921 378 1543 2 1541 10.5 47 1494 1919 2181 12708 2729 17.7 150 282 230 2527 507 2020 15 2006 13.0 2006 2542 2228 14156 2409 14.5 133 287 366 2355 484 1870 10 1860 11.2 1860 7316 1122 7399 1209 8074 1313 Q1FY13 14713 21.5 Q4FY13 15437 12.5 (Rs. In millions) Q1FY14 16565 12.6

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CONSOLIDATED PROFIT & LOSS STATEMENT

Y/E Mar. Total Sales Total Raw materials Personnel Cost Ads & promotion cost Other Expenditure Total Expenditure EBITDA Depreciation Int. & Finance charges Other Income EBT (as reported) Tax PAT Minority Interest APAT Extraordinary adj. RPAT

FY12 53054 26924 3874 6595 6759 44153 8902 1032 538 574 7905 1464 6441 (8) 6449 6449

FY13 61761 30193 4712 8370 8188 51463 10298 1124 589 945 9530 1826 7704 24 7680 46 7634

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BALANCE SHEET AS ON Equity Share Capital Reserves Net worth

FY12 1742 15430 17172

FY13 1743 19501 21244

Total Loans Minority Interest Def. Tax Liabilities Capital Employed Fixed Assets Investments Inventories Sundry Debtors Cash & Bank bal

11172 30 274 28649 16680 4825 8239 4617 4184

12577 121 362 34303 16745 6319 8439 4841 5128

Loans and Advances Other Current Assets Total Current Assets Current Liabilities & Provisions Net Current Assets Misc Expenditure Total Assets

2117 803 19960 13355 6605 538 28649

2173 3428 24009 13061 10948 292 34303

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CONSOLIDATED FINANCIAL RATIOS Y/E Mar. Growth (%) Total Sales EBITDA APAT Profitability (%) EBITDA Margin Adj. PAT Margin ROE ROCE Per Share Data (Rs.) Adj. EPS Adj. CEPS Adj. BVPS Valuation P/E (x) P/BV (x) EV/EBITDA (x) EV/Total Sales (x) Dividend Yield (%) Gearing Ratio D/E (x) Turnover Net Fixed Asset T/O(x) 3.2 3.9 0.7 0.6 45.9 17.2 34.1 5.7 0.8 38.6 13.9 29.5 4.9 0.9 3.7 4.3 9.9 4.4 5.1 12.2 16.8 12.2 41.5 31.7 16.7 12.4 40.0 32.1 29.3 11.3 13.4 16.4 15.7 19.1 FY12 FY13

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Dabur India Ltd has reported good set of numbers for the quarter ended June13 which was in-line with our expectations. Its international business has also performed well. We also attended the conference call and some of the key points are summarized below: Key Highlights of Q1FY14 Results Daburs Standalone Performance: For Q1FY14, its Revenue grew 10.7% YoY to Rs.11260.2 mn with domestic FMCG value & volume growth of 13.2% & 9.0% resp. EBITDA grew 10.0% YoY to Rs.1618.8 mn with margins of 14.4% which decreased by 9 bps YoY as the benefit of raw material prices softening was compensated by higher employee cost and other expenditure as % of sales. APAT grew 10.1% YoY to Rs.1308.9 mn with margins of 11.6% which decreased 7 bps YoY. It reported EPS of Rs.0.75 in Q1FY14. Consumer Care business contributed 76.9% to sales while Foods & Others contributed 19.6% & 3.6% to sales respectively. Daburs Consolidated Performance: For Q1FY14, its Revenue grew 12.6% YoY to Rs.16565.2 mn. EBITDA grew 12.7% YoY to Rs.2408.8 mn with margins of 14.5% which improved by 2 bps YoY as the benefit of raw material prices softening was compensated by higher employee cost and other expenditure as % of sales. APAT grew 20.7% YoY to Rs.1860.1 mn with margins of 11.2% which improved by 76 bps YoY mainly on account of lower interest cost and higher other income. It reported EPS of Rs.1.07 in Q1FY14. Consumer Care business contributed 81.3% to sales, retail business contributed 1.0% to sales while Foods & Others contributed 15.1% & 2.5% to sales resp. Daburs International Business Performance: Its International business reported 17.4% revenue growth during Q1FY14. Its organic business grew 18.5% in Q1FY14 with volume & price growth of 15% & -0.7% resp. In Q1FY14, Bangladesh reported 11.0% growth while sales in GCC, Egypt & Nepal grew by 17.0%, 22.0% & 15.0% resp. Namaste business is back on recovery path with strong 16% growth in sales (Constant Currency Growth 13%). Hobi business also performed well in Q1FY14 and reported double-digit growth. MENA region is sitting on a sweet spot as it is witnessing deflationary environment resulting in gross margins expansion but Egypt is a concern area currently.

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Key Points from Concall of Dabur India Strong growth across all the key categories in Q1FY14: Health Supplements 7.5%, OTC & Ethicals 11.8% (OTC 10.9% & Ethicals 13.2%), Hair Care 11.8% (Shampoo 22.8%, Hair Oil 10.0% & Perfumed Hair Oil 15.3%), Oral Care 8.6% (Toothpaste 14.0% & Toothpowder declined marginally), Home care 25.8%, Digestives 15.1%, Skin Care 12.7% (Fem Bleach Portfolio grew well and registered gains in market share) & Foods 18.7% (Both Real & Real Activ performed well). Daburs retail business, under NewU, has also marked a turnaround with a substantial reduction in losses and the business has attained store-level profitability in Q1FY14. Fruit Juice manufacturing facility in Sri Lanka has commenced production in Q1FY14. New Products Launched in Q1FY14: Dabur has launched a host of new products/variants across geographies, all of which have received encouraging response. In the domestic market, Dabur has launched Indias first drinking yoghurt under the brand Ral Activ, besides a range of super-fruit juices under the brand Ral Supafruits. It launched Oxylife Aloe Vera Gel bleach, the first of its kind in India. In the overseas market, it launched a range of hair care productslike Hair Mayonnaise, Shampoos, Conditioner, Hair Oils & Hair Colour Crme-under the brand Vatika, besides a range of Fem hair removal wax. International Business Outlook: Expects Namaste to perform well in the coming quarters and there is also scope for further margins improvement (~500-600 bps). Dabur expects organic international business to perform well with scope for further margins improvement (~100 bps). Overall Outlook: For FY14, the management expects domestic volume growth in the band of 8-12% & price growth of ~4-5% instead of ~2-3% guided earlier due to increasing commodity prices & rupee depreciation. It expects to maintain A&P as % of sales at ~13-14% and improve the EBITDA margins by 100 bps for FY14 on consol basis. Dabur highlighted that they are not worried about the demand from rural India in FY14 as stimuli will happen at the rural end due to elections and good monsoon. In Q1FY14, rural growth (14.2%) was higher than urban growth (9.6%) and rural India contributed ~47% to the overall domestic sales with ~46% gross margins. For FY14, Dabur guided for capex of Rs.150-175 Cr.

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New Products: Expects to fill up gaps in its existing portfolio (e.g. building a light hair oil brand) & will also try to enhance growth from its existing small biz like Fem Skin Care, parts of HPC, Home Care & Healthcare.

OUTLOOK & VALUATION Considering strong performance in FY13, strong brand portfolio, favourable domestic & International sales mix, favourable Rural & Urban sales mix, introduction of new products/variants, Namaste biz revival in Q1FY14, we expect Daburs Revenues & APAT to grow at a CAGR of 14.1% & 18.6% resp. during FY13-FY15E. It is believed that the current pressure on discretionary staples in India will not impact Dabur as it contributes only 10% to its domestic sales. At the CMP of Rs.170, the stock trades at a valuation of 27.4x its FY15E EPS of Rs. 6.2. Analysts have maintained a HOLD rating for the stock.

KEY FINANCIAL VARIABLES Revenue Y/E Mar. (Rs mn) FY12 FY13 53054.2 61761.2 (Rs mn) 6448.9 7680.0 (Rs) 3.7 4.4 (% Ch.) 13.3 19.0 (x) 45.9 38.6 (%) 31.7 32.1 (%) 41.5 40.0 (x) 17.2 13.9 APAT AEPS AEPS P/E ROCE ROE P/BV

RISK RATING Dabur's well diversified product mix provides a steady revenues stream that is less susceptible to seasonal swings. However Dabur is increasingly expanding into segments wherein it will compete head on head with large firms. While its herbal niche should allow it to differentiate its offering, it would be difficult for Dabur to match larger firms in terms of distribution reach and advertising. Also with its international expansion and overseas raw material outsourcing, Dabur is increasingly becoming susceptible to country risk and global currency movements. However, given its lower revenue cyclicality, low financial leverage and medium operating leverage, Dabur has low systematic risk. Therefore the company gets a medium uncertainty rating.

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PEST ANALYSIS OF DABUR INDIA LIMITED - (PERIOD 2005 ONWARDS)

Political Factors The key factors that have triggered growth for the FMCG industry in the period include reduction in excise duties, relaxation of licensing restrictions and reduced dominance of unorganized sector due to creation of level playing field. With the revival in demand in the FMCG sector and capacity planning done by all major FMCG companies in tax haven areas the future looks promising. Also, the government thrust on agriculture and rural economy has facilitated improved demand for the FMCG products. The hair oil industry is witness to a large amount of unbranded oil manufacturers that account for nearly half of the total coconut oil market. This also provides a significant upside potential for companies like Marico and Dabur. The implementation of Value added tax is also expected to tilt the balance in favor of organized players. Given the fact that there is only a moderate scope for differential in coconut oil segment, the players concentrated on value added oils like Amla, Badam and so on. The addition of these high margin products in the portfolio also leverage the players against the no frills coconut oil segment. They have been successful in the venture with brands like Vatika, Dabur Amla (Dabur) and Hair & Care (Marico) firmly rooted in the markets. While the coconut oil brand of Marico, 'parachute' grew by 8% in volumes in FY '05, the growth of value added oils like Sampoorna, Shanti Amla and Hair & Care has been comparatively faster at 14%. Even for Dabur, the flagship brand 'Dabur Amla' reached a milestone in FY '05 by crossing a turnover of Rs 200 crore and registered a 16% growth. This speaks of the success of the value added products. In 2008-09, finance ministers decision to reduce CENVAT rate to 14% was in line with t he GST roadmap, and this coupled with lower income tax incidence on individuals will accelerate disposable incomes, and thus augurs well for the FMCG sector.

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Economic Factors Better reforms and investment policies attract foreign investments, which ultimately improves the standard of living of the people in that country. With improved standard of living more and more consumers prefer using branded FMCG products which have so far remained an aspiration. Consumers who are already using branded products will upgrade themselves to premium products. We could expect similar recovery in our economy in the FMCG segment in the coming years. FMCG sector is going to be in the limelight with strong economic fundamentals, rising demand and a growing GDP. The future growth is expected to come from newer segments such as the youth and through increased rural and small town penetration. The Internet and e-commerce will change the dynamics of this industry helping companies improve their procurement, distribution and selling efficiencies. FMCG market remains highly fragmented with almost half of the market representing unbranded, unorganized sector products. This presents a tremendous opportunity for makers of branded products who can convert consumers of unbranded products to branded products. In the scheme of things, Dabur Foods Limited' was merged with Dabur India Ltd. in 2007. It was now an over Rs 2,200-crore entity including the Rs 200-crore from Dabur Foods. It thus became one of the business divisions of Dabur India, alongside consumer care division (CCD) that encompassed all the personal care and home care products, and consumer health division (CHD). Dabur also made retail venture under the health and beauty format, through its wholly owned subsidiary, H&B Stores. It envisaged selling products ranging from personal care, cosmetics, baby care to over-the-counter drugs. Social Factors In 2004, the frequency of usage of oral care products in India as compared to developed world was very low, giving scope for growth to the sector. Per capita consumption of toothpaste in the country was only 70 gm compared with 300 gm in Europe and 150 gm in Thailand. Also, a critically low dentist to population ratio in our country, results in low oral hygiene consciousness and widespread dental diseases. This provided a good opportunity to expand the market and encourage people to use modern dentifrice to improve oral hygiene. Moreover, it is one of the larger players in the toothpowder category. However the company is witnessing negative growth rates in the category, as there seems to a shift of the consumer from

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toothpowder to toothpaste segment. The company is compensating for the loss in the category by launching Dabur Red toothpaste that has grown into Rs 50 crore brand in two years of its launch. It was also worthwhile for Dabur India Ltd. to consider inorganic growth. Even though Balsara (with brands Promise, Meswak, Babool etc.) was making losses, it did possess synergies with the growing oral care business of Dabur. Dabur estimated the market for this category to be Rs. 2500 crores growing @ 10% p.a., which made the market very lucrative. Thus, acquiring Balsara was an obvious step to grow inorganically. The penetration levels of shampoo are abysmally low in the country. The penetration in urban areas is around 65% while its just 35% in rural areas. Also the per capita consumption of shampoo is just 16 ML compared to 1000 ML in UK and US. This provides an opportunity to the players to improve the market and their size. The Indian shampoo market is characterized by sachets. Around 70% of total shampoo sales are through sachets. The general trend in the international markets is to introduce a brand through sachets and thereafter upgrade the consumer to bigger bottles. Dabur thus shifted gears to anti-dandruff shampoo (Dabur Vatika anti-dandruff shampoo) in 2004. It also relaunched brand Vatika in 2007. Technological Factors The market size of bleach products in India is around Rs 85 crore and is growing at 15% with Fem holding 60% market share in it. The market size of hair removing cream is around Rs 110 crore and is growing at 22% with Fem having around 7% market share. The liquid soap market size in India is around Rs 50 crore and is growing at 25%, where Fem has 2 main competitors, Dettol and Lifebuoy. In 2009, Dabur acquired 72.15% stake in Fem Care to provide the company with the technology to enter high-growth skin care market with an established brand name 'FEM'. Apart from Fem bleach, other popular brands by the firm are Oxybleach cream, Botanica anti-ageing cream, Stratum colour protecting hair conditioners, SAKA men's bleach and Bambi fabric softeners. Fem is world leader in bleaching cream category by tonnage. Fem brand is very well placed in India and aboard. With this acquisition, Dabur will become key player in skin care category. Fem has reach of around 25000 parlours, which can be leverage by Dabur for promoting its own Gulabari skin care products and its Vatika brand. Dabur was thinking of launching its products into ayurvedic skin care category, will delay its launch by couple of months due to acquisition.

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OPERATIONS STRATEGY
The Operations Strategy of Dabur India Limited has changed as their business has evolved over time. The section below tracks the various key operations strategy such as the Manufacturing ( processes involved and locations), the Supply chain initiatives over the years, Inventory Management, Quality Management, Research and Development Initiatives, Procurement procedure, Vendor Management etc over the time frame from late 1990s till 2009. The section highlights the key defining operational strategies adopted by the company during this period. Manufacturing By the year 2002-03 the company had 6 manufacturing facilities at Sahibabad (Uttar Pradesh), Baddi (Himachal Pradesh), Alwar (Rajasthan), Katni (Madhya Pradesh), Kalyani and Narendrapur (West Bengal). The APIs and formulations of the Company are manufactured inhouse at Kalyani, Sahibabad and Baddi. Fifty per cent of FMCG products, comprising the Health Care products and Ayurvedic specialities portfolio, are manufactured in-house, while the Personal care products portfolio, which accounts for the remaining 50 per cent, are out-sourced to eight contract manufacturers. Dabur was in the process of setting up a manufacturing facility at Jammu, for manufacturing Personal care products. Jammu had been selected as the new site in order to avail fiscal benefits offered for setting up manufacturing facilities in that location. Dabur has been giving considerable emphasis on improving manufacturing and operational efficiencies. During the year under review, Dabur focused on enhancing productivity of capital and existing assets, improving plant efficiencies in the existing manufacturing facilities and following more stringent quality control and supervision norms at outsourcing locations. Standardisation of processes, tight budget controls and energy audits constituted some of the other initiatives undertaken by the Company to improve its operational performance. As a result of these measures, operating profit margin (excluding other income) of the Company had improved from 9.2 per cent in 2001-02 to 10.3 per cent in 2002-03. The chart below shows the continuous improvement of the Companys productivity (defined as value of sales per worker), from 1998-99 to 2002-03. Productivity increased by almost 18 per cent, from Rs.28 lacs per worker in 2001-02 to Rs.33 lacs per worker in 2002-03, mainly due to better shop floor practices, lower breakdowns and improved efficiency in energy use. Wastage on the shop floor had reduced by more than 20 percent in 2002-03 over 2001-02.

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Source: Dabur Annual Report 2002-03 In 2002-03, Total Quality Management (TQM) techniques were implemented on a pilot basis at two plants in the area of statistical process control. The purpose of implementing TQM was to achieve lower rejection of raw materials, time savings, and make the procurement process more efficient. The Company had plans to implement TQM for other functional areas in the future. In addition, Total Production Maintenance (TPM) measures were initiated in two locations in 200304, and hence TPM has become an integral part of the production processes of your Company. This initiative is aimed at improving the productive efficiency of capital assets In 2004-05, Dabur successfully commissioned its largest and state-of-the-art manufacturing facility at Rudrapur, Uttaranchal. It was set up in a record time of four months, the plant was used to manufacture Chyawanprash, Hajmola tablets, Amla hair oil, Vatika hair oil, Lal Tail and Janam Ghunti. While the Rudrapur facility enjoyed similar fiscal benefits as the Jammu and Baddi plants, the Company remained focused on leveraging higher operational efficiencies and superior quality levels from this plant. Daburs Jammu plant which was commissioned in 2003, was utilized to manufacture hair oils, shampoos, Gulabari, Kewra water and intermediaries. This plant featured a modern and compact shop floor design, lean organization structure, improved system processes and stringent quality control norms. Higher batch sizes and larger scales of production at this facility contributed to major improvements in product quality, consistency and productivity. As a result of the Balsara acquisition in the fiscal year 2004-05, Dabur added three more manufacturing facilities to its fold, located at Silvassa, Baddi and Kanpur. While the Silvassa and Kanpur facilities were primarily engaged in manufacturing household range of products and the private label business, the Baddi plant produced oral care products, including fluoride based

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toothpaste. This plant was set up in 2004-05 and enjoyed greater tax benefits as were available to new units in Himachal Pradesh. Dabur Foods multi-fruit processing facility at Siliguri, West Bengal, became fully operational during the year. The plant produced pulp and concentrates and brought the Company a step closer to achieving full backward integration and realising the resultant cost efficiencies. The location of this plant was a major source of its competitive strength. It was located at the heart of a major fruit-producing and trading area, thus, giving it access to a variety of fruits including litchi, guava, mango and tomato at competitive prices. Moreover, it was in close proximity to the Dabur Foods juice plant located in Nepal, thereby reducing time and cost of transportation. In 2004-05, Dabur Foods acquired a new facility near Jaipur for manufacturing fruit juices. The plant had manufacturing facilities for 200 ml packs. This plant was upgraded to manufacture 1 litre and 200 ml packs of Real brand of fruit juice and the Coolers range of products. The success of DIL's manufacturing lies in is its ability to regularly produce and meet requirements of the sales plan. This is achieved through an efficient production planning system that is a part of the overall supply chain initiative called project Garuda. The initiative has helped reduce stocks and, therefore, requirement of space with the CFAs. The ability to sustain much higher levels of growth with the same level of inventory as 2006-07 bears testimony to efficiency of DIL's production and supply chain system.

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PORTERS FIVE FORCES MODEL FOR DABUR

1) Threat of competitors The threat of competitors is high because there are a lot of players in the Market. The ayurvedic platform is also being used by other players like Emami and Ayur. Premium personal care products face competition from international brands as well as boutique products. Existing players are entering new segments which will increase the competition e.g. Casper entering the vaporizer segment and Good Knight the personal spray and gel segment. 2) Threat of New Entrants In case of home care segment the entry barriers are low since the costs to set up manufacturing facility is not very high. The exit barriers are low and thereby firms can enter and exit easily. But the entry barriers in terms of building a national brand as well the distribution network is high. So is the exit barrier. 3) Threat of Substitute Products Substitutability is highest in Food category followed by Personal care category, where product innovation is high. Home grown and traditional substitutes to Home care products e.g. traditional insect repellents. 4) Threat of Buyers Bargaining Power The buyers bargaining power is low since they cannot influence the prices to such a great deal. Even in case of Modern trade the buyers bargaining power is moderate as it generates less than 10% of FMCG sales. Price sensitivity is high especially in the Food and Home Care category.

5) Threat of Suppliers Bargaining Power The number of suppliers is low for the Home Care category e.g. Certain oils are not available everywhere which increases the raw material suppliers bargaining power when negotiating the price with Godrej etc.

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SWOT ANALYSIS
Strengths Unique Ayurvedic and Health Positioning. Extensive market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India. High brand awareness and perception of Dabur, Vatika, Hajmola, Real. Monopoly status in multiple product categories like digestives (90% MS), branded honey (75% MS) and Chyawanprash(65% MS). Weaknesses Low Penetration in Rural areas in Food, Health Supplements and Home care categories. (Appendix 5). Daburs R&D work is low and insignificant, which is a major weakness in FMVG as it is constantly creating new products. Opportunities Packaged Foods category. Sugar free food and health care substitutes e.g. Sugar Free Chyawanprash Expanding size of pie in Home care segment due to efforts by firms like Godrej Sara Lee and niche products like Jyothy laboratories. Increasing Modern trade is a good indicator for Personal care segment as it provides higher visibility, higher rotations and a personal touch (relevant for premium products). Threats Counterfeit products in the Food and Home care category. Increasing competition from private labels. Increasing bargaining power of modern trade especially in the Personal Care segment

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FUTURE PROSPECTS
RETAIL STORE New U A retail store for complete makeover of women. The brands under New U includes Daburs own private label, NewU, range of affordably priced cosmetics such as nail paints, facial kits and hair accessory among others Rising beauty consciousness. The roughly Rs 7,000 crore organized and unorganized hair and beauty industry is growing at the CAGR of 35%. At this rate, it has the potential to become a Rs-30 ,000 crore business by 2015. Expansion of presence in Retail sector. FDI in Muli-Retail. Online Marketing.

CRITERIA OF M&A Foreign Company/Indian Company. Plans to expand already established retail player in Beauty Care.

GROWTH IN AFRICAN MARKET Africa epicenter of our growth Africas real compound GDP growth, about 5 percent annually between 2002 and 2009 Consumer spending to be boosted by 35% till 2015. New plants in South Africa, Kenya and Nigeria coming up. Products acquired through Namaste Lab and Hobi have to be leveraged in these markets Manufacturing Plants to be set up in Egypt and Nigeria Inorganic growth

RURAL PLANS FMCG Rural rush Low Penetration levels High Demand Revamped Distribution System in 2011. Need Sound logistics systems to supplement

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BIBLIOGRAPHY
http://www.scribd.com/doc/18435906/Dabur-Herbal-Promise http://www.scribd.com/doc/22107413/Entrepreneurship-Project http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization %20Behavior/HR%20Restructuring-Coca%20Cola%20&%20Dabur-Case%20Studies.htm http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization %20Behavior/HR%20RestructuringThe%20Coca%20Cola%20&%20Dabur%20Way.htm#The_Leader_Humbled http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization %20Behavior/HROB003.htm http://www.moneycontrol.com

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