Dabur picks up 51% in Badshah Masala for Rs 587 crore

BENGALURU: Dabur India on Wednesday reported a fall in quarterly profit as higher commodity prices weighed on margins, and said it would acquire a majority stake in spices and seasoning maker Badshah Masala.

The Ayurvedic and herbal consumer goods maker is seeking to expand its foods business at a time inflation has hit rural demand growth, which was slower compared to urban areas for the first time in five quarters.

Dabur will acquire a 51% stake in privately held Badshah for Rs 5.88 bn or Rs 587 cr ($71.61 million), minus proportionate debt as on the closing date, valuing the company at Rs 11.52 billion.

The toothpaste and packaged juice maker will acquire the remaining stake after five years. The transaction is expected to be to be neutral to cash earning per share in the first year and add to profit thereafter, Dabur said.

The company’s consolidated net profit in the three months to Sept. 30 fell nearly 3% to Rs 4.9 billion ($59.73 million), from a year earlier.

“While the challenging economic environment continued to be a concern and impacted the purchasing power, we are seeing green shoots of recovery with the onset of festive season,” CEO Mohit Malhotra said.

Dabur earlier this month warned that soaring inflation during the second quarter could lower its operating margin by around 150-200 basis points. India’s annual retail inflation rate accelerated to 7% in August, driven by a surge in food prices.

The company’s revenue rose 6% in the quarter to Rs 29.86 billion.