InvestorQ : How do you see Dabur benefitting from the buyout of Badshah Masala?
Mary Joseph made post

How do you see Dabur benefitting from the buyout of Badshah Masala?

Arusha Ray answered.
1 month ago

Along with its quarterly results for the Q2FY23 quarter, Dabur also announced the acquisition of 51% stake in Badshah Masala. Badshah is one of the leading Indian manufacturers of cooking spices and competes with the likes of Ramdev, MDH and Kitchen King. Dabur has paid Rs587.50 crore for a 51% stake in the company and the entire consideration has been paid in cash. The balance 49% will be acquired by Dabur in five years-time. The deal is still subject to various regulatory approvals plus a series of terms and conditions that have to be met within a stipulated timeline.

The share purchase agreement and the shareholders agreement has already been signed by Dabur promoters with the existing promoters and shareholders of Badshah Masala Private Limited. The idea is to eventually absorb the entire company into Dabur to mark its foray into the lucrative Indian foods business. Dabur has been targeting total sales of Rs500 crore from the food products business. The stake buy values the Badshah Masala at an enterprise value of Rs1,152 crore. In valuation terms, that translates into 4.5 times sales and about 19.6 times EBITDA. That is among the best in class pricing you get in this space.

The deal gives Dabur a direct entry into the Rs25,000 crore organized spices market. If you add the unorganized informal spices market the size is Rs70,000 crore. So the real opportunity is not just in taking a share of the organized market but also in converting the unorganized buyers into the organized segment. Spices business is an eclectic mix of taste and consistent quality. Badshah has the brand and the franchise, but it needs a more powerful balance sheet to work on. This business is likely to see geometric growth as the consumption improves and it is also likely to give a boost to the food business of Dabur.