Project

On

Dabur India Ltd.

By: K. Sai Prasad

T oday India is at the forefront of global economic activity and investments on account of its
strong economic growth and stellar corporate performance. The GDP in India has grown at 8.5
per cent, 7.2 per cent and 8.1 per cent in the last three years. The consensus among analysts is
that India has gone beyond the point of inflexion and is poised for a period of sustained high
growth. However, the FMCG industry had not kept pace with this overall economic growth. The
period 2000-2004 saw low rates of growth in demand for FMCG products leading to intense
competition between companies and severe pricing pressures. It has often been postulated that a
few consecutive years of sustained high growth is necessary for overall economic prosperity to
translate into benefits for the FMCG sector. In 2005-06, on the back of 3 consecutive years of
strong economic growth, the fortunes of the FMCG industry as a whole have started to look much
better. The FMCG sector will continue to gain from the fact that domestic consumption is growing
both on the urban as well as the rural front. Successful businesses of the future will have to reach
out to the vast semi-urban and rural markets in India. The low levels of FMCG market penetration
in rural and semi-urban India coupled with improved economic conditions provide considerable
scope of growth in these areas. Your company with its product mix and sales and distribution
network is well positioned to leverage its strengths and consistently deliver high quality products
at affordable prices in these markets. In addition the consumer spends in urban areas are
increasing with rising affluence, changing lifestyles and a seeming up-gradation to premium /
higher end products. Your company has a good portfolio of brands and products catering to this
market as well. In 2005-06, your Company has successfully leveraged the revival in the FMCG
sector and combined it with laudable improvements in costs, productivity, efficiency and supply
chain management to deliver superior growth in revenues and even more so in profits.

Some key achievements are-

_ Consolidated net sales from operations increased by 23.6 per cent from Rs.1,537 crore in
2004-05 to Rs.1,900 crore in 2005-06.

_Consolidated profits after tax (PAT) after accounting for minority interests and exceptional items
grew by 37.5 per cent from Rs.155.8 crore to Rs.214.2 crore.

_Return on capital employed (ROCE) increased from 31.5 per cent to 39 per cent.

_ Return on net worth (RONW) increased from 43.5 per cent to 46.1 per cent.

_Fully diluted earnings per share (EPS-diluted) rose from Rs.2.71 to Rs.3.71.

I would like to touch upon some of the key developments that occurred during the year 2005-06.
As you know, we had acquired the Balsara business in the current year. Integration is the key to
any successful acquisition. I am delighted to inform you that due to the focussed efforts of your
Company and the Balsara team, the integration was successfully completed within the first six
months of acquisition. Balsara's home care and oral care products have been well positioned in
the overall Dabur portfolio and have demonstrated good potential for growth. Also we have turned
a loss making business into a profit making one. Operational integration completed, the process
of merging the three Balsara entities with Dabur is underway and will further contribute to
shareholders' value. Dabur's Consumer Care Division, which comprises of the core FMCG
business has performed well during the year, driven by new product launches, innovation and
marketing initiatives. During the year your company forayed into the soap category by launching a
herbal soap under the Vatika brand. While Dabur Chyawanprash further consolidated its market
share and continued to be the market leader, its variant Chyawanshakti was also launched during
the year. Toothpastes emerged as major drivers in the oral care segment. Focus on South India
market added momentum to CCD growth. Dabur's traditional ayurvedic business is undertaken
by the Consumer Healthcare Division. This business consistently recorded high growths
throughout the year. With sales of Rs.148.6 crore, it has registered 38.7 per cent growth. This
growth has been led by a number of initiatives like reaching out to the consumers directly through
Dabur Ayurvedic centers, organizing health camps, vaid meets, collaborating with the
academicia, etc. We identify our healthcare business as one of the growth drivers in future.
Increasing preference for natural remedies is likely to ensure a sustained demand for our
ayurvedic products. The group's foods business under Dabur Foods Limited, a wholly owned
subsidiary of your Company grew by over 46 per cent to reach sales of Rs.190crore. Today, many
of its products, especially its juices under the brands Real, Real Activ and Coolers are found in
every household and account for almost 57 per cent of India's juice market. During the year, the
business more than doubled its profit due to scale and operational excellence and has become a
significant driver of growth of your Company. Changing lifestyles and modern retail formats are
expected to benefit the foods business in future. I would also like to share with you your
Company's overseas business performance. Overseas business grew at 19% with markets such
as GCC growing at 27% and Egypt at 49%.There is a lot of potential for Dabur products in the
international market. During the year, your company has reorganised its international business
around the focus, potential and opportunistic markets to be able to tap its potential to the fullest. A
subsidiary has been established for Pakistan market to leverage on Dabur's equity there. On the
operational front, the company's manufacturing unit at Uttaranchal crossed Rs 500 crore
production in a span of just 18 months. Your company is the first company in Uttaranchal to
achieve this milestone. It has become the largest employer in the region and has added to the
region's economic prosperity. Going ahead further capacity expansion has been planned for this
unit. Also, the Silvassa unit that came with the acquisition of Balsara is being upgraded/
transformed into an EOU to cater to the export requirements. During the year, the company spent
its time and resources to migrate to an improved ERP platform- SAP to ensure best business
practices. The target of going live on 1st April 2006 on SAP was successfully met. The Institute of
Companies Secretaries of India conferred upon Dabur the 'National Award for Excellence in
Corporate Governance' for the year2005. The company's CFO was recognised as one among the
best three CFOs of the country for the year 2005 by Business India. Your company has always
made concerted efforts to ensure highest levels of disclosures, transparency and corporate
governance. Such recognition further motivates the Company towards continuing its efforts in this
direction. A major survey conducted by two reputed HR consulting firms and published in the
Business World listed your Company as one of the top ten 'Great Places To Work'. This is a
creditable achievement for your company and recognizes its efforts to empower its employees
and keep them fully motivated and aligned with the Company's goals. During the year your
Company made a bonus issue of one share for every share held thereby rewarding the
shareholders for its outstanding growth in the past few years. The Company also declared a
dividend of 350% on pre-bonus capital, the highest till date. I would like to take this opportunity to
thank all the employees, vendors and distributors for their commitment and hard work leading to
the Company's success. Also I would like to thank the shareholders for their continuing faith and
support. Your company has performed well in the past and I can assure you that it will continue to
aim for higher achievements in future too.
Yours sincerely,