Billionaires Chase Growth for Dabur in Villages: Corporate India

Billionaires Chase Growth for Dabur in Villages: Corporate India

Dabur India Ltd. (DABUR), the household goods maker controlled by the billionaire Burman family, is expanding in the rural market of the world’s second-most populated nation to revive sales that grew at the slowest pace in two years. The company increased its rural network to cover 36,000 villages as of October from 14,000 in March 2012, Dabur said in an e-mail. That helped the maker of Hajmola digestive candy boost sales in villages to 50 percent of revenue in the year ended March 31 from 40 percent in 2009. Revenue from Indian operations in the quarter ended Sept. 30 grew 10.6 percent, the slowest pace since the same quarter in 2011.The best monsoon in six years is luring companies including Dabur, Mahindra & Mahindra Ltd. (MM), India’s biggest tractor maker, and HDFC Bank Ltd. to a population that exceeds the U.S. and Europe combined. Higher farm output and the Congress-led government’s $77 billion spent in rural areas is boosting demand for Dabur’s Sani Fresh toilet cleaners and Odomos mosquito repellent creams, according to Rohit Prakash Gupta, Dabur’s head of homecare products.

“The incremental domestic consumption story, which is by far the most important driver of growth in India, is going to be stronger among the rural population than urban,” Jan Dehn, the head of research at London-based Ashmore Group Plc, which oversees $78.5 billion in emerging market assets, said in a phone interview yesterday. “It makes sense to watch this space very carefully.”

Election Effect

General elections may also help consumer goods makers boost sales next year, said Naveen Vyas, Kolkata-based analyst at Microsec Securities Ltd. Profit at Ghaziabad, India-based Dabur’s may rise 22 percent to 9.29 billion rupees ($150 million) in the year ending March 31, according to a median estimate of 40 analysts surveyed by Bloomberg.

In regional elections that ended yesterday, the opposition Bharatiya Janata Party is poised to become the largest party in four out of the five states that went to polls, according to the C-voter exit poll shown on Times Now television channel. National elections must be held by May 2014.

The gains for consumer good companies may be short-lived, said Swati Gupta, an analyst at AC Choksi Share Brokers Pvt. in Mumbai. A good monsoon and increased handouts from the government during the election season have led to a “short term effect” of higher rural incomes, Gupta said.

Monsoon Season

Higher rural income will mean Dabur faces intensifying competition from companies including Hindustan Unilever Ltd. (HUVR), India’s biggest consumer goods company, which supplies its goods through 2 million retail outlets across India and has a network of 48,000 women in villages to promote and sell its portfolio of soaps, detergents and skincreams.

Dabur’s shares, which have risen 26 percent this year, gained 0.4 percent to 163.60 rupees at 10:44 a.m. in Mumbai. Hindustan Unilever has advanced 9 percent this year. The shares rose 0.3 percent to 573.5 rupees.

With more than half the cultivated area in India being rain-fed and the four-month monsoon season accounting for about 70 percent of total rainfall, a good monsoon boosts farm output. India received the highest rainfall since 2007 in the season that extends from June 1 to Sept. 30, according to the nation’s meteorological department.

Production of food grains in the 2013-14 season will probably reach a record, Agricultural Minister Sharad Pawar said in September. Rising output of foodgrain helped Mahindra’s local tractor sales surge a record 24 percent to 128,626 units in the six months ended September.

Village Fairs

Companies looking to expand their business in India’s 600,000 villages are spending more on television advertisements and setting up stalls and billboards in village fairs, that are visited by millions of people from rural areas and small towns, according to Sanjay Kaul, owner of rural marketing firm Impact Communications.

Kaul has experienced a 50 percent jump in the number of companies seeking his help to sell products in the month-long Sonepur animal fair in Bihar state, which began on Nov. 17 and is likely to attract 5 million people this year.

“The market area is full with stalls,” said Kaul, who counts the Indian units of GlaxoSmithKline Plc., Reckitt Benckiser Group Plc. and Britannia Industries Ltd. as his clients. “This is better than we expected.”

To contact the reporter on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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