Dabur India — Q3 FY25 earnings call

Call held 30 Jan 2025

Management summary

Dabur India reported a mixed Q3 FY25, with consolidated revenue growing 3.1% (INR) and 5.6% (constant currency) amidst a challenging demand environment and delayed winters. International business and HPC (especially Oral Care and Home Care) showed strong growth, while Healthcare and Beverages faced headwinds. The company is undertaking strategic initiatives, including a partnership with McKinsey, to refine its vision and address category-specific challenges, aiming for sequential improvement in demand and margin expansion.

Highlights

  • Consolidated revenue grew by 3.1% in INR terms and 5.6% in constant currency terms.

  • International business exhibited strong growth of 18.9% in constant currency terms, with double-digit growth in Middle East, North Africa, Egypt, UK, US, and Bangladesh.

  • HPC portfolio performed well with 5.7% growth, with Oral Care growing 9.1% and Home Care growing 5%.

  • Foods business demonstrated strong performance with Culinary growing 30% and Badshah domestic portfolio growing 15%.

  • Gained market share in Hair Oil (125 and 236 bps), Odomos (574 bps), Air Freshener (101 bps), Chyawanprash (140 bps), and Juices & Nectar (320 bps).

  • Dabur Red toothpaste received accreditation from the Indian Dental Association (IDA), the first Ayurvedic toothpaste to do so.

Concerns

  • Challenging operating environment marked by unfavorable weather conditions and a slowdown in consumption, with delayed and contracted winters.

  • Healthcare portfolio was flat, impacted by delayed and contracted winters, leading to soft performance in Health Supplements (Chyawanprash and honey).

  • Odomos portfolio was under pressure due to cyclones in South India and delayed winters.

  • Juices and Nectar category was impacted by muted festive season demand and price-driven competitive intensity.

  • INR 81 crores of translation loss was recorded in international business due to currency devaluations in emerging markets.

Key financials

  1. Consolidated Revenue (INR) — +3.1%YoY
  2. Consolidated Revenue (Constant Currency) — +5.6%YoY
  3. India Business Growth — +1.7%YoY
  4. India Business Volume Growth — +1.5%YoY
  5. International Business Growth (Constant Currency) — +18.9%YoY
  6. Operating Profit Growth — +2.1%YoY
  7. PAT Growth — +1.8%YoY

What they filed

Q1 FY27: revenue up 10.5%, net profit up 15.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,029 3,355 2,830 3,405 3,191 +5%3,559 +6%3,038 +7%3,764 +11%
EBITDA553 682 427 667 588 +6%734 +8%461 +8%741 +11%
Net profit418 516 313 508 445 +6%554 +7%362 +16%586 +15%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • HPC Portfolio
    5.7% Growth
  • Oral Care Portfolio
    9.1% Growth
  • Hair Oil Portfolio
    3.1% Growth
  • Home Care
    5% Growth
  • Healthcare Portfolio
    0% Growth
  • Foods Business (Culinary)
    30% Growth
  • Foods Business (Badshah domestic)
    15% Growth

Guidance & targets

Inflation

  • Expected Inflation Inflation · upcoming months · High confidence 5%
    I get you. So, overall, I think the inflation is picking up in the country. Last full year, the inflation was 3%. We passed on the entire inflation to the consumer. Because the inflation was too high, we had to give trade and consumer inputs to buffer it up, and I think going forward the inflation is inching up across the markets of business. We expect a 5% inflation to actually hit us.

    — Mohit Malhotra

Profitability

  • Margins Profitability · going forward · High confidence Maintain
    And we should be in a position to maintain margins going forward. Whatever margins that we have, we will maintain our margins. And next year going forward margin should only improve from here by way of price increases and cost saving.

    — Mohit Malhotra

  • Margins Profitability · next year · High confidence Improve
    And next year going forward margin should only improve from here by way of price increases and cost saving.

    — Mohit Malhotra

  • Margins Profitability · Q4 FY25 · High confidence Maintain
    Before I get to full year next year, at least for quarter 4, our intent is at a mid-single digit top-line growth, we will try to maintain our margins for quarter 4.

    — Ankush Jain

  • Margins Profitability · FY26 · Medium confidence 20-21%
    Yes, so I think our attempt will be to go to around 20-21% levels. That's what we were aiming at.

    — Mohit Malhotra

  • Margins Profitability · FY26 · Medium confidence Maintain but slightly improve
    However, having said that, we foresee a bit of inflation. We will try to mitigate those. Intent is again to maintain it, but we will take appropriate price increases, cost saving initiative. Some leverage will also come. So, the intent is to maintain but slightly improve, and if there is a significant improvement, then we will also try to reinvest it back into advertisement.

    — Ankush Jain

Oral Care

  • Growth Oral Care · next year · Medium confidence Best growth
    So, I don't think in Oral Care taking price increase will ever be an issue for us while growing volume. So, there will be a part volume and part price increase in Oral Care that will be easy for us to handle there in Oral Care. And also we are coming out with premium variants. So, in terms of mix, that premiumization should take care of the inflation which might hit us and we expect the best growth to come in from Oral Care only going forward next year.

    — Mohit Malhotra

International Business

  • Profitability International Business · going forward · Medium confidence Better
    So, in international business one lever is obviously legal cost going down for us which is overlapped. The second will be the dollar denominated currencies are doing better for us. Namaste business is doing better. Middle East and North Africa is doing well. All the pegged currencies are performing well, and we expect them to perform well and depreciating currencies will also overlap the currency depreciation next year. So, as we speak, we have INR 81 crores of translation loss which I think will go down going forward. So, that should be another lever which will add to our international business profitability.

    — Mohit Malhotra

Overall Company

  • Top-line Growth Overall Company · Q4 FY25 · High confidence Mid-single digit
    Before I get to full year next year, at least for quarter 4, our intent is at a mid-single digit top-line growth, we will try to maintain our margins for quarter 4.

    — Ankush Jain

  • Growth Overall Company · next year · Medium confidence Mid-single kind of growth
    So, we expect a mid-single kind of growth coming up, except for inflation is picking up now. So, I think that's a little concern, but I think that inflation should be mitigated by pricing increases and cost saving initiatives that we are embarking on. So, we expect a mid-single, if not, high growth to come in and there will be a sequential improvement. Definitely the business will be much better than quarter 3 for what we have done.

    — Mohit Malhotra

McKinsey Engagement

  • Conclusion McKinsey Engagement · FY25 · High confidence End of fiscal year (March end)
    This exercise has already begun, and we plan to conclude the same by end of the fiscal year.

    — Mohit Malhotra

What to watch in Q4 FY25

Q4 FY25 Top-line Growth

next quarter
Current Q3 FY25 India business growth 1.7%
Target Mid-single digit top-line growth

Why it matters

To assess if demand environment is improving and company's initiatives are yielding results.

Before I get to full year next year, at least for quarter 4, our intent is at a mid-single digit top-line growth, we will try to maintain our margins for quarter 4.

Risks & concerns

  • Unfavorable weather conditions and delayed winters

    high

    Delayed and contracted winters impacted Health Supplements (Chyawanprash, honey) and Odomos, leading to flat or muted performance.

    The quarter presented a challenging operating environment marked by unfavorable weather conditions and a slowdown in consumption. India experienced delayed and contracted winters with October and November being the warmest in many years.

    Management acknowledged

  • Competitive intensity in Juices and Nectar category

    high

    Muted festive season demand and price-driven competitive intensity impacted the category, especially from players like Campa Cola.

    Juices and Nectar category was impacted in the quarter due to muted festive season demand and price driven competitive intensity.

    Management acknowledged

  • Slowdown in consumption and urban demand moderation

    medium

    Urban demand showed signs of moderation, contributing to overall challenging operating environment.

    While urban demand showed signs of moderation, the rural market remained resilient.

    Management acknowledged

  • Inflationary pressures

    medium

    Faced inflationary pressures this quarter and expect 5% inflation to hit going forward, requiring calibrated price increases.

    Talking about profitability, we faced inflationary pressures this quarter and took judicious price increases in our portfolio.

    Management acknowledged

  • Currency devaluations leading to translation loss in international business

    medium

    INR 81 crores of translation loss was recorded due to currency devaluations across emerging markets like Egypt, Nigeria, Bangladesh.

    We witnessed currency devaluations across emerging markets like Egypt, Nigeria, Bangladesh which impacted the translated growth.

    Management acknowledged

  • Chyawanprash penetration problem post-COVID

    medium

    Chyawanprash penetration went up significantly during COVID, creating a headwind post-COVID, which the company is addressing with new formats and positioning.

    In this 500 crore portfolio, which did so well during COVID, post COVID we had little headwind because Chyawanprash penetration really went up in the country to settle that problem, which is a big problem for us as we see.

    Management acknowledged

  • Food inflation impacting rural discretionary spending

    medium

    High food inflation (8%) could cause rural consumers to prioritize food over discretionary items, potentially impacting rural demand.

    But this thing might change because food inflation is very high. It's at around 8%. So, if rural also starts prioritizing food as compared to discretionary, this thing could change.

    Management acknowledged

Q&A highlights

6 direct
Healthcare segment performance post-COVID and new initiatives Direct
Now comes to Chyawanprash. That is the only brand. The turnover of Chyawanprash is around INR 500 crores for us. In this 500 crore portfolio, which did so well during COVID, post COVID we had little headwind because Chyawanprash penetration really went up in the country to settle that problem, which is a big problem for us as we see. So, we are trying to come out with modern formats of Chyawanprash. like tablets, liquid, powder Chyawanprash, capsules of Chyawanprash, whole format extension. That is underway and that is doing well.

Addresses the stagnation in the key Healthcare segment, detailing specific challenges for Chyawanprash and the strategies (new formats, target group expansion, all-weather positioning) to revive growth.

Asked by Mihir P. Shah from Nomura

Divergent trends and Dabur's growth in Oral Care category Direct
So, the Oral Care category itself is doing very well, if I ask you. So, there are different vectors of growth in the Oral Care category. A, the category is doing well. And our Dabur Red is doing well on back of a lot of tailwind coming from the herbal category. Herbal category saliency, which is 30%, has improved to around almost 32% now. The herbal category has grown by 7% as compared to the growth of 5% in overall Oral Care non-herbal category.

Explains the drivers behind Dabur's strong Oral Care performance (9.1% growth) amidst varied industry trends, highlighting the success of herbal products, new product launches (Gel), and market share gains.

Asked by Mihir P. Shah from Nomura

Impact of Campa Cola and competitive intensity on fruit juice business Direct
As far as juice portfolio is concerned, yes, there are headwinds in juices which is basically price driven. To reduce the relative price differential between the Colas and us, what we are doing is we have already planned it for the next season, we are planning to give consumer value. Now again the beverage business is not very simple. It has to be divided into again 3-4 parts for us versus Activ juices.

Directly addresses the competitive threat from Campa Cola and other beverages, outlining Dabur's strategy to offer consumer value and introduce new economical ranges to regain growth in the Nectar segment.

Asked by Abneesh Roy from Nuvama

Effectiveness of McKinsey engagement given past FMCG consultant outcomes Direct
No, I think you got the answer in your question only. So, I think because what happens is despite our strategy, the best attempt, hard work, if the results do not reflect our ambition and aspiration, then you start sometimes questioning your strategy. Are you on the right path or not? That is where you require to do that introspection, you require some validation from outside expert.

Challenges the rationale for engaging McKinsey, prompting management to explain the role of external consultants in validating strategy, providing global benchmarks, and aligning the company's vision in a dynamic market.

Asked by Tejash Shah from Avendus Spark Institutional Equities

Nature of 1.2% domestic volume growth – underlying or channel correction impact? Direct
Yes, there was no one-off impact of any stock coming back, etc. No, that wasn't the case in this. This was the growth that we have seen in the marketplace, yes. So, that is one. There was some element of honey stock which we cleaned up. I think there is a minor return of sales was there. Barring that, I think nothing major, nothing consequential. The pipelines have been maintained. We reduced the pipeline to 21 days and 21 days is the pipeline now also. So, that was not the case at all.

Clarifies that the reported domestic volume growth is genuinely underlying market growth, not an artifact of channel inventory adjustments, providing confidence in the demand trend.

Asked by Latika Chopra from J.P. Morgan

Future volume growth expectations – mid-single digit volume or value? Direct
No, we were alluding the mid-single-digit value level. It will be a part price and a part volume because what happened in the current quarter also while we had taken a price increase of 3% or so, that got nullified by giving extra scheme, trade scheme, which got netted from gross and therefore net remained where it was. So, while the price increase was there but that did not accrue in terms of the net sales because of netting out of the consumer promotion, which he had to give because the consumer demand was low and you have to fight the competitive intensity in the marketplace.

Distinguishes between volume and value growth expectations, revealing that price increases in Q3 were offset by trade schemes, impacting net sales realization and highlighting ongoing competitive pressures.

Asked by Latika Chopra from J.P. Morgan

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Detailed narrative

Q3 FY25 Performance Overview

Dabur India reported consolidated revenue growth of 3.1% in INR terms and 5.6% in constant currency for Q3 FY25. The India business, including Badshah, grew by 1.7%, underpinned by a volume growth of approximately 1.5%. International business demonstrated strong performance, growing 18.9% in constant currency terms. Despite inflationary pressures, operating profit increased by 2.1% and PAT grew by 1.8%.

Domestic Business Performance by Category

The HPC portfolio performed well with 5.7% growth. Oral Care recorded a robust 9.1% growth, driven by the Red franchise and Meswak, with the Gels toothpaste portfolio growing 50% year-on-year. Hair Oil grew by 3.1%, gaining market share of 125 and 236 bps in coconut and perfumed oils respectively. Home Care grew 5%, with Odonil showing double-digit volume growth and gaining 574 bps market share, while Air Freshener gained 101 bps market share.

International Business & Profitability

The international business recorded strong growth of 18.9% in constant currency, with double-digit growth across key markets including the Middle East, North Africa, Egypt, UK, US, and Bangladesh. However, currency devaluations in emerging markets resulted in an INR 81 crores translation loss. Management expects future profitability to improve due to reduced legal costs and favorable dollar-denominated currencies.

Strategic Vision & McKinsey Engagement

In response to a volatile geopolitical landscape and uncertain macroeconomic indicators, Dabur has revised its strategic vision cycle from four to three years. The company has partnered with McKinsey & Company to refine and align its strategy, covering all categories including beverages and Chyawanprash. This exercise, aimed at validating strategies and identifying growth opportunities, is expected to conclude by the end of the fiscal year.

Healthcare & Health Supplements Challenges

The Healthcare portfolio remained flat, primarily due to delayed and contracted winters impacting Health Supplements like Chyawanprash and honey. Chyawanprash, a ₹500 crore brand, saw a 3% decline against a market decline of 6%, but new formats and target group expansions are underway. Odomos also faced pressure from cyclones and delayed winters. However, new initiatives within Healthcare, representing 2.5% of the portfolio, are performing well.

Beverage Segment Headwinds & Strategy

The Juices and Nectar category was impacted by muted festive season demand and intense price-driven competition, particularly from new entrants like Campa Cola. Dabur's Nectar portfolio was most affected, especially in 200ml packs in metro cities. To counter this, the company plans communication revamp, consumer value offers (reducing price from ₹130 to ₹100 via offers), and introducing a new economical range with a price index around 2 to Colas.

Rural vs Urban Demand Trends

While urban demand showed signs of moderation, the rural market remained resilient, outperforming urban for the fourth consecutive quarter. Syndicated data indicates rural market growth at 10% versus urban at 5%, with Dabur's India business reflecting this trend with rural growth at 2% and urban at 0.6%. Management noted that real wage growth is higher in rural India, but cautioned that high food inflation (8%) could potentially shift rural spending from discretionary items to food.

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