Dabur to demerge foods division

Dabur India is looking at demerging its foods business, Dabur Foods, into a separate company to grow the business.

The company, however, said it had no such plans at present, but sources indicate that Dabur was waiting for the foods business to reach a certain revenue size before going in for a demerger to get a better valuation.

Sources indicated that the company would perhaps bring in private equity at a later stage. Listing the new entity is another option the company is likely to explore.

The demerger would make it easier for Dabur India to raise funds for acquisitions it is planning, both locally and overseas. Talks of a demeger have been on ever since the group demerged Dabur Pharma from its FMCG business in 2003.

Industry watchers point out that in recent past, a number of companies have taken to demergers to unlock shareholder value and have done so successfully.

The company's food business has been doing well, posting a net profit of Rs 12.1 crore in 2005-06. Sales too grew over 46 per cent to reach Rs 190 crore in the previous year.

At present the company has a 57 per cent share in the fruit juices market.

Announcing the plans going forward, the company had recently said that it would be investing Rs 100 crore in the business over five years and that it was aiming for a turnover of Rs 500 crore by 2010.

This includes an investment of about Rs 50 crore to upgrade the food processing unit at Siliguri along with a packaging plant there.

The reasoning behind the demerger is seen as a way of bringing in the required focus to the foods business, which may not be possible if it remains a part of the larger FMCG business which also has a substantial consumer health care and consumer products division.