'Our plans are based on organic growth'

Q & A/ P D Narang

P D Narang, group director "" corporate affairs of Dabur India, has been a key player in the growth of the Rs 1,200-crore company and is on the board of most of the group's companies.

He spoke to Parul Gupta about the group's vision for future, especially after the de-merger of the pharma company.

Excerpts:

What is the Dabur group's vision for its FMCG [ fast moving consumer goods ] business since the pharma business has been de-merged?
We have revised the strategy for the group and have drawn up a business road map for both. In FMCG, we have decided to become herbal specialists and will play only in the ayurvedic, herbal and natural domains in personal care, health-care and food categories.

We have redrawn our brand architecture and will now have five major brands "" Dabur, Vatika, Anmol, Real and Hajmola. Dabur will become the parent brand even for the other four growth brands. Under Dabur, we will have all the health-care products, Vatika would be beauty care or personal care, Hajmola would be digestives, Anmol is value-for-money brand across categories but mostly in personal care and Real will focus on in food.

All the existing 40-odd brands will be migrated under any of these five growth brands according to their fit. The brand that does not fit into any of these five catagories "" Binaca, for example "" will not be promoted as of now.

So will you change the advertising strategy accordingly?
Yes. We will be putting a lot of advertising money behind the umbrella Dabur brand which we never did in the past. This year, the ad-spend is going to be higher by 1.5 per cent compared to the last year. We will be spending 14 to 15 per cent of total turnover on advertising and 5 to 8 per cent of the total ad-spend would be exclusively behind Dabur.

How does the group plan to grow its international business?
The group has consolidated its international business. An international division has been created in Dubai and has a separate chief executive officer "" Arvind Kumar. We have received the Reserve Bank of India's approval to buy out our franchisee in Africa "" Redrock Ltd "" for $5 million. The company has a turnover of Rs 65 crore and makes profits of about $1 million every year.

This company would probably be called Dabur International Ltd. In this company, we will set up subsidiaries where Dabur will have an absolute majority of over 75 per cent. For example, we already have an 80:20 joint venture with the owners of Savlon in Bangladesh "" Asian Consumer Care. We are targeting Pakistan and Nigeria for possible joint ventures.

Are any other countries being targeted for distributorship or dealers?
Besides Africa which would be serviced by our manufacturing facility in Dabur Egypt, we plan to increase distributors in CIS countries and south east Asia. We have already appointed a person to look after the CIS region where we expect the growth to be high.

We have identified the UK, US and Australia as core markets in the developed world. In the UK, we already have a warehouse and 200 distributors. We plan to target the supermarket chains including Boot's. Our international division is in the process of identifying these chains and negotiating with them.

Where is the company planning to increase distribution in India?
Currently, while 40 per cent of our turnover comes from the north, 30 per cent from the east, 20 per cent from the west and the remaining 10 per cent from the south. This year, we will increase focus on both south and west India. Based on all these initiatives, we are planning a higher single-digit growth in the current year compared to a historical growth of 6.5 to 7 per cent.

Are you planning to weed out any brands from the current portfolio?
Apart from Binaca, we are not planning to sell any other brand. We have already given the mandate to PricewaterhouseCoopers and have fixed a reserve price of Rs 20 crore.

Is there any time frame for selling the brand?
If at all, the brand will get sold in the next three months, otherwise we don't even mind retaining the brand since we are leveraging its equity anyway. For example, we can make a Binaca toothbrush for Rs 4.50 and sell it at Rs 10. If we make some 3 crore brushes, imagine the advantage we can get. Also, the perceived value of this brand in oral care is much more than that of Dabur. We are already selling these brushes in the market worth Rs 10 crore or Rs 12 crore.

Are you considering mergers and acquisitions to achieve growth?
No, our business plan at present is based on the organic route "" but we will always look at opportunities wherever they exist in herbal, ayurvedic and the natural domain. We have a wish-list of the segments that we keep discussing but we don't build them into our business plan. Also, we are good at building our own brands.

How do you plan to take the pharma business forward?
We have a 10-year road map for the pharma company. We are going to be a generic global player in oncology in which we'll tap the first vendor market and will come out with new molecules and patents. We are working on the three aspects and are an entirely vertically-integrated company unlike several others, which gives us a competitive advantage.

No other company in the world has that range of the generics that we do. We are already present in many countries and will enter the developed world through alliances as in the case of FMCGs. We don't intend to build our own distribution. We are in the process of identifying potential partners and should finalise them in three months. The strategy to not invest too much and still grow by 10 to 15 per cent every year.

What proportion of the pharma business will come from the international market vis-à-vis the domestic market? What would be the main drivers of growth in this company?
In pharma, the growth would come from international areas. At present, 35 to 40 per cent of the business is non-oncology which is mainly in India which we plan to continue as a cash-generator for the oncology part.

Do you plan to exit any business under the new business plan?
We will be exiting our finance business as well as Da Bon. We have already exited non-core activities including confectionery, biscuits and value-added milk products. Dabur Finance's balance-sheet size is about Rs 7 crore, with most of the money lying in the form of cash. We would, however, not give the Dabur brand to the buyer.

The group has also decided to exit its 50:50 joint venture with Bongrain International to manufacture cheese and other milk-based products under the 'Dabon' brand-name. Dabur's stake in value terms is about Rs 13.5 crore. Since our joint venture partner has asked us not to divest the stake immediately, we'll sell our shares to them over a period of time.

When the pharma de-merger took place, it was considered an indication of a split in the family. Is that correct?
No, since de-merger by definition means that the shareholding in the resultant companies would stay the same, there is no question of a split.

What about promoter's money?
They can invest it wherever they want. Banking interests us as a sector but we don't plan to launch a bank on our own. The family already has some investments in ABN Amro Securities as well as the Lord Krishna Bank but those are strategic investments.