Dabur India share drops 3% on promoter stake sale

Shares of FMCG major Dabur India dropped over 3% in opening trade on Tuesday amid strong volume trade. As many as 189 lakh shares changed hands over the counter in the first hour of trade, which represents over 1% of the total equity of the company, as compared to the two-week average volume of 0.4 lakh stocks.

Burman family, the promoter of Dabur India, is likely to sell stake worth ₹800 crore in the personal care products company through a block deal today, as per report. The floor price for the offer has been fixed at a discount of 4% to the current market price of ₹589 per share, which implies a price of ₹566. As per BSE data, the Burman family together own a 67.24% stake in the company, while public shareholders hold the remaining 32.76%.

Reacting to the news, shares of Dabur India opened 2.1% lower at ₹576.30, against the previous closing price of ₹588.75 on the BSE. Extending opening losses, the FMCG heavyweight declined as much as 3.3% to hit a low of ₹569.40, driven by strong volume trade. The market capitalisation slipped to ₹1.01 lakh crore at the time of reporting. In comparison, the BSE Sensex was trading 533 points lower at 61,272 levels, tracking weak cues from global peers.

For the July-September quarter of the current fiscal (Q2 FY23), the consumer goods company reported a 2.85% decline in its consolidated net profit to ₹490.86 crore for the second quarter ended September 30, 2022, compared with ₹505.31 crore in the same quarter a year ago. The consolidated revenue from operations rose 6% to ₹2,986.49 crore in Q2FY23, against ₹2,817.58 crore in the corresponding quarter of the previous fiscal. The top and bottom line growth were impacted by inflationary pressures and the consequential impact on consumption. The board of company also declared an interim dividend of ₹2.50 per share, aggregating to a total payout of ₹442.94 crore for the financial year 2022-23.

Besides, the FMCG major also announced acquisition of a majority stake in Badshah Masala, marking its entry into the over ₹25,000 crore branded spices and seasoning market in India. The company signed definitive transaction agreements to acquire 51% shares in Badshah Masala for ₹587.52 crore at an enterprise value of ₹1,152 crore. As per the company, the acquisition is in line with Dabur's strategic intent to expand its foods business to ₹500 crore in 3 years and expand into new adjacent categories.

Post Q2 results, foreign brokerage Morgan Stanley had assigned an 'equal-weight' call on Dabur with a target price of ₹537. The brokerage in its report said that Dabur’s Q2 earnings were largely in-line with expectations, adding that the company’s growth in rural areas and healthcare business were weak.

Another foreign brokerage house Goldman Sachs had given a 'buy' call on the stock with a target price of ₹680, citing that acquisition of spices brand ‘Badshah Masala’ is a major boost for its ambition, but weak rural demand remains a key concern.