While searching for good investment opportunities in the secondary markets a company that attracts our attention is Dabur India Limited, whose shares are traded around Rs.220/-.(As on 22/1/98)

Dabur which had a turnover of Rs.706.81 crores for the year 1996-97 is today a well diversified company. It represents an excellent mix of the ‘old’ and the ‘new’ with herbal remedies packed in capsules and plastic bottles.

It has over 400 products some in the personal care category, some in medicinal category and some in food supplement category. "Chavanprash", "Hajmola" and "Vatika Hairoil" are fast growing brands which have created a stable customer base for the company in India and abroad. Since these major products cater to different consumer segments their combined demand growth prov

The herbal/ayurvedic base for the products have made Dabur a unique truly Indian company. The demand for such herbal products is growing fast even in the West and this strength provides the competitive edge to the company to survive and grow in the ‘globalisation’ scenario. Afterall this 110 year old company has seen many ups and downs in the Indian economy including the two worldwars and independence proving its resilience.

The financial performance of the company over the last three years shows a steady growth in turnover and net profits for last 3 years (Ref. Table)

During 1996-97, the company’s turnover increased significantly by over 25% while the profit after tax increased by 21%. The growth continued in the current year with the half yearly turnover of Rs.397.13 crores indicating a growth of around 13% on an annualised basis.

The company which made a public issue in 1993 has an equity base of Rs.28.51 crores of which the promoter group holds nearly 79%.

Foreign companies still hold only a small share and considering the prospects of the company could be eyeing at it eagerly. The possibilities of any downward risk for the share prices is therefore low.

Currently the share price is havering around Rs.220/- as against a 52 week high/low of Rs.297/185. At this price the price earning ratiod works out to around 15. Compared to pharmaceutical MNCs, this discounting a low and probably reflects the low availability of shares in the market place. Recently the shares have been dematerialised and are now traded through the depository. This could raise the level of interest in the scrip by the institutions. The book value of the shares which is around Rs.68 at present could bloat to around Rs.80 next year. In case the company considers any bonus issue, the floating stocks will increase and the prices at post bonus issue could provide better bargains for the investors.

With a dividend of 30%, the investment in the share at Rs.220/- cannot of course give a high yield. However, the inherent strengths of the company and its recent successes in personal care products and food supplements while preserving the growth on traditional products indicates a good long term potential for investors of this company.

Na Vijayashankar

(naavi@iname.com)