Strategy to expand rural footprint has paid off, says Dabur

Dabur is buzzing in trade on the back of a good set of Q2 results. While the volumes came in line, the profit after tax (PAT) was impacted by a one-time loss of Rs 40 crore.

Speaking to CNBC-TV18, Mohit Malhotra, CEO of Dabur, said the company is facing headwinds owing to economic slowdown.

“However, our efforts in terms of strategy have paid off and rural for us is also growing at around 6 percent, urban is firing at 3 percent – this is because of the investment that we have made in rural infrastructure. So we are pretty happy with the results,” he said.

The food business has come as a dampener for the company. "If I leave the food segment aside and look at other parts of the company, which is around 80 percent of our business, our volume growth is to the tune of around 7.4 percent. The team has done a great job in this slowing environment,” he added.

“From the category growth point of view, we are not seeing any green shoots at the moment. We have seen the category growth - overall in Q2 of last year was in the range of around 16 percent, down to 7 percent. Volume growth from 13 percent down to 3 percent in the categories where we operate in - whether it is hair oil, toothpaste or juice segment. We do not see too much of abatement in the market growth rate. The company’s performance has been good. Our rural business has grown by 6 percent, which is 300 bps ahead of urban because our direct reach to rural has increased,” said Malhotra.

“As far as our guidance going forward in the future for the business, the slowdown is bottomed out and from here if we can go, we can only go up and I do not see our results becoming more sluggish than what it is at this point in time. We are seeing a little improvement in our business performance. As winter is approaching and we are also a healthcare company and winter season is more salient for us as compared to summer season, I think the performance should become better going forward,” he noted.

The company's effective tax rate was in the range of 21.5, which is now around 17.5. It expects the tax rate to be 17.5 till 2021.