On October 30, 2024, Dabur India Limited, a leading player in the personal care and wellness industry, announced a significant step towards expanding its market presence by entering into an Implementation Agreement with the shareholders of Sesa Care Private Limited. This strategic acquisition aligns with Dabur's vision of enhancing its footprint in the Ayurvedic personal care market, a sector characterized by increasing consumer preference for natural and holistic products.

Overview of the Acquisition

As per the announcement, Dabur will acquire 51% of the paid-up Cumulative Redeemable Preference Shares (CRPS) of Sesa Care from its existing shareholders. Additionally, Dabur will provide a Corporate Guarantee for the loans availed or to be availed by Sesa Care from various lenders. This acquisition is expected to integrate Sesa Care’s operations with Dabur, thereby bringing substantial revenue and cost synergies.

The transaction also includes Sesa Care’s wholly owned subsidiary in Bangladesh, Sesa Care Bangladesh Pvt. Ltd., which will become a wholly owned subsidiary of Dabur post-merger. This move reflects Dabur’s strategy to leverage its extensive distribution network and expertise in the personal care segment to boost Sesa’s brand recognition and market reach.

Rationale Behind the Merger

Sesa Care has established itself as a prominent brand within the Ayurvedic hair oil category, holding a notable market position. By merging with Sesa Care, Dabur aims to capture a larger share of the INR 900 crore Ayurvedic hair oil market, which is identified as a key whitespace in its current product portfolio. This strategic merger is anticipated to bolster Dabur’s growth trajectory by enhancing its product offerings and tapping into new customer segments.

Dabur's Board of Directors approved the transaction in their meeting on the same day, underlining its commitment to expanding its market presence and product diversity. The acquisition is subject to the approval of the National Company Law Tribunal (NCLT), with the merger process expected to complete within 15-18 months.

Financial Considerations and Impact

The indicative cash consideration for the acquisition of the 51% stake in Sesa Care's CRPS is approximately INR 125.9 million. The overall enterprise value of the target company, including its debt of INR 289 crore, is estimated to range between INR 315-325 crore. Following the merger, the share swap for Sesa Care's equity shares will be determined based on valuation reports obtained during the merger approval process.

In terms of financial health, Sesa Care has demonstrated steady growth, with a consolidated turnover of INR 133.3 crore for FY 2023-24. The brand's flagship product, Sesa Ayurvedic Oil, alongside its range of shampoos and conditioners, positions it favorably within the wellness segment.

Corporate Guarantee Details

In addition to acquiring Sesa Care, Dabur will extend a Corporate Guarantee to support Sesa’s existing loans, which is capped at INR 400 crore. This guarantee ensures that in case of any default by Sesa Care, Dabur will take responsibility for repaying the specified debt, reflecting Dabur's confidence in the future performance of the acquired entity.

Conclusion

Dabur India Limited’s proposed acquisition of Sesa Care Private Limited marks a significant milestone in its strategic roadmap. This merger is expected to catalyze growth within the Ayurvedic personal care market while enhancing Dabur’s overall portfolio. As the transaction progresses through the necessary regulatory channels, stakeholders are optimistic about the potential synergies and benefits that will arise from this merger.

For more information on the merger and related updates, interested parties can refer to the company's official communication and investor presentation available on Dabur's website.

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