Dabur acquires Badshah Masala

Dabur India has announced acquisition of one of the oldest and very well established spice maker, Badshah Masala Private Limited.

Key points to note –

• Badshah, established in 1958 has a strong brand recall across India. It was founded by Shri Jawaharlal J. Jhaveri and Indiraben Jhaveri and is currently managed by the second generation – the son, Hemant Jhaveri (MD).
• The Company is in the business of manufacturing, marketing, and export of ground spices, blended spices, and seasonings.
• Dabur is currently acquiring 51% stake at Rs 587.52 crore valuing the Company at Rs 1,152 crore. These numbers include debt, details of which are not disclosed.
  • Dabur has also informed that it will acquire the balance 49% after 5 years. (no further details wrt to valuations, conditions precedent etc are disclosed for the balance acquisition).
• The current 51% acquisition has valued Badshah at 4.5x revenue and 19.6x EBITDA of FY 2022-23 estimated financials. i.e., Rs 256 crore revenue and Rs 58.78 crore EBITDA. Previous year revenue numbers were –
  • FY 21-22: Rs 189.1 crore
  • FY 20-21: Rs 154.6 crore
  • FY 19-20: Rs 154.8 crore

The valuations are definitely on the expensive side but given the brand recognition of Badshah and small size of the transaction (relative to Dabur), I am ok.

Some interesting additional points to note – 

1. In late 2019, PE firm General Atlantic was in talks to acquire Badshah.
2. In 2020, there was an internal family rejig at Badshah
   • Prior to rejig Hemant Jhaveri and his brother Kailash Khaveri owned 55% and 45% of Badshah respectively
   • Hemant then acquired 24% from Kailash for approx 130 crore valuing the total equity at approx Rs 542 crore. This number however is not directly comparable to the current valuation of Rs 1,152 crore as the former is only equity and latter includes debt.
     • It was also then agreed that Kailash will sell his balance 21% stake in tranches over the next three years. Whether and how much of that is being acquired in the current round by Dabur is not known.
3. Till January 24, 2021, Badshah was being operated as a partnership firm. Thereafter, it was converted into a private company.

Rationale of the current transaction

To Dabur – notwithstanding an expensive buy, Badshah does fits well in Dabur’s well stated strategy of expanding it’s food category.

To Badshah – it seems promoters were happily wanting to cash out and a sell out to a Company like Dabur further ensures the best they could have done to the brand and the legacy.