Dabur India Ltd.'s board of directors approved the amalgamation of Sesa Care Pvt. into the firm, according to an exchange filing on Monday.
This is subject to the approval of shareholders, creditors and regulatory bodies. No cash consideration was involved in this scheme, the filing said.
Reasons For Amalgamation
Dabur said that the amalgamation of Sesa was because it is a "leading brand with strong recall" and holds the third position in the ayurvedic hair oil category.
"The proposed amalgamation presents a strategic opportunity for Dabur to bring a premium brand with strong credentials around ayurveda to its product portfolio — a key whitespace in its current hair oil portfolio," the filing said.
This is intended to raise Dabur's profile in the hair care category and bring Sesa's range of ayurvedic hair care products to a wider consumer base, on a domestic and international scale.
It is also intended to improve the growth prospects of the combined entity in the hair oil segment which is expected to benefit from Dabur's experience and expertise in, advanced supply chain capabilities, extensive distribution network, deep category knowledge, market research abilities, technical engineering and access to key international markets.
It is also intended to "result in synergies between their businesses including by pooling their financial, managerial, technical, distribution, marketing and other resources".
Other benefits illustrated by the firm include improved efficiency from better control in cash and debt management, and utilising the unrestricted cash flow from their combined businesses for enhanced development and growth.
"The amalgamation is expected to result in optimisation of costs, coordination and streamlining of day-to-day operations of the business of the transferor company and transferee company," the firm said in its filing.
Shares of Dabur India closed 0.34% lower at Rs 480.30 apiece on the NSE, compared to a 0.6% rise in the benchmark Nifty. The stock has fallen 15.35% in the last 12 months and 5.27% on a year-to-date basis.
Fifteen out of the 42 analysts tracking the company have a 'buy' rating on the stock, 19 recommend 'hold' and eight suggested 'sell', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside/downside of 7.4%.
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