Dabur Share Price Falls Over 2% In Early Trade After FSSAI Ban: Should You Buy The Dip?

Shares of Dabur India Ltd. fell over 2% in early trade on Tuesday, Aug. 4 after the Food Safety and Standards Authority of India (FSSAI) directed the FMCG major to immediately stop selling a range of food products carrying what it described as misleading "100%" claims, citing violations of advertising and labelling regulations. The prohibition order covers honey, apple cider vinegar, virgin coconut oil, sesame oil, cow ghee, coconut water, coconut milk and other food items marketed with claims such as "100% Natural", "100% Pure", "100% Purity Guaranteed", "100% Organic" and "100% Tender Coconut Water".

On Tuesday, shares of Dabur India opened at Rs 420.80 against a previous close of Rs 425.80 and extended gains by upto 3% to hit an intraday low of Rs 405.35. The domestic frontline indices also traded in red as volatility around the F&O expiry weighed on equities, while investors stayed cautious ahead of the Reserve Bank of India's monetary policy decision.

ALSO READ: 'FY27 Earnings Unlikely To Disappoint': Kenneth Andrade Spots Long-Term Winners In Auto, Pharma

Dabur India Share Price Intraday

FSSAI's Order Against Dabur India

According to FSSAI, such claims violate the Food Safety and Standards (Advertising and Claims) Regulations, 2018, as they are "ambiguous, unverifiable and likely to mislead consumers." The regulator also found that Dabur Himalayan Organic Apple Cider Vinegar and Dabur Organic Honey displayed the Jaivik Bharat logo without a valid FSSAI organic endorsement, which it said contravenes the Food Safety and Standards (Organic Foods) Regulations, 2017.

In addition, FSSAI flagged Dabur Hommade Coconut Milk for carrying the claim "100% Purity", stating that such a claim is not permissible for compound food products under the advertising and claims regulations. The leading food regulator said the action follows Dabur's failure to adequately comply with an earlier notice directing it to discontinue the disputed claims.

ALSO READ: Asian Markets Mixed As South Korea's Kosdaq Jumps 3%; Kospi, Japan's Nikkei Pare Early Gains: Here's Why

Should you buy?

According to domestic brokerage Axis Securities, Dabur's long-term growth trajectory remains intact, and hence, analysts maintained the BUY rating on the stock; however, the company remains cautious regarding the uncertainty in the West Asia conflict, and hence we cut our FY27/FY28 estimates. The brokerage has pegged a target price of Rs 515 per share on Dabur. ''With an upside potential of 19% from the CMP, we maintain our BUY rating on the stock,'' said Axis Securities analysts.

Monarch Networth Capital expects Dabur India to deliver healthy earnings growth, supported by premiumization, innovation, market share gains and continued strength in rural and international markets. However, near-term commodity inflation and geopolitical uncertainties may keep margins under watch. ''We initiate coverage on Dabur India with an 'Accumulate' rating. Valuing the stock at 36x FY28E EPS with a target price of Rs. 485,'' said analysts at Monarch Networth Capital.

Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.