Bajaj Consumer Care Ltd

Cmp-175 Rs

Bajaj Consumer Care Ltd (formerly known as Bajaj Corp Ltd) is 67 year old, 100% debt free and is one of India’s leading FMCG companies with major brands in hair care and skin care category. The company’s main brand is Bajaj Almond Drops in hair oil category. It markets its skin care products under the brand Nomarks. The company is a part of the Shishir Bajaj Group of companies.

The company product portfolio includes Hair oil & skin care products and Nomarks skin care products.The company markets its hair oil under the brand names Brahmi Amla, Amla Shikakai and Jasmine Hair Oil. The company also produces oral care products under the brand name Bajaj Black Tooth Powder. The company is exporting its brands to many countries including UAE, Mauritius, Malaysia, Kuwait, Maldives, Oman, Kenya, Saudi Arabia, Uganda, Singapore, Myanmar, Pacific Islands (New Zealand, Australia, Fiji Islands) West Indies, Sri Lanka, Bangladesh, Afghanistan, Cambodia, Nepal and USA.

About

Bajaj Corp Ltd was incorporated on April 25, 2006 as a private  limited company with the name Bhaumik Agro Products Pvt Ltd which was later changed to the Bajaj Corp Ltd.

Bajaj Corp acquired skin care brand NOMARKS, along with associated goodwill, from Ozone Ayurvedics in August 2013. On signing of these agreements with Ozone Ayurvedics, Bajaj Corp has become the sole owner of the NOMARKS brand which gives the company access to the second largest brand in the fast growing Anti Marks & Anti Blemish category of about Rs 350 crore which comes under the overall skin care category of Rs 8,500 crore. NOMARKS product portfolio consisting of face wash, facial cream, soap etc. is based on the natural science of Ayurveda. This acquisition enhances Bajaj Corp’s position in the personal care market and gives entry into the fast growing skin care category. At the same time the acquisition of NOMARKS brand is expected to reduce Bajaj Corp’s dependence on hair oils.

The company has nine production facilities including third party operations to cover foot prints across India and overseas.

In order to further expand its footprint in the Hair oils category and to strengthen the product portfolio, Bajaj Corp restaged Bajaj Brahmi Amla Hair oil with an Ayurvedic formulation and a premium new packaging and also launched a completely new Hair oil in the value-added coconut oil segment – Bajaj Coco Jasmine Hair oil. The new Bajaj Coco Jasmine Hair oil has a unique combination of coconut oil and Vitamin E to reduce hair breakage by 3 times. It also has jasmine extracts to give it a pleasant fragrance. This is the first product to roll out of the company’s newly founded innovation centre and has been tested extensively with consumers before launch.Bajaj Corp’s skin care brand NOMARKS witnessed strong results in offtake and internal sales on the back of investments for the brand with a new TV commercial, print, outdoor, digital, consumer promotions & trade support. The focus on chemist channel through deployment of a pharma sales team in the company’s test market (UP) has also worked and is a key reason for growth. The spillover impact of the media and improved positive sentiment has helped to turnaround the brand’s internal sales in all zones except the low salience South zone. As a result, the all India market shares have also moved up in line with the strong positive growth rates for the focus product – NM cream in the Domestic business.

Financials

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The company reported a sales turnover of 191 Crores for the quarter with a decline of 17.6% over the same quarter of previous year. The EBITDA for the quarter was at 58.25 Crores, a decline of 19% against the previous year, and the EBITDA to sales ratio was at 30.4%, which is a decline of 50 basis points versus the EBITDA reported in the last year same quarter. 

The gross margin was at 63.6% as against 66.7% in Q1 2020. The margin drop was due to adverse impact of the product mix, which included the launch of sanitizer range during the quarter. 

The PAT for the company was at 54.19 Crores against 58.65 Crores during the corresponding quarter of the previous year. The PAT as a percentage to sales improved to 28.3%, which was led by higher income from treasury as well as reduction in income tax rate. 

The hair oil industry continues to see a severe sequential slowdown. Till March 2020, the growth rate in the hair oil market was 2.8%. E-commerce sales saw good growths in the quarter, the absolute number still remain relatively insignificant. This will remain an area of focus for the company going forward. 

Going forward the company expect export orders to start trickling in as the situation is slowly coming to normal and our main markets as you would be aware are basically the Gulf, the Middle East, Bangladesh and Nepal. 

General Trade Sales under COVID 19 

➢Physical selling came to standstill in April and May 

➢Majority of Field Force were in market with adequate precautions from June 

➢Depot operations gradually started from mid April 

➢Urban markets, both Retail and Wholesale, were under severe stress due to curtailed working hours and absence of end to end transportation 

➢Retail servicing continues to be a challenge with shortened timing and lack of public transport 

➢Rural growth outstripped Urban demand substantially

Going Forward

Alternate Trade Channel Sales under COVID 19 

➢Modern Trade business got impacted due to closure of Malls and Hyper Market stores for large part of the quarter, in Metro cities 

➢E Commerce Channel was leveraged to drive sales 

➢Bajaj Nomark Sanitisers was introduced in few Modern Trade stores 

➢Focus on visibility of our products on shelves in Modern trade ➢E Commerce grew strongly as a platform in Urban India during Lockdown 

➢Leveraged the platform through sustained investment in the form of Visibility, Search Marketing and Consumer Offer

Focus on Rural India

➢Distribution Expansion in Rural Markets through scale up of Vans ➢ Vans are operational PAN India across 15 states 

➢Overall coverage expanded to over 50,000 villages across country

➢Range selling of ADHO along with Sanitizers 

➢TV + Digital Media with focus on Key Rural markets to build demand for ADHO in conjunction with Distribution Expansion

Sanitizer Launch in Response to COVID 19 

➢Bajaj Nomarks Hand Sanitizer was launched in Q1’ 21 

➢Launched in April with 50ml, 100ml, 200ml and 5 litre SKUs 

➢500 ml Pump pack added in June 

➢Bajaj Multipurpose Sanitizer (5 Litre Pack) launched in June to cater to Institution requirements 

➢Can be used on Surfaces as well as on Hands

Bajaj Zero Grey through E-commerce

➢Premium Hair Oil launched through E-commerce Platforms 

➢Anti Greying Hair Oil with Natural Ingredients known for stopping greying 

➢Premium Pricing – Rs. 199/ Rs. 360 for 100ml / 200 ml respectively 

➢Supported with Digital Marketing

Sectorial Outlook

The Indian FMCG sector has been growing at a robust pace galvanised by a large middle -class population, rise in per capita consumption, changing consumer lifestyle, growing income and proliferation of e-commerce market. Moreover, with a young population, consumerism and brand consciousness on the rise, India is emerging as one of the large economies in the world in terms of purchasing power and consumer spending. India’s FMCG sector is an important contributor to its GDP growth. It is the fourth largest sector in the Indian economy and employs approximately 5% of the total factory employment. Rising globalisation, product innovation, infrastructure development and advancement of supply chain efficiencies

Risk

One of the key aspect we were not able to understand was significant dilution in the promoters stake, that is from 60% promoter holdings in Sept-19 to 38% in Dec-19. We are not able to know the where did the promoters offload this stake in specific in the category (Like DII , FII , MF etc).

Conclusion

Company has solid ROCE of about 58% , Opm of consistent above 30% and with dividend payout of more than 80% over past 3 years is worth exploring for long term. Apart from that company is 100% debt free. Therefore it is worth exploring for long term.

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