New RBI norms will hardly impact us: Dabur

RBI has further eased the overseas investment norms of Indian companies. It has doubled the remittance limit to USD 200,000 from USD 100,000/FY. Now, Indian companies can invest upto 400% of net worth in overseas joint ventures

Rajan Verma , CFO, Dabur said that the juice segment is growing at 30%. Verma added that the new RBI norms will hardly impact them.

According to Verma, Dabur will approve capital requirements for juices in Nepal and three fourth of the growth will come from volumes.

Excerpts from CNBC-TV18’s exclusive interview with Rajan Verma:

Q: How are you approaching this new whiff of competition and how do you think this will change the market share game as a whole?

A: Let me clarify that Minute Maid is a juice-based fruit drink while Real is a product that Dabur has in the juice segment. Therefore, there is as such no direct competition per se within the two products. They belong to two different categories within the overall area of juice-based drinks. 

But we take the view that with the introduction of this product, it is going to enhance the entire juice based drinks category per se. The category is growing at about 30%. It will only enhance the overall category. We have no direct impact on our products, with the launch of Minute Maid.

Q: Take us through the inorganic moves that your company seems to be making, with respect to Unza , and any other acquisitions you may be looking at?

A: The Unza deal did not go through for various reasons. While mergers and acquisitions remain part of our strategy for growth, there is nothing specific happening at the moment, that will add on to the inorganic growth for the time being.

Q: The RBI’s rules say that one can now use 400% of networth abroad, as well as invest in portfolio investments, up to 50% of networth. Will this make a material difference?

A: As far as we are concerned, it is not going to impact us directly. The areas that we were looking for internationally, we were than talking within the guidelines and the parameters that this company wanted, to get into terms of its product range and its capability to invest.

So, if we do find something that does require these new regulations, we will certainly look into that in detail. But, so far, it has not created any impediment for us in the recent past, till these regulations changed.   

Q: How has pricing panned out, for the better part of this quarter? How are you seeing growth distributed between price and volumes?

A: We have taken some price increases, in the second quarter, ranging between 3-5%. But if one were to assume a growth of about 16%, that took place in the first quarter, approximately 3% of that would have been on account of pricing and the remaining would be coming out of volume.

Q: What is the overall capex you have planned for this quarter? In the last quarter, food was the highest margin business for you.

A: We are about to approve some capital enhancements, for the juices business, in Nepal and in India. It will get going sometime in Q3 or so. Apart from the juices business capitalization, there is the capitalization that will take place in our Ras Al Khaimah factory in the UAE, which will probably go on board sometime in Q1 of next year.

We have approximately Rs 35 crore being invested there. Apart from that, there is the normal expenditure of capital taking place, in our local factories in Uttaranchal and Jammu, which is on an ongoing basis. So, our two major projects are the one in Ras Al Khaimah and the investment in the juices business.

Q: Would it be fair to say that, on an average three fourth of your growth would continue to come from volumes, for the rest of FY08 and perhaps going to FY09 as well?   

A: It would be a fair assumption to make.