Dabur India has spent around Rs 60-65 crore in legal costs in H1FY24 in the ongoing case regarding its hair relaxer, which customers claim has caused ovarian cancer, the Dabur India management said in its investor conference call. The company will spend Rs 20 crore every quarter on legal expenses going ahead. Legal expenses are insured but not fully covered under insurance so the company will have to bear a part of the expense.
On October 19, Dabur India and its subsidiaries were among companies sued in the United States and Canada by customers alleging that the use of hair relaxer products had caused ovarian cancer, uterine cancer and other health issues. There were about 5,400 cases against several companies, including Dabur India's subsidiaries, Namaste Laboratories, Dermoviva Skin Essentials and Dabur International. A multi-district litigation was filed before a US District Court in Illinois regarding the same.
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The company said that these legal costs will affect Dabur India's international business only and have no impact on its Indian business. The Chawanprash maker has also retained its guidance for FY24.
Dabur India said that 25 percent of the company's international business is in the hair relaxer business. Amid the ongoing legal case, the company will gradually reduce its dependence on the hair relaxer business and in the next four to five years, it will develop a non-relaxer business. The company said that 40 percent of its business is coming from the US where the case is going on, while the rest 60 percent of the total business comes from other countries.
Ajay Thakur, lead consumer analyst at Anand Rathi said that the legal costs will impact the company's consolidated business and not the standalone business. "Continuing gross margin expansion in H2FY24 and other cost-saving initiatives by the company will cover up the legal expenses," said Thakur.
Dabur India on November 2 reported a consolidated net profit of Rs 507.04 crore in Q2FY24, registering a growth of 3.29 percent from Rs 490.86 crore in the year-ago quarter. Revenue came in at Rs 3,203.84 crore, up 7.27 percent from Rs 2,986.49 crore in the year-ago quarter, the company said in a regulatory filing, driven by steady performance of both the home and personal care.
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