Akash Jha
The ongoing case involving Dabur India’s hair relaxer, which customers allege caused ovarian cancer, incurred legal expenses between Rs 60-65 crore in H1FY24, according to a conference call with investors and Dabur India management. Legal expenses will cost the organization Rs 20 crore per quarter moving forward. Although legal expenses are granted insurance coverage, they remain partially the responsibility of the company and must be borne.
Dabur India and its subsidiaries were named in a group of lawsuits filed by customers in the United States and Canada on October 19. The plaintiffs alleged that the use of hair relaxer products was responsible for various health complications, including ovarian cancer and uterine cancer. The subsidiaries of Dabur India, Namaste Laboratories, Dermoviva Skin Essentials, and Dabur International were among the entities that were subject to approximately 5,400 legal cases. Concerning the subject, a multidistrict lawsuit was initiated in an Illinois US District Court.
Dabur India’s international operations will be unaffected by these legal fees, according to the company; its Indian operations will remain unaffected. The producer of Chawanprash has maintained its guidance for the fiscal year 2024.
Hair relaxers account for twenty-five percent of Dabur India’s global operations, according to the company. The company will develop a non-relaxer business within the next four to five years, while progressively reducing its reliance on the hair relaxer industry in light of the ongoing legal case. According to the organization, the United States, where the litigation is ongoing, contributes to forty percent of its overall business, with the remaining sixty percent originating from other nations.
The legal fees will have no effect on the company’s standalone operation, according to Ajay Thakur, chief consumer analyst at Anand Rathi. “Continuing gross margin expansion in H2FY24 and other cost-saving initiatives by the company will cover up the legal expenses,” Thakur commented.
The consolidated net profit for Dabur India in the second quarter of fiscal year 24 amounted to Rs 507.04 crore on November 2. This represents a 3.29 percent increase compared to the Rs 490.86 crore recorded in the corresponding quarter of the previous year. The company stated in a regulatory filing that steady performance from both the domestic and personal care segments contributed to a 7.27 percent increase in revenue to Rs 3,203.84 crore from Rs 2,986.49 crore in the same period last year.
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