Dabur India is willing to dilute its holding in its wholly-owned retail subsidiary H&B Stores and bring in an investor to grow the business once the government eases rules on foreign direct investment in multi-brand retail, according to Sunil Duggal, the Chief Executive Officer of the company known for its Ayurvedic products.
“Going forward, we would like to scale it up outside the boundaries of Dabur, not within Dabur; outside boundaries means getting a foreign partner in or getting some outside investment in so that we are able to scale up because the issues with NewU (stores operated by H&B Stores) is the faster you scale up, the more money you lose,” Duggal told Chillicious in an interview.
H&B operates stores under the name ‘NewU’ that offer a wide range of beauty and personal care products and are located in premium high footfall malls and markets. These stores offer both domestic and international brands covering cosmetics, fragrances, skin care, personal care and beauty and fashion accessories.
Once FDI is allowed, which is perhaps is going to happen at a point in time, in multi brand retail, that’s the time we will be starting to talk to people, he said.
For the nine months ended December 31, H&B Stores made a loss of Rs 54 lakh (before tax and interest) on revenues of Rs 86.11 crore.
H&B was founded in 2007 but Duggal said its synergies with the main business of the company were low and the parent was not willing to let it be dragged by the struggles at the beauty chain.
“We can open up 100 new stores; we have got around 80 stores, we can open up 80 more in one year but then the bleed which will come out of there will be quite high and since it’s part of the consolidated set of numbers, we are not willing to absorb that bleed. So, the whole long-term plan or the medium-term plan for NewU is to carve it up as a separate entity with outside investments and then scale it up to a different level,” he said.
While the United Progressive Alliance government had allowed up to 51 percent FDI in multi brand retail, the current dispensation is opposed to FDI in the segment even though it hasn’t reversed the policy decision of the previous government.