The Hindu Business Line : Dabur to launch Sikkim unit this year

DABUR India Ltd (DIL) is planning to invest up to Rs 17 crore this year in expanding capacity. The company, which has already set up three manufacturing plants in geographies that offer excise and other benefits over the last year-and-a-half, is now planning to establish its fourth unit in Sikkim this year.

Mr Charanjit Mohan, Executive Director (Operations) at DIL, told Business Line: "We were looking to set up a manufacturing site to cater to the markets in eastern India. Sikkim offered not only the appropriate locational advantage, but also allows us to avail ourselves of excise waiver and other benefits. The company plans to invest between Rs 10-12 crore in Sikkim."

He said the Sikkim facility should become operational by end of 2005 and would primarily manufacture hair oils and healthcare products.

Also on the cards is expansion of the existing manufacturing capacity at Baddi for which DIL has earmarked up to Rs 5 crore investment over the next three months.

Mr Mohan said the strategy of expanding capacity at locations that offer excise benefits is expected to reap rich benefits. In 2004-05, Dabur India is expected to save Rs 30 crore - about one-third of the net profit the company posted last fiscal - because of excise savings at the four new locations - Baddi, Uttaranchal, Jammu and Sikkim. This figure would touch Rs 40 crore in 2005-06.

DIL's strategy of expanding capacity with an eye over excise benefits falls in line with what several FMCG companies are doing to contain spiralling costs. Analysts said that the across-the-board price rationalisations in 2004 have led companies to look for ways to contain costs and the move to manufacture at excise-free zones is part of it.

According to a survey by market analyst SSKI Securities, more than Rs 600 crore is being invested by companies including Hindustan Lever Ltd, Colgate Palmolive, Britannia, Nestle India and Marico in expanding manufacturing capacities.

And substantial savings are expected to accrue to each of these companies as a result of investing in excise-free zones, according to SSKI.

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