Dabur India Spends Rs 65 Crore on Legal Costs Amid Ongoing Hair Relaxer Cancer Case in the US
Dabur India has disclosed that it incurred legal expenses of approximately Rs 60-65 crore during the first half of FY24 in relation to an ongoing legal case involving its hair relaxer product. This case involves claims from customers who allege that the hair relaxer has been linked to ovarian cancer. During an investor conference call, the company revealed its plans to allocate Rs 20 crore each quarter for legal expenses moving forward. While some of the legal expenses are covered by insurance, the company will still need to bear a portion of the costs.
On October 19, Dabur India and its subsidiaries were named in a lawsuit filed by customers in the United States and Canada, asserting that the use of hair relaxer products has led to ovarian cancer, uterine cancer, and other health issues. There were approximately 5,400 cases against various companies, including Dabur India’s subsidiaries, namely Namaste Laboratories, Dermoviva Skin Essentials, and Dabur International. These cases have been consolidated into a multi-district litigation filed before a US District Court in Illinois.
Dabur India clarified that the legal expenses would primarily impact its international business and would not affect its operations in India. The company also confirmed that it has maintained its guidance for FY24.
It was further revealed that 25 percent of Dabur India’s international business is linked to the hair relaxer segment. In light of the ongoing legal challenges, the company intends to gradually reduce its reliance on this business and, over the next four to five years, aims to develop non-relaxer segments. Notably, 40 percent of the company’s business originates from the US, where the legal case is ongoing, while the remaining 60 percent comes from other countries.
Ajay Thakur, lead consumer analyst at Anand Rathi, explained that the legal costs would impact the company’s consolidated business, excluding its standalone operations. Thakur expressed optimism that continued gross margin expansion in the second half of FY24 and cost-saving initiatives would help offset the legal expenses.
In its latest financial report on November 2, Dabur India announced a consolidated net profit of Rs 507.04 crore for Q2FY24, marking a 3.29 percent increase from the Rs 490.86 crore reported in the same quarter last year. The company’s revenue also saw growth, reaching Rs 3,203.84 crore, up by 7.27 percent from Rs 2,986.49 crore in the corresponding period of the previous year. The growth was attributed to the steady performance of both the home and personal care segments.
