IIFL identifies turnaround potential at Bajaj Consumer Care; ADHO revival key to strategy

IIFL Securities has signalled Bajaj Consumer Care as a potential turnaround opportunity following discussions with the company's newly appointed Managing Director, Naveen Pandey. The brokerage suggests that a focused revival strategy could deliver commensurate returns for shareholders as operational changes are implemented.

Pandey's immediate priority is to restore the health of Almond Drops Hair Oil (ADHO), aiming to regain market share and profitability. This is being pursued through strategic price increases, more efficient use of advertising budgets, strengthening distribution channels, and introducing affordable price points. Additionally, the company is reviewing its portfolio beyond ADHO, intending to take fewer but more focused bets.

In its approach to strengthening the core, Bajaj Consumer Care is allocating a higher proportion of advertising spend towards ADHO, with the share of voice and share of market moving closer to 2, and 40% of advertising expenditure now digital. Refinement in marketing messaging, annual increases of 8–10% in direct distribution, and heightened focus on affordable packs are also underway, with improved monitoring and systems targeted at distribution quality.

Price increases have already been implemented as part of efforts to raise EBITDA margins towards the sector average. IIFL Securities anticipates this could be achieved by the end of FY26 or early FY27. The company notes that margin improvement could be front-loaded, increasing the probability of EPS upgrades in the near term.

Outside of ADHO, a shift in advertising focus will see fewer resources allocated to non-core products, with coconut oil remaining a key area of attention. The company is evaluating other portfolio segments and considering acquisitions, stating an intent to assess new brands “from a framework of ‘what can be brought to the table to make the brand more valuable in our hands than it was with the seller’.”

According to IIFL Securities, Bajaj Consumer Care could deliver double-digit topline growth and achieve Ebitda margins in the high teens. The brokerage forecasts EPS growth of approximately 14% between FY25 and FY28, with risk potentially skewed to the upside as operational discipline is reinforced and the product portfolio is rationalised.

Mr Pandey, on a five-year contract, is an FMCG industry veteran with prior experience at Marico and Unibic. His remuneration package is being structured to align with shareholders’ interests, further supporting a shareholder-focused governance approach. The stock currently trades at around 19x FY27 earnings, and IIFL Securities believes its discount to the sector average could narrow if performance improves as expected.

IIFL Securities reiterated its 'Buy' rating on Bajaj Consumer Care, maintaining a target price of Rs 280. The brokerage underlines that as portfolio rationalisation and digital advertising initiatives take hold, margin improvement may be realised earlier, increasing the potential for upward EPS revisions. The company’s performance will be closely watched for successful execution of this turnaround strategy.