A household name in the Indian consumer goods industry has been having a bad couple of days. FMCG major Dabur disclosed in an exchange filing on Wednesday that three of its foreign subsidiaries have been sued in the US and Canadian federal and state courts involving allegations that some of its products caused cancer.

Dabur has manufacturing facilities in eight locations outside India and its products are sold in over 120 countries.

The market was quick to react to the news. The stock fell over 3% in Thursday’s trade. It settled at Rs 525.65 on NSE, down 1.56% from the previous closing.

What’s up with Dabur? Founded in 1884, Dabur India has banked on its herbal and ayurvedic products—ranging from hair oils and popular dietary supplement chyawanprash to toothpaste and honey—to emerge as a top player in India’s extremely competitive FMCG sector. But its reputation seems to have taken a hit lately.

It’s battling multiple lawsuits across the US and Canada, with consumers alleging that the company’s hair relaxer products contained certain chemicals that caused ovarian and uterine cancer, apart from other health issues. The exchange filing did not say what these chemicals are.

The three subsidiaries are Namaste Laboratories, Dermoviva Skin Essentials and Dabur International. These are among the several companies facing about 5,400 cases, which have been consolidated as a multi-district litigation before a US District Court in Illinois.

The lawsuits allege that these hair straighteners and relaxers—typically used for making hair smoother and manageable—contain chemicals known for putting users’ health at risk. Dabur International sells over-the-counter hair straightener and relaxer products under several brands.

It has also been alleged that these companies were aware of the fact that the products contained harmful chemicals but continued to sell them.

The company noted in the filing that these cases are currently in the “pleadings and early discovery phases of litigation” and that the accusations are based on an "unsubstantiated and incomplete study”. It also said that the financial implications, whether through settlements or verdicts, remain uncertain at the moment.

On top of this, this development comes a day after Dabur India said that it received a GST demand notice of Rs 320.6 crore. It also asserted that it will challenge the notice based on “strong merits” and that there would be no impact on its finances or operations because of this.

The important question is, would there be any far-reaching consequences for Dabur India?

“Dabur draws about 26% of its business from the international segment, but within that, Namaste’s contribution is still in single digits,” Shirish Pardeshi, research analyst at Centrum Broking, told BQ Prime.

For the June quarter, the company registered a 3.5% rise in net profit to Rs 456.61 crore, while its total income was up 10.85% at Rs 3,240.25 crore.

Pardeshi also noted in the BQ Prime report that there are no current concerns regarding the impact on the company’s top line as several factors are poised to bolster its long-term growth, like the healthcare portfolio falling back into stable growth rates as the pandemic-driven high base normalizes. Additionally, the winter season is set to boost Dabur’s growth driven by the demand for its immunity booster products like chyawanprash and honey.

Speaking of Dabur Honey, the company’s hair relaxer products are not the only items that have been marred by concerns.

Not the first time: In August, a report by Zee News said that a high concentration of carcinogenic material was found in Dabur Honey. It was alleged that the samples—tested at the Centre for Analysis and Learning in Livestock and Food in Gujarat—contained 176.57 mg of HMF. Short for hydroxymethylfurfural, the organic compound is formed in honey after extraction from the comb that serves as a quality indicator. The amount of HMF found in the sample surpassed the permissible limit of 80 mg.

The company had junked the report, calling it “motivated” and “baseless” and insisting that all batches of the products comply with the Food Safety and Standards Authority of India.

Again, this was still not the first time that the purity of the company’s packaged honey has come into question. In 2020, Dabur Honey was one of the brands named alongside 12 others by the Centre for Science and Environment for allegedly failing to pass quality tests after the products were found to be adulterated with sugar syrup. Even then, the company had refuted the CSE report, calling it “motivated” and “aimed at maligning its brand”.