Jyothy Labs likely to launch a new product in Q2FY22: Ullas Kamath

Ullas Kamath, Joint Managing Director, Jyothy Labs Limited, talks about the March quarter numbers, demand situation, margins, inorganic growth opportunity, product pipeline and exceptional loss of Rs 23 crore among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: The company has posted good numbers for Q4FY21. How will you summarize the numbers and where did you saw maximum positive cues?

A: Overall, the quarter was quite challenging but the results are good. The turnover stands at Rs 495 crore, which is a 27.3% growth as compared to the last quarter. The EBITDA stands at 14.3% and the annual EBITDA stand at 16.5%. SO, overall, it has been a very good quarter for us but very challenging. In the March quarter, there was an exceptional item of Rs 23.5 crore, otherwise, the PBT is 56.3 crore, which is 142% more than the same period last year. With this, it was a well planned, well thought and well-executed business plan for us and we hope to continue the same way. Even in April month, there has been double-digit growth for us. The sales are good in both urban and rural.

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Q: How is the overall demand, although you said that April has been good, but May onwards, lockdowns were enforced in many states across the country. So, tell us about the kind of impact you are seeing in May and the first quarter of this financial year? Also, you have good exposure in the rural areas. So tell us the impact you will have there?

A: We are not facing too many problems this time. The difference between the last time lockdown and the current year lockdown is that this is a local lockdown not a national lockdown and transportation goods vehicles across the country is going fine. And our production companies are working at 100% production. As far as May is concerned, results are good yet and things are moving in double-digit but cannot say anything due to uncertainties. But national lockdown must not be there as we can manage the local lockdown.

And people have also earned experience from the first COVID wave in terms of transportation, distribution, stockiest, retailer and also the consumer also. There is no rush in the retail outlets that we saw last time. Also, good digitization is going on and even small retail outlets also receive orders on WhatsApp and deliver the products. In fact, even money is being transferred digitally on WhatsApp. So, there is a lot of improvement in digitization even at the semi-urban level. Currently, we are positive and hopefully, if COVID comes down in the next two-three then we will not have to worry about this quarter. And then, we have to prepare for Wave-3 if it is there but the positive outlook is that vaccination is progressing smoothly across the country and we are also asking all of our staffs, distributors and dealers among others for the vaccination. So, based on the same, overall, neither positive nor negative, the outlook is that people know that there is some solution for this virus or COVID and that is the takeaway.

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Q: Your margins have shown a sharp increase, what is the reason for this, have you taken any price hike? Also, with the commodity prices on the upside, do you think that the margins are sustainable? What is the pricing outlook going ahead and is there any price hike in offing? 

A: At this point in time, we have taken a price increase of up to 5% in the last quarter and April. At the same time, we have also reduced our trade promotion, sales promotion and incentive links by 5-6%. Based on these factors, we are protecting the margins and will be able to protect them in this quarter. However, if the raw material prices shoot up, then we can take a price increase once more, maybe the next quarter. It is the same for the industry as well. Raw material prices have increased by around 6-7% and we are managing as much as we can. But if it continues, then we have no option other than to take a price hike in the next quarter as per the industry.

Q: The company has become debt-free on net levels. What are the further plans and where are you going to use the cash? What are the CapEx and any plans related to acquisitions? What is the outlook for the next three years in terms of using your cash? 

A: Like any progressive company, inorganic is a good route to grow. 

Earlier, we have acquired Henkel and had good growth from it and we have to do something similar to it. So, always good to have cash and our balance sheet is quite strong at present and is in debt-free status. We are getting a good cash flow and our EBITDA x 1.25 times cash generation is happening. Accordingly, in the next 2-3 years, definitely, we will be able to do a good and smart acquisition but do not feel like making a transition amid the pandemic. So, we are investing the money in our own brand building and we are gaining market share in every brand in the last one year. There is no brand where we have not taken the market share high. So to that extent, we are confident to invest the money in our own brands and at an appropriate time, like any progressive company will look for inorganic growth opportunities.

Q: Do you have any product launch in the pipeline this year in any specific segment where you feel that you can get good growth or you will consolidate with the existing portfolio? Also, there is an exceptional loss of around Rs 23 crore. Can you explain what that is?

A: We have written off an exceptional item because the industry went to Guwahati and Jammu for access benefit and it is continuing since 2000. In 2008, the government issued a notification, which had withdrawn some benefits from the retrospective effect. In regard to the same, we went even to Gauhati High Court and even won it, similarly, we also won the case in the Jammu High Court. But the issue went to the Supreme Court and we couldn’t win it there. Because it was for all the industry who have gone to North East and Jammu and on the basis of the same, we showed the list of receivables of Rs 23.5 crore and we write-off it. It is a non-cash item and we are not supposed to pay any payment in it. What was a receivable has been written-off, it was a one-time expenditure that we have taken.

Q: Can you please tell us about the new launches that are in pipeline?

A:  The entire product category where we are, maybe it is fabric care, dish wash, household insecticide and personal care, our products are ready in the R&D and we are waiting for the time. In the last quarter, we launched a Maxo Genius Machine, earlier we have launched a variant of Exo, before it, we have launched Margo Sanitizer, Margo hand wash and Margo face wash. But in the current quarter and the next two quarters, we are ready with the products in all the categories but the environment should be good and there should be a feel-good factor to launch any product. So, that the distributor, retailer, our staffs should be happy and celebrate the new product launch. And for that we are waiting for an opportunity, maybe in the next quarter you will see something coming out, not from the existing portfolio but it will be a brand extension.