Jyothy Labs expects to be debt-free by March: Ullas Kamath, Joint MD

Ullas Kasaragod Kamath, Joint Managing Director, Jyothy Labs Ltd, talks about the quarter results, the reason for fall in revenue, expectation from the budget 2020 among others during an interview with Pooja Tripathi, Zee Business. Excerpts: 

Q: How was the volume growth of the company in this quarter?

A: This quarter the sale has been down by about 5.9% and de-growth is around 5.6%. This is because we have taken the stock correction at modern trade and at the same time we have taken 2% stock correction in general trade. This is why sale has been down by 5.9%. 

Q: What was the reason behind the downfall in revenue in almost all segments? 

A: The company has faced pressure from the rural market in this quarter. Rural market contributes 40% in our general trade. At the same time, we also faced liquidity challenges, as well as the distributors and wholesalers, have also reduced their investment. For the purpose, we came with a 22-day stock, which would reduce their working capital, which in turn ends our burden of providing credits to them. So, we have introduced the stock correction which has helped in improving our gross margin but reduced our EBITDA and Profit After Tax (PAT) by 10% each. This is the correction for one quarter but the sales will be back to its normal in the next quarter. 

Q: Would like to understand the segment-wise performance of your company and which segment has registered the best growth?

A: Positive growth is not visible anywhere. The decrease in rural demand has an impact on us. Secondly, the company has decided to work in cash and carry format and will don't provide credits anymore. At the same time, we will also try to reduce stocks in areas where it is in abundance as transport gets easier under GST. So, we have brought down the stock level to 22 days from a month in the market. This has an impact on the top line which has come down but the secondary sales have been more than the primary sales. So, we are not much worried too much about that. Normal sales in March will help us in placing positive results at the end of the year. 

Q: Do you think that the budgetary announcements will boost the demand and growth will be back on track?

A: The budget is giving us the feel-good factor as post Union Budget announcements discussions gave a feeling that the government is investing a lot on the rural as well as infrastructure. It has also reduced the income tax which will bring more money in the hands of middle-class people. Summing up all these gives a feel that it is good for the business but its result will be seen after April 2020. Thus, we will have to struggle but in the March quarter because consumption will go up after they have more money in their hands. So, I think things will turn better from April. Hopefully, with this, we will reach the bottom of FMCG's growth trajectory and if bottoms out then we are perfectly fine and good to go in the next year with a good growth trajectory. 

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Q: What is the situation of pledge share and also the debt situation of the company and plans to reduce the two?

A: The company's debt will reach almost zero levels by March, however, a debt of around Rs60-70 crore will be available in the working capital. The company is not facing problems related to debt. Besides, there was a pledge loan of Rs400 crore at the level of the promoter, which has come down to Rs125 crore, which will be paid off in the next 2 years by the dividend income. So, no worry at the company level, which is at a very normal debt that we have and at the level of the promoter the loans will be cleared in a couple of years from the dividend income that the promoters are getting back.