Trickle-down effect ensures that the benefits of economic growth reach almost all strata of the economy. In a high growth economy like India?s, this ensures that there will be a rise in incomes at all levels. The obvious beneficiaries of this boom are fast moving consumer goods (FMCG) manufacturers.
Jyothi Laboratories (JLL) is well known for its brands like Ujala. This Mumbai-based FMCG company is in the segments of fabric care, household insecticides, surface cleaning, personal care and air care.
Business
JLL started as a proprietary concern in 1983 and converted into a private limited company in 1992 and then to a public limited company in 1995. The company has built brands like Ujala (fabric care), Maxo (mosquito repellent), Exo (dish washing bar), Jeeva (soap) and Maya (incense sticks or agarbatti). According to AC Nielson survey, at the all-India level, Ujala enjoys 72.2% of the fabric whitener market by value and 20.8% of the mosquito repellent coils market by value as on July 31, 2007. Exo dishwashing bar enjoys 17.9% of the south Indian dishwashing bar market by value. The company boasts of a strong distribution network throughout India. It has 2,500 distributors and 1,500 field staff and claims it has a reach of approximately one million retail outlets. The company manu- factures products at 21 units at 14 locations across the country.
Financials
JLL registered an increase in sales from Rs 286.04 crore in FY2002-2003 to Rs 374.51 crore in FY2006-2007, a CAGR of 7%. On the other hand, PAT has grown from Rs 17.70 crore in FY2002-2003 to Rs 51.41 core in FY2006-2007 connoting a CAGR of 30.5%.
Offer objective
The offer for sale is aimed at providing an exit route to existing institutional investors. The promoters are not selling their holding now which remain constant at 69%.
Outlook
JLL derives nearly 45% of its revenue from sale of Ujala and has shown a declining trend over the years, which is good for investors. It has, however, been building on its brands and distribution network. The company?s move into third party product distribution is expected to add to its bottomline. Tie-ups with CCL Products for distribution of coffee, Godrej Tea for distribution of Tea and with Balaji Telebrands for distribution of dhoop, along with entry into Bangladesh are the new avenues that add to the company?s bottomline. The offer is priced at 19 to 21 times its EPS of Rs 33.15 for the FY2006-2007, offering value to the investors. Investors in the long run are expected to benefit as the company expands into new markets and new segments.