A year ago, we set out to write a new chapter in our history. We
embarked on our plan to reap new opportunities as we acquired
controlling stake in Henkel India Limited and commenced the process of
integrating newly acquired business of Henkel with our core operations.
I must state here that we remained on track with our planned
integration in the midst of an economy which was witnessing high
In spite of the present economic turmoil, the opportunities in India is
expected to be good and consumer spending in India is expected to grow
phenomenally driven by rising incomes and aspirations, widespread media
proliferation and better physical reach across the country.
Hence, while the economic scenario remains volatile and uncertain
across the globe, we believe that the impact will be relatively lesser
in India on companies in the consumer goods space. Due to the large
consumer base that India has, excellent opportunities lie ahead.
We continue to focus on the landscape of our business, our products and
our consumers to determine where our biggest opportunities lie. We
identified our strengths and where improvements could be made, we did
that. We also developed key strategic objectives and consciously worked
on them. Since then, the results confirm that our strategy is working.
Net Sales grew by 10%, at Rs 66,278 lakhs on a standalone basis. In
terms of profitability the operating profits stood at Rs 8,266 lakhs and
Profit after Tax at Rs 8,352 lakhs after considering other income. If we
account for the entire 12 month period in terms of erstwhile Henkel as
well as Jyothy Laboratories'' Net sales would be Rs 107,091 lakhs. The
profit growth was flat on account of restructuring of the distribution
network from tier 3 to tier 2 model due to which inventory levels was
brought down to almost one week stock at CSA level and receivables was
brought down to Rs 4251.55 lakh as on March 31, 2012 from Rs 10349.89 as
on March 31, 2011.
Behind the Scenes
Our integration strategy was divided into phases, which is why the
numbers have panned out just as we had planned. We commenced with
streamlining the management at Henkel by retaining certain select
middle level managers handling brands and distribution.
Looking at the future for the product lines that we acquired, we have
rationalised all sales promotions and offers and brought the
advertising under Jyothy Laboratories'' umbrella. We have and will
continue to increase retail prices across products keeping in mind
reasonable profitability, cost of production and other operational
costs in line with their positioning, during the year.
We have shifted erstwhile Henkel''s corporate office functions from
Chennai to Mumbai. The Production activity has been streamlined to
ensure procurement, production and logistics efficiencies. The Purchase
and Supply Chain activities are centrally undertaken from Mumbai, again
to ensure, cost efficiencies. Marketing strategies for the new products
brought under our umbrella like Margo, Pril, Henko and Fa which have
immense potential, new campaign will be rolled out as we attempt to
reposition these flagship products in FY 2012-13.
The trade environment in India is unique with different urban and rural
market dynamics. With a strong presence now in urban and rural markets,
our product visibility has improved manifold and across the board. The
process of having a balanced presence in small stores to modern trade
formats is ongoing and the results will be visible over the next few
Another important step which we have undertaken in the area of
distribution is that we made a deliberate move from a three tier to two
tier system by phasing out state level super stockists (CSA) resulting
into cost savings and higher efficiencies.
The year gone by was like a tightrope walk as we preserved organic
growth of Jyothy''s product line, even while turning around erstwhile
Henkel''s business. Moving forward, although we will continue to focus
on operational efficiency with expectations of further improvement in
our key operating and financial metrics, our primary focus will be on
accelerating the growth of our brands and expanded combined portfolio.
Certain measures have already been initiated in this direction,
including contemporary packaging, a streamlined product portfolio and
Notably, the efforts have been across the spectrum of our business -
production, sales, marketing, management bandwidth, supply chain and
finance , in a phased manner. This is also evident from our quarter on
quarter numbers where in the first quarter of FY 2011-12 we did
register a de-growth followed by gradual ascent in the sales figures
and eventually turning it around to record 40% growth in the last
A similar trend has been observed in our EBITDA growth, quarter on
quarter. I believe that this is an indication of our integration
process bearing fruit and we understand that while there will be some
pain initially and the integration and turnaround process will be
complete over the next quarters.
There have been concerns about the Debt which we have taken on our
books on account of the Henkel acquisition. Our thought process has
been that while we have real estate on hand to sell and pay off to
extinguish this debt, we would do it only if required and only at the
right price and time.
We are confident that the growth and profits generated by the erstwhile
Henkel products itself will help us service this debt. Our focus will
be on enhancing our profitability numbers which will, in turn, take
care of the debt servicing and repayment.
We have setup a joint venture in Bangladesh with Kallol Enterprise
Limited for setting up a state-of-the-art manufacturing facility as we
propose to manufacture and market the entire range of our products
portfolio in Bangladesh. Needless to say, this will be done in a phased
Growth Story Continues
The Jyothy Fabric Care Services Limited is now the biggest laundry
chain with 122 outlets and we are on track with our expansion across
the length and breadth of the country with presence in Bangalore,
Delhi, Mumbai, Hyderabad, Pune and Chennai. We have grown both
organically and through inorganic route here and going forward the
potential is immense, especially in the light of new contracts bagged
Shaping a New Future
According to Confederation of Indian Industries (CM), the Indian FMCG
sector is the fourth largest sector in the economy with a total market
size in excess of USD 13.1 billion. Availability of key raw materials,
cheaper labour costs and presence across the entire value chain gives
India a competitive advantage.
The FMCG market is set to treble from USD 11.6 billion in 2003 to USD
33.4 billion in 2015. Penetration levels as well as per capita
consumption in most product categories in India is low indicating the
untapped market potential.
The burgeoning Indian population, particularly the middle class and the
rural segments, presents an opportunity to makers of branded products
to convert these consumers into using branded products.
With long term structural strengths in the industry, we have stepped
forward with confidence and aligned our organisation and infrastructure
to support our new corporate strategy. In the process, we reduced non-
value-added costs and imposed new financial discipline across the
With the acquisition of Henkel, we have emerged as Company with a suite
of products across categories like Fabric Care, Surface Cleaning,
Household Insect repellents and Personal care. Within each of these
categories too we have a diversified portfolio of products across
socio-economic categories ranging from premium to niche category
products. This widens our presence across FMCG market categories and
will be the key growth driver.
Simultaneously, we developed the necessary capabilities to improve our
competitiveness and today,
we are better positioned to manage our business at enhanced scale and
to allocate our resources to the most promising opportunities.
A Vote of Thanks
I extend my gratitude to all of you who have helped us at every step to
march forward successfully and continue to shape our bright future
—our employees, our consumers, our suppliers, our bankers and our
shareholders. I am also grateful to our Executive Leadership Team for
its exceptional management skill and commitment of our Board of
Directors for their continuing guidance. I do ensure that we will
strive hard to continue to earn the trust, confidence and pride of all