Jyothy Labs sees gross margins at 45% from laundry biz

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Jyothy Labs sees gross margins at 45% from laundry biz

In an interview with CNBC-TV18, Ullas Kamath Deputy Managing Director, Jyothy Laboratories, spoke about the latest happenings in his company and sector.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Expect 35% topline growth in H2: Jyothy Labs ALSO READ See latest News about Jyothy Laboratories See previous management interviews See what other Experts & Brokerages are saying about Jyothy Laboratories Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

In an interview with CNBC-TV18, Ullas Kamath Deputy Managing Director, Jyothy Laboratories , spoke about the latest happenings in his company and sector. Below is a verbatim transcript.

Q: Can you take us through what exactly you are doing with the laundry services segment and what kind of targets you could achieve hopefully by the end of the first year of operation there?

A: This is a laundry which for the first time anybody is doing at a corporate level in India. It is a world-class laundry at affordable price at the doorstep of every common man and this is what we are trying to target. We have already set up a pilot plant in Bangalore with an investment of about Rs 35 crore. It is a world-class facility with the world-class machinery, with the world-class people, delivering the world-class laundry presently which is not available in the country. The target in Bangalore alone in the first year of operation which I think by March 31, 2011-we should be targeting - about minimum of Rs 25 crore in the service industry. This is laundry alone apart from some big institutions we are targeting that could be additional sales. But from retail alone, I should be happy if I get about Rs 25 crore, which I am very optimistic about.

Q: How high margined is this business, what might it do to your blended margins?

A: In service industry generally these are all high-margin driven business but initially the start-up cost and the operational cost will be higher. I would say that in the first six months of operation, you will see higher operational cost but over a period of time, like in a second year, our margins should settle down around 45% at the gross level and net level maybe around 15% being very conservative because in service industry, always the margin side is higher than in the product category.

Q: Existing business itself is looking robust-you had a good Q2, what kind of target have you set out for the full year in terms of sales and profits?

A: Six months have been very good to us and we have grown the topline at about 35% and the bottomline by 56% and going forward, the trend looks similar to me. Rural is doing extremely well and Ujala has crossed more than 30 lakh retail outlets placement-unheard of in fast moving consumer goods (FMCG) industry. Going forward, I see the same trend continuing till March. That is a growth of about 38% topline and about 60% bottomline.

Q: What are your key brands like Ujala or Maxo exhibiting in terms of core volume growth?

A: Entire growth has come from volume because there is no maximum retail price (MRP) increase in the last twelve months and the entire growth has come from all the sectors and volume. The growth drivers for the last year have been Maxo which has grown more than 45% and the Exo which is a dish-wash segment in South India which we have rolled out nationally-that has been a growth driver for the last one quarter. But otherwise all the sectors are growing very steadily.