Will maintain 20-25% topline growth for FY14: Jyothy Labs

Jyothy Laboratories maintains its guidance of 20-25 percent topline growth and 15 percent EBITDA for FY14, says joint MD Ullas Kamath. According to him, the company does not see any reduction in its product range, where, most of them are for the masses.

"We are still seeing around 20-22 percent growth in the volumes because of good monsoon, feel good factor in the rural and semi urban and water availability,” Kamath says in an interview to CNBC-TV18.

Also Read: See Q2 demand momentum continuing in Q3: Havells

Meanwhile, he is hopeful that the debt of the company is likely to come down by Rs 100 crore by FY14-end.

Below is the verbatim transcript of Ullas Kamath's interview on CNBC-TV18

Q: You have shutdown your Bhubaneswar factory in Q1; there are plans to shutdown your Chennai factory as well in this coming quarter. Going forward, you are looking to rationalise your manufacturing operations at Salem as well as Silvassa, is the company planning to monetise any non-core assets in FY14 per se?

A: Absolutely and after acquiring Henkel we have four more manufacturing units in the fold of Jyothi Labs, so we are rationalising all our manufacturing at the existing places and wherever we find that the units that we are not using, we will be monetising that before March 2014. We are not desperate to sell our real estate but if we get our price then definitely we will be monetising as quickly as possible.

Q: Which factories will you look to monetise immediately? Will it be Bhubaneswar or Chennai, which one could happen in FY14? How much could you possibly raise from this and at least this fiscal year?

A: I do not want to name the unit as such but around Rs 50 crore we should be able to monetise before March 2014.

Q: Focusing on the business itself, we have been speaking to a lot of fast moving consumer goods (FMCG) players in the past couple of weeks and most of them have said that there has been rural growth which has held up but maybe there is some amount of deceleration in volumes. What is the case with Jyothi Labs in particular? How is volume growth panning out within the rural as well as urban consumption markets?

A: For the product range in which we are now, most of them are for masses and we are not seeing any reduction as of now. But growth has been there, we are still seeing around 20-22 percent growth in the volumes and because of good monsoon, feel good factor in the rural and semi urban. Also, water availability is very important for both fabric wash and for the personal wash and we are into the business of fabric wash and personal wash and mosquito repellent business.

By and large, we are seeing robust volume growth in the semi urban and rural but going forward we need to see how it works for 2014-15. But for 13-14, we still hold on to the guidance of 20 percent upward on the topline growth and 15 percent EBITDA. We are inline with that as far as Jyothi Labs’ portfolio is concerned because our products are for masses.

Q: In your earlier answers you said you will at least raise about Rs 50 crore from your monetisation in FY14. Your debt stands at Rs 600 crore as of now, so can we assume your debt will only come down by Rs 50 crore or the cash flow generation will increase and therefore, your debt will come down? Can you give us your internal target for reducing debt?

A: As of now, the debt stands less than Rs 500 crore. It is not Rs 600 crore, it must be above Rs 475-480 crore and in our internal accruals for the current year we expect at least about Rs 150 crore of positive cash flow into the company in the current year. So, hopefully we should bring down the debt by at least by Rs 100 crore keeping in mind the dividend payout and that is our internal working.

Q: How are you doing in terms of possible price hikes and the reason I ask is that there is a brokerage report which indicates that the rupee depreciation especially in Q2, might impact the company going forward because a lot of your raw materials are crude linked, is that the case? What is the margin pressure and have you been able to mitigate it via price hikes?

A: So far we have not taken the price hike because if you want to drive the volume, you cannot increase the retail price so easily. So, we are going for higher productivity and higher operations like high productivity levels at our existing factories reducing as much as possible in the cost of production. This is how we are shutting down on a couple of units that helped us to produce more from other factories.

We are still able to maintain the EBITDA at 15 percent but if it breaches less than 14 percent then probably we will take a price hike and also we need to see the industry, how others are working in the retail price because at the end of the day, I cannot take unilateral decision. But looking at the combination, if the rupee depreciated further, we might take a decision. But at this point in time at least for the next two months, we don’t have any intention of increasing the retail price.

Q: How much would your margins get impacted by? How much are you comfortable with in terms of margin worsening?

A: Percentage is fine, 100 bps, but as of now we are in the range of 14-15 percent so 100 bps is fine but above that we are left with no option than increase the retail price of the products where we have good competitive advantage especially in fabricate segment.