JHS Svendgaard Laboratories Ltd Management Discussions.

Forward looking statement

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The following discussions on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", "JHS Svendgaard" are to JHS Svendgaard laboratories limited.


Global Industry

The COVID-19 viral pandemic has been individually experienced, but globally shared. It has continued to wreak havoc and has disrupted lives across all countries and communities. Not just that it has negatively affected global economic growth in 2020 beyond anything experienced in nearly a century. Estimates so far indicate the virus reduced global economic growth to an annualized rate of -4.5% to -6.0% in 2020, with a partial recovery of 2.5% to 5.2% projected for 2021. Global trade is estimated to have fallen by 5.3% in 2020, but is projected to grow by 8.0% in 2021. According to a consensus of forecasts, the economic downturn in 2020 was not as negative as initially estimated, due, at least in part, to the fiscal and monetary policies governments adopted in 2020. Major advanced economies, which comprise 60% of global economic activity, are projected to operate below their potential output level through at least 2024, which will negatively affect national and individual economic welfare. Compared with the synchronized nature of the global economic slowdown in the first half of 2020, the global economy showed signs of a two-track recovery that began in the third quarter of 2020 with developed economies experiencing a nascent recovery, but economic growth in developing economies lagging behind.

Source : https://fas.org/sgp/crs/row/RA6270.pdf

Indian Industry

Indian FMCG sector is the 4th largest sector in the country, which promises attractive business opportunities for foreign investors. As per reports, the FMCG sector witnessed a healthy and promising FDI flow of 16.28 Billion USD from April 2000 to March 2020. This was following a significant increase in private consumption as well as rural income since the last decade.

Indias food and beverage sector is one of the essential components of the FMCG market, which accounts for about 3% of its GDP Furthermore, the report also reveals that this sector is the single largest employer in the country, with more than a 7.3 Million workforce. FMCG industry in India has built growth momentum by growing at 9.4 per cent in the quarter ending March 2021 after growing at 7.3 per cent in the previous quarter (October-December 2020), over the same quarter of the previous year.

In order to aid the growth of the FMCG sector, the Government of India is also actively framing lucrative policies, like:

• In both Cash and carry and single-brand retail segments, the Indian Government has allowed 100% FDI. Furthermore, in the multi-brand retail segment, the Government has allowed a 51% FDI.

• Production Linked Incentive Scheme (PLI) proposed by Indian union cabinet in 2020 has also provided a boost to the manufacturing capabilities and exports.

• Furthermore, the initiation of GST has also reduced the tax bracket of many FMCG products by significant amounts. Most importantly, GST on food products is reduced to 0-5% only.

There is a growing awareness among consumers about hygiene and well-being. Demands for organic products, healthy foods, and goods for self-care hygiene are significantly rising. Leading FMCG companies are embracing these new trends and are leveraging their efforts to create new products in the healthcare domain.

A shift in manufacturing

Much of the world has had China as its resource, assembly and manufacturing hub. With Covid-19 infecting Millions across the world, China is facing an unprecedented global backlash that could destabilize its reign as the worlds factory of choice. The shutdown of supply chains, however, has called for a need to shift the market or become independent. India sensed an opportunity and is keen to make inroads to a space it hopes China will vacate sooner rather than later. Thankfully, the Indian government has planned to boost local production and emerge as a global alternate supplier.

Companies that already have some manufacturing in India may be earlier movers in reducing output in plants in China and scaling up in production in India. India is seeking to lure U.S. businesses to relocate from China. This will indirectly boost infrastructure of the country and there will be a rise in the employment.

The Oral Healthcare

According to the statistics the global oral care market is expected to be valued at an all-time high of US$ 65,900 Billion in the year 2021 and is further valued to reach in the next five years to US$ 78,600 Billion, at 7% CAGR in the forecast period. The market of Oral Care is primarily dominated in the Asia-Pacific, owing to the large population of the region, which is then succeeded by the North American and European region, caused by the demand of premium oral care products by the population.

India oral care market has shown tremendous growth by value & volume in last few years. Growing oral care market is driven by change in lifestyle of consumers, demand of premium products, rising of disposable income etc. Penetration level of oral care products in urban area is high. Companies are focusing into rural area for penetration of other products to increase sales. Rise in awareness of Oral hygiene has created huge demand of Premium and innovative products in urban area. Rural consumer has start shifting from toothpowder to toothpaste & toothbrushes. New emerging premium products, like mouthwash, have gained popularity in Indian market.

India Oral care market is fragmented in 5 categories includes toothpaste, toothbrushes, toothpowder, mouthwash and others. Toothpaste is dominant in oral care market. It is a primary product in daily oral hygiene and has huge presence in urban and rural area. Increasing health and personal oral hygiene, Indians are now more aware how their diet affecting their teeth and mouth. Indian is now willing to pay more for prevention attention. This has helped toothpaste category to grow drastically in oral care market. Herbal toothpaste demand is increasing in oral care market from last few years. Toothbrushes are second increasing market in oral care market after toothpaste. Toothbrushes are sub-categorized in manual & Electric. Manual toothbrushes have huge potential in Indian oral care market. Electric toothbrush is new emerging category and has huge opportunity in urban India; Toothpowder category is at decline stage due to consumer taste and preference. Consumers are shifting from toothpowder to toothpaste. Toothpowder has huge presence in rural India.

Source: https://lnct.ac.in/oral-care-market-growth-trends-covid-19-imipact/

About JHS Svendgaard Laboratories limited

Started as a small-scale enterprise in August 1997, Sunehari Svendgaard Laboratories Limited moved at a brisk pace and was incorporated as JHS Svendgaard Laboratories Limited on 8th October, 2004. By April 2005 the Company took over businesses from Sunehari Svendgaard Laboratories Limited, Sunehari Oral Care and Jai Hanuman Exports. Keeping up with the pace it reached new heights on 21st October, 2006 when it was listed at BSE and NSE of India Limited at a price of Rs. 58.00.

Starting with manufacturing of only Toothbrushes the Company widened its scope to Toothpastes, Mouthwash and Denture Tablets and today is amongst leading oral care product manufacturers and exporters. The Company offers Contract Manufacturing Partnership to well-known domestic and international brands in India and international market Some of the prominent brands with whom the Company has been associated with during its journey includes Amway India Enterprises Pvt. Ltd., Dabur India Limited, Patanjali Ayurved Limited, Hindustan Unilever Limited, Me N Moms Pvt. Ltd., Vestige Marketing Pvt. Ltd., Colgate Palmolive India Ltd., Elder Health Care Limited, J. L. Morisons India Limited, Dr. Fresh Inc., Boots, Lavoris, Walgreens, Walmart and many more recognized brands.

Multiple production facilities of the Company are in Kala-Amb, Himachal Pradesh,. The Company has over 60 highly qualified managers, engineers, officers and supervisors to manage and maintain the plants effectively. The Companys belief in Human Resource Development ensures the presence of all statutory welfare, recreational and emergency services within the plant.

JHS team is a perfect blend of experienced professionals from technical, commercial and other fields. This combined with the Companys vision ensures in manufacturing of high-quality toothbrushes using the best raw materials and equipment from around the world JHS has grown at a rapid pace to become one of the top Indian exporters and a leading supplier to MNC customers in the Indian market.

JHS well-established research and development department strives for constant innovation and high-quality oral products. This assures that the Company is well prepared for the future challenges of this vast and growing field. The Company also has complete in house process facilities from injection molding to bristling and packaging to ensure strict quality control. The presence of a fully equipped Q.C. laboratory with latest gadgets combined with state of the art Vertical & Injection Molding machines from Demag and Cincinnati, Tufting & Trimming machines from Zahoransky Gmbh, Germany and Blister Packing Machines from Boucherie, Belgium ensures international quality of products.

JHS is today a proxy for Indias oral care market being Indias largest integrated manufacturer of oral care products. JHS is a one-stop shop solution for oral care products (toothbrushes, toothpastes, mouthwash, whitening gels, and denture products. JHS possesses a fully integrated oral care unit to manufacture toothpaste and toothbrushes in the same premises, reconciling completely different manufacturing competencies - mechanical and chemical under one roof.

The Company is an ISO 9001, GMP, SMETA certified and focuses on both export and domestic market. The Company has earned various rewards and recognitions, some of them are listed below:

Awards & Achievements:

• The Company bagged the top exporter award in Toothbrush category from the Plastics Export Promotion Council, Ministry of Commerce and Industry, Government of India, for 5 years in a row from the year 2003-04 onwards.

• The Company has also received the Best Performing Enterprise Award (25-100 Crores category) Runner-Up at Plastic on Awards 2009 for complete range of oral care products including toothbrush, dental plate brush toothpaste, mouthwash, mouth rinse, tongue cleaner, denture tablets and tooth powder, etc. from the Plast india Foundation.

• In the year 2012, the Company was also awarded the certificate of excellence in recognition to exemplary growth by Inc. India, Indian edition of Inc., the leading US magazine that focuses on entrepreneurship and growth.

• The Company has also been ranked 215th among the top 500 India fastest growing midsized companies.

• The Company has been winning the award as the top exporter of toothbrushes from India for five years in a row. The award was given out by the PLEX Council promoted by the Ministry of Commerce, Government of India.

• The Company had been a Government of India recognized Star Export House (SEH) which provided the Company a green card clearance which means its goods are cleared for both import and export on self-certification basis.


The performance of the Company for the financial year ended 31st March, 2021, is as follows:

(Rs. in Lacs)

Particulars Manufacturing Business Other than Manufacturing Business Retail Business
Mar-21 Mar-20 Mar-21 Mar-20 Mar-21 Mar-20
Sale to External Customers 9453.24 12749.14 436.29 898.60 186.99 263.68
Revenue with other operating segment 10007.24 13924.45 527.61 908.82 296.06 461.64
Depreciation 55643 742.97 20.86 20.47 148.17 112.63
Cost of Goods Sold 6439.80 9161.38 237.80 595.84 156.30 205.93
income Tax Expenses 43.11 0.38 (31.31) (88.96) (49.25) (11.94)
Total Assets 21448.30 22908.71 3233.84 2742.61 963.23 1197.81
Total Liabilities 2300.49 4758.91 1640.79 1630.63 503.54 603.51

Resources and Liquidity

As on 31st March, 2021, the net worth stood at Rs. 188.69 Crore and the debt was at Rs. 0.47 Crore.

The cash and cash equivalents at the end of 31st March, 2021 were Rs. 21.15 Crore.

Segment wise Business Performance

The Company is into manufacturing toothpaste, toothbrushes, mouth rinse etc. The Company apart from also having its own proprietary brand also has retail stores at various Airports in india.

Revenue share broad segments are stated below:

Name of the product % of Total turnover of the Company
Toothbrushes 36.45%
Toothpastes 59.91%
Mouthrinse 0.62%
Beauty Care 1.22%
Retail operations 1.81%

While the revenue for the Company has come down due to the shift in the demand pattern of the consumers amidst COViD-19, but the Company with its timely strategic realignment, has not just been able to grew its domestic business by 23%, but has successfully enhanced its operating profitability by 5.89%^


Like every business, the Company faces risks, both internal and external, in the undertaking of its day-to-day operations and in pursuit of its longer-term objectives. A detailed policy drawn up and dedicated risk workshops are conducted for each business vertical and key support functions wherein risks are identified, assessed, analyzed and accepted / mitigated to an acceptable level within the risk appetite of the organization. The risk registers are also reviewed from time to time.

The Company faces the following Risks and Concerns:

Credit Risk

To manage its credit exposure, the Company has determined a credit policy with credit limit requests and approval procedures. Company does its own research of clients financial health and project prospects before bidding for a project.

Timely and rigorous process is followed up with clients for payments as per schedule. The Company has suitably streamlined the process to develop a focused and aggressive receivables management system to ensure timely collections.

Interest Rate Risk

The Company has judiciously managed the debt-equity ratio. As on date, the Company is relatively debt free with only few vehicle loans and thus the Company has been able to reduce its overall interest cost drastically.

Competition Risk

This risk arises from more players wanting a share in the same pie. Like in most other industries, opportunity brings with itself competition. We face different levels of competition in each segment, from domestic as well as multinational companies. The Company has created strong differentiators in project execution, quality and delivery which make it resilient to competition. Furthermore, the Company continues to invest in technology and its people to remain ahead of the curve. While the Company is continuing to diversify into different product categories, a strong, stable client base consisting of large and mid-sized corporations further helps to insulate the Company from this risk. We counter this risk with the quality of our infrastructure, our customer-centric approach and our ability to innovate customer specific solutions, timely and consistent delivery, focusing on pricing and aggressive marketing strategy, disciplined project executions, coupled with prudent financial and human resources management and better control over costs. Thus, we do not expect to be significantly affected by this risk.

Input Cost Risk

Our profitability and cost effectiveness is relatively less affected due to change in the prices of raw materials, power and other input costs as most of the impact is passed over to the clients. Some of the risks that are potentially significant in nature and need careful monitoring are Manpower costs, Power costs, capacity utilization etc.

Liability Risk

This risk refers to our liability arising from any damage to equipment, life and third parties which may adversely affect our business. The Company attempts to mitigate this risk through contractual obligations and insurance policies.

Inventory Risk

This risk refers to the problems with high and low inventory. In case of low inventory or out of stock situation customers would easily switch to use of competitor products. Contrary to the out-of-stock situation, high inventory shows that products are not consumed as expected.


Growing awareness of maintaining high hygiene standards to prevent the spread of COVID-19 resulted in a spike in demand for personal care products, especially bar soap, liquid hand wash and sanitizers, during March.

Multinationals such as Hindustan Unilever, ITC and Godrej Consumer Products have suspended the manufacturing of most product lines and enhanced the production of necessities, including hygiene products, to ensure there are no supply constraints. These companies are also working closely with the Indian government to provide price cuts for liquid soap, hand sanitizers and bar soap to ensure higher access and affordability.

Changing consumer preferences and growing Industrial base

• With ever changing consumer needs and demands, today consumers are looking for a complete package with good quality product and design.

• With rising income and urbanization, consumers purchasing power.

• Online retailers are gradually being preferred over traditional distributors, retailers, and pharmacies. The successful sale of oral care products through e-commerce has prompted increasing investment towards these channels by major market players.


• Competition from local and multinational players setting up their in house manufacturing units due to higher liquidity

• Execution risk

• Regulatory changes

• Input Cost risk

• Attraction and retention of human capital

• Technological Advancements


The Company implemented proper and adequate systems of internal control to ensure that all assets are safeguarded and protected against loss from any unauthorized use or disposition and all transactions are authorized, recorded and reported correctly. The Company also implemented effective systems for achieving highest level of efficiency in operations, to achieve optimum and effective utilization of resources, monitoring thereof and the compliance with provisions all laws including the Companies Act, 2013, Listing Agreement, directions issued by the Securities and Exchange Board of India, labour laws, tax laws etc. It also aimed at improvement in financial management, and investment policy. The System ensures appropriate information flow to facilitate effective monitoring. The internal audit system also ensures formation and implementation of corporate policies for financial reporting, accounting, information security, project appraisal, and corporate governance. A qualified and independent Audit Committee of the Board of Directors also reviews the internal control system and its impacts on improvement of overall performance of the Company.

The Company has put in place internal control systems and a structured internal audit process vested with the task of safeguarding the assets of the organization and ensuring reliability and accuracy of the accounting and other operational data. The internal audit department reports to the Audit Committee of the Board of Directors.

Similarly, the Company maintains a system of monthly review of the business as a key operational control, wherein the performance of units is reviewed and corrective action is initiated on timely basis. The Company also have in place a capital expenditure control system for authorizing spend on new assets and projects. Accountability is established for implementing the projects on time and within the approved budget.

The Audit Committee and the Senior Management Team are regularly apprised of the internal audit findings and regular updates are provided of the action taken on the internal audit reports. The Audit Committee reviews the quarterly, half yearly and the annual financial statements of the Company. A detailed note on the functioning of the Audit Committee and of the other committees of the Board forms part of the section on corporate governance in the Annual Report.

During the year, the Company carried out a detailed review of internal financial controls. The findings were satisfactory and suggestions for improvement have been taken up for implementation. Policy guidelines and Standard Operating Procedures (SOPs) continue to be updated where required, to keep pace with business requirements.


The Companys HR philosophy is to establish and build a high performing organization, where each individual is motivated to perform to the fullest capacity, to contribute to developing and achieving individual excellence and departmental objectives and continuously improve performance to realize the full potential of our personnel. As on 31st March, 2021, Company is giving employment to 352 permanent employees. Industrial relations are cordial and satisfactory.

Employees are critical to our business. The Company internally assess its employees to periodically identify competency gaps and use development inputs (such as skill up gradation training) to address these gaps. The Company has implemented staff training policies and assessment procedures and intend to continue placing emphasis on attracting and retaining motivated employees.

The Company also plans to continue investing in training programmes and other resources that enhance employees skills and productivity which will continue to help our employees develop understanding of the customer-oriented corporate culture and service quality standards to enable them to continue to meet the customers changing needs and preferences.

Our deep understanding of local needs and our ability to adapt quickly to changing consumer preferences has helped our performance driven growth. Our robust IT systems have significantly aided this growth by simplifying complex processes throughout our operations.

Our IT systems are equipped with an array of data management tools specific to our business needs and support key aspects of our business. IT has enabled our cash management systems, in-store systems, logistics systems, human resources, project management, maintenance and other administrative functions. This implementation has contributed positively towards minimizing product shortage, pilferage, out of stock situations etc. and has increased overall operational efficiency.

Impact of COVID-19 on Industry

The ongoing COVID pandemic has not drastically affected the global market of oral care, instead it has forced the people to care largely about their personal hygiene of which oral care is an important aspect. The nation-wide lock downs, have although caused certain disruption and restrictions in the distributing channels across the world.

The impossibility of conducting services on the ground level because of the highly contagious nature of the virus, has forced the industry to operate in the online space of the virtual world. Therefore, major companies have shifted online and the changing trends of the online market are reflected in their services. Key companies have not ceased the production of goods in these crucial times.

In the wake of the global pandemic, many services were shut down and as his world is slowly re-opening, many consumers prefer services that can be provided to them in the comfort of their homes, which has given rise to the home application segment. Manufacturers are coming up with various new and innovative ways, to make the dental-care products more easily available to the people. The COVID-19 pandemic has increased the usage of consumers at home.

Therefore, it can be fairly concluded that the sector will witness a growth in the coming years. The focus on consumer hygiene has grown in the post COVID times. The virus has led people to especially focus on their personal health and hygiene, of which dental and oral care is important aspects. The changing lifestyle of the population has given rise to many new diseases and in turn the need to maintain oral health by the means of mouthwashes, rinses and adhesives.


The Total concept of hygiene and oral hygiene has drawn special attention in the unprecedented covid times. Now with the pandemic fueling consumer interest in everything health, immunity and natural health, companies are capitalizing hard on the trend.

The modern-day parameters amongst the youth for oral hygiene has evolved over the years and the same goes for the rural part of the country where there is a smooth transition from the naturals products to the our modern day products. A large young working population, along with increasing working women population, various awareness campaigns and emerging opportunities in the services sector are going to be the key factors in the growth of oral care sector in India. The rising awareness of the importance of maintaining a good oral hygiene has led to companies making more user-friendly products. Depending on the need and requirement of the individual concerned, specialized products are also being manufactured and produced. It is this, personalization of the oral care market that is a contributing factor of the growth of the market.

As for the Company, it is particularly targeted on tapping the kids sector in the oral care segment with a well formulated plan in order to gain dominance since kids range is not a focused range by the competitors. JHS Svendgaard tries to bring in the oral care hygiene in places with no access through tie ups with various domestic and international brand names. Through various partnerships via the subsidiaries, it creates an extensive community all through the country.

The Company proves to be a one stop provider of the oral care products and hence enhances easier ways to maintain the same in the country. The intention is to be the most preferred manufacturing unit globally. The consciousness is to capture a fair share in the kids oral care segment and be the brand of choice for kids and is poised to grow out of the shadows into the big league.

The Company has managed to overcome Covid at the best of its abilities and not let business get affected. With the help and perseverance of our employees and highly dedicated and efficient management team, we have managed to show up a decent set of numbers.

Will need to include the following as well:

Particulars FY20 FY21 % of Change Reason for Change if change 25% or more
Debtors Turnover Ratio 140 1.65 18% There has been improvement in the receivables period, as the sales mix during FY21 is largely comprising of domestic business.
Inventory Turnover Ratio 42.91 11.13 -74% While the change is higher but is majorly due to immediate reduction of inventory during last FY20, caused by country wide lockdown amidst COVID-19 creating uncertainty amongst the companies and consumer.
Current Ratio 2.59 5.13 98% Due to reduction in the debtors outstanding, while the Company has been able to reduce its creditors outstanding at one hand and on the other hand has been able to getter better prices and discounts to protect its margins resulting in higher margins despite reduction in the revenues.
Debt Equity Ratio 0.0020 0.0017 -11% There has been further improvement in the debt equity ratio as the Company continues to remain debt free with enhanced net worth.
Operating Profit Margin 26.98 31.08 15% With the change in the sales mix, products and geography wise, there has been improvement in the operating profit margin for the Company during FY21.
Net Profit Margin 1.33 2.85 114% Due to efficient management and optimization of expenses, the Company has been able to improvise its profit margins.
Return on Net Worth 0.98 145 48%
Book Value Per Share 29.80 29.69 0% -
Interest Coverage Ratio 15.59 20.36 31% As the working capital debt was fully repaid by the first quarter of FY21, hence the interest cost has come down substantially resulting in the improvement of the coverage ratio.