Jyothy Labs Ltd Management Discussions.

Economic Overview

Global Economy

The global economy witnessed an unprecedented crisis in 2020 as the outbreak of the novel coronavirus (COVID-19) in China towards the end of 2019 spread rapidly across the globe. While ensuing lockdowns announced by all major economies played a critical role in saving lives, they resulted in severe damage to economic activities, thereby plunging the world economy into a slowdown. Economic activity was hit by reduced personal interaction, while uncertainty about the post-pandemic economic landscape discouraged investment.

As per the International Monetary Fund (IMF), the global economy contracted by 3.3% vis-a-vis 2.8% growth registered in 2019. While Advanced Economies (AEs) declined by 4.7%, with the USA and Europe contracting by 3.5% and 6.6% respectively, Emerging Markets and Developing Economies (EMDEs) clocked a relatively a lower decline of 2.2%, the improvement largely reflects rebound in the Chinese economy in the second half of CY 2020 post successful containment of virus spread in the country.

Global prospects continue to remain uncertain one year into the pandemic. New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment. Economic recoveries are diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support. The outlook depends not just on the outcome of the battle between the virus and vaccines, it also hinges on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis. Successful vaccination programmes will boost investor sentiment and will lead to kickstart private capital inflows and fixed capital formation. Backed by improving macro-economic indicators, the IMF estimates the global economy to grow at 6.0% in 2021. However, limiting the spread of the virus; providing relief to vulnerable populations; and overcoming vaccine-related challenges are key policy priorities.

Global Economic Growth: Actual and Projections (%)

Particulars 2019 2020 2021(P) 2022(P)
World Output 2.8 -3.3 6.0 4.4
Advanced Economies 1.6 -4.7 5.1 3.6
Emerging Markets and Developing 3.6 -2.2 6.7 5.0
Economies (EMDEs)

(Source: IMF World Economic Outlook, April 2021, P = Projections)

Indian Economy

The Indian economy contracted by 8.0% in FY 2020-21 as against 4.0% growth recorded in FY 2019-20, marking a mild recession since 1980. Overall economic slowdown, led by COVID-19 onstage, followed by stringent lockdowns severely impacted economic activity, bringing manufacturing and trading activities to a screeching halt. Prolonged lowdown exacerbated existing vulnerabilities of the country including the weakened financial sector, private investments, and consumption demand.

The Government announced a special comprehensive package of Rs.20 Lakh Crore, equivalent to 10% of Indias GDP under Self-Reliant India movement to revive the countrys languishing economic activity. The package focussed on providing benefits in the form of financial aid, provision of food, and ensuring security to enable the country to tackle the economic fallout.

Notable policy measures of the Union Budget 2020-21 included:

• Reiteration of Atmanirbhar Bharat Abhiyan (Vocal for Local) to support local companies

• Collateral-free loan for business

• Change in definition of MSMEs

• Launching National Digital Health Mission and National Digital Health Blueprint towards digitalisation of healthcare

• Concessional Credit Boost to farmers

• Establishment of Development Finance Institution (DFI) to boost long-term financing for the infrastructure sector

The Reserve Bank of India (RBI) continued with the accommodative monetary stance by bringing the key repo rate and reverse repo rate to 4% and 3.35% respectively to provide monetary stimulus and trigger economic growth back to the earlier trajectory.

The fiscal and monetary stimulus provided by the Government and RBI would assist greatly in the recovery of the economy. Despite the challenges posed by the second wave of COVID-19, the outlook for

FY 2021-22 seems promising largely due to relaxations in lockdowns, mass vaccination drive, normalisation of economic activities, thrust on reviving manufacturing and infrastructure sector, and the countrys increasing prominence in the global supply chain.

(Source: https://economictimes.indiatimes.com/news/economy/ indicators/beyond-the-pandemic-indias-economic-outlook/ articleshow/80874732.cms)

Industry Overview

Fast-moving consumer goods (FMCG) is the fourth largest sector in the Indian economy. There are three main segments in the sector, i.e., food and beverages which accounts for 19% share; health care accounting for 31% share; and household and personal care accounting for 50% share. (Source: IBEF)

The retail market in India has grown rapidly. It is estimated to grow at a CAGR of 9-11% and reach USD 1.1 - 1.3 trillion by 2025. The countrys FMCG has also been growing at a similar pace. Currently pegged at Rs.4.3 trillion, the FMCG industry saw significant innovations and digital adoption in 2020 post the pandemic-led disruption and is all set to rise in the coming years. The urban segment accounts for a revenue of around 64% making it the largest contributor to the overall revenue generated by the FMCG sector in India while rural area contributes around 36%.

(Source: Boston Consulting Group, NielsenIQ)

The Government has allowed 100% Foreign Direct Investment (FDI) in food processing and single-brand retail and 51% in multi-brand retail. This would boost employment, supply chain and high visibility for FMCG brands across organised retail markets which in turn would drive consumer spending and product launches.

The sector witnessed healthy FDI inflows of USD 17.8 billion from April 2000 to September 2020.

Fast-moving consumer goods have a high inventory turnover and are contrasted with specialty items which have lower sales and higher carrying charges. Small convenience stores stock fast-moving goods; the limited shelf space is filled with higher turnover items.

Coronavirus pandemic and its subsequent lockdown has brought many significant innovations in the FMCG sector, putting the worst behind and posing optimism for 2021. Adapting to the new normal and digitalisation has made the sector learn, innovate and rise from disruptions. The rising sale of essential food items, hand sanitisers and disinfectants supported to the sectors performance.

(Source: https://www.allresearchjoumal.com/archives/2020/ vol6issue10/PartE/6-9-137-377.pdf)

Industry Performance Review, FY 2020-21

As per NielsenIQs Retail Intelligence team, the FY 2020-21 started on challenging note for the FMCG industry due to shortage of manpower and supply chain disruptions, resulting in a contraction of 19% in first quarter and a marginal growth of 0.9% in the second quarter. However, as the year progressed sentiments improved, and the industry saw revival, clocking a growth of 7.3% and 9.4% in the last two quarters.

This growth in Traditional trade (Grocer, Chemist, Paan shops, etc.) and Organised Trade (Modern Trade and E-commerce) was driven by consumption. Products such as liquid toilet soap, antiseptic liquid, floor cleaner, toilet cleaner in the Hygiene & Immunity building categories continued a high-value growth. The home and personal care basket made a consumption-led recovery while food categories saw a boost in consumption as well as a price increase in some food baskets.

While the Indian consumer had a tough year, the last quarter of FY 2020-21 has seen a recovery in consumption as economic activities have started moving back to normalcy (opening up). The festive season brought a further boost to the sentiments and since then there has been a visible uptick in growth for the industry resulting in an increase in consumption across staples, and home and personal care.

The Indian metropolitans with more than a million population have come back into the positive growth zone after a quite long decline. Rural markets continued to grow in Double digit and continue to be resilient unlike the urban markets, which took a big toll because of mobility reasons and are coming back to growth albeit still at a very low level. This sharper recovery is on the back of favourable agricultural sector performance, government action towards rural employment generation, and as rural India had a lesser impact of the COVID-19 in the first wave.

Key shifts Indian FMCG industry is expected to undergo: Technology

Because of the internet, consumers get the convenience to order at their time after comparing the product features. E-commerce has changed the market paradigm completely. Boost in FMCG sector has been witnessed due to internet penetration as traditional channels have also adopted to digitisation in their day-today operations.

Marketing drive and research

Indian consumers are increasingly looking for the best deals as they have options to choose from newer brands. Thus, FMCG companies are constantly trying to influence consumers with their promotional deals and many firms offer combo deals to attract consumers to buy their product.

Low capital intensity

Post pandemic the market scenario is changing towards cash basis, unlike credit basis, which was prevalent in the market. With the help of technology, distributors and retails are holding less stock which further enhances their ROI (return on investment) which further aides the growth of FMCG Industry.

Initial launching cost

Increasing the market share for companies is getting more challenging due to increase in number of competitors. Companies are more focussed on the promotions, advertisements, product development, testing market compatibility, market research.

This requires a high initial cost bringing a major shift in this sector.

Atmanirbhar Bharat and Vocal for Local

Atmanirbhar Bharat movement initiated by the Government and the Honble Prime Ministers call for Vocal for Local, would greatly influence consumers preference to purchase local products and local brands. It will accelerate growth to the industry due to its established local manufacturing capabilities, local markets, and extensive local supply chains.

Key trends in Indias FMCG Market

1. Surge in organic products demand

The premium end of the market is shifting towards natural products, which are produced entirely from naturally-occurring ingredients.

2. Lifestyle changes

Change in lifestyle and traditional culture is having a positive impact on the FMCG industry.

The population in urban areas is increasingly willing to spend more on premium products with a higher value proposition. This is leading to FMCG companies to rethink strategies as people are willing to pay high prices for premium products.

3. Amendments in policies and regulations

Government policy is opening an Indian FMCG market for global companies. This includes the introduction of the relaxation of licence rules and approval of 100% foreign direct investment (FDI) in single-brand retail stores and 51% in the multi-brands stores. Regulatory frameworks like National Food Security Act, and Telecom Regulatory Authority of India (TRAI) advertising regulations are some main changes in policies and regulations directly affecting the Indian FMCG industry. The implementation of Goods and Services Tax has enhanced consumption of FMCG goods as reduction in the tax rates has enhanced affordability of products.

4. Increased in advertisement cost

FMCG companies in India have increased their expenditure cost for sales promotions and advertisements by 10-20%. Every year, these companies invest more in advertisement to establish a strong consumer base and also as a strategy to reduce market competition.

5. Shift to organised players

Demonetisation, GST became tailwinds for organised retail sector by triggering mass adoption of digital payments. The overall contribution of supermarkets and organised grocery stores in India still remains 10% of overall FMCG sales, with a greater concentration in urban areas. The switch to goods and services tax (GST), has helped the countrys organised grocery stores register a strong 22% growth in sales, according to a report by Melsen India. (Source: Welseri)

Key enablers for the growth in the FMCG Industry High population and rising affluence level

The growth momentum in FMCG sector largely depends on its strong structural drivers like high population and rising affluence level, which are key factors contributing to the growth of the sector. India is reporting an annual population growth of 1.1% and is expected to emerge as the most populous country in the world by 2024.

This indicates that the growth in the non-discretionary consumer demand, like food, healthcare, household and personal care products, are likely to continue growing.

In addition, India is also witnessing strong growth in per capita and disposable income, which in turn is driving discretionary spending. While the young population is likely to provide the steady growth in revenue for FMCG companies, rising affluence and disposable income level is likely to bring the incremental growth for the sector.

Increased support from Government

The Government has increased number of initiatives like farm loan waivers, Direct Benefit Transfer (DBT) and development of infrastructure in rural areas. The Union Budget has also focussed on shifting towards education, agriculture, healthcare, infrastructure, tax rebate and micro, small and medium enterprises (Ministry of Micro, Small and Medium Enterprises). These initiatives are projected to have an impact by increasing the minimum wages of common people, especially in rural areas. Thus, any increment in income will be directly proportional to demand in FMCG products.

Low per capita consumption and penetration level

While India achieved high penetration levels in some of the FMCG categories, consumption level in such categories is still very low. Further, there are many categories where penetration level itself is very low.

This provides a huge growth opportunity to drive the volume growth and bring the operating leverage for FMCG companies which in turn will help in improving profitability.

Increased investments in R&D

While catering to the basic needs of Indias population, FMCG companies are focussed on improving quality of its products. They are consistently investing in research and development activities to launch innovative and premium products, especially in categories where the penetration levels are closer to their peak levels. Going forward, the growth in premium products is expected to be driven by the rising aspirations of the Indian consumer mainly on the back of improvement in prosperity with the rising income levels and increasing urbanisation (in the likes of Smart City and National Urban Mission projects). Consumers have higher aspirations for premium products, so FMCG companies are increasingly investing in R&D.

Growing internet consumption and smartphone users will drive e-commerce

The growth of internet consumption and smartphone users, along with the convenience of online shopping will drive e-commerce consumption and thus boost FMCG industry sales. E-commerce is reshaping the global retail market by outpacing the general trade as it has larger market and greater reach to even the most remote place. Online shopping is booming as internet access has reached all corners of the world and smart phones have quickly become an intrinsic part in the lives of billions of people. Nielsens Future Opportunities in FMCG E-commerce study estimates four times faster than offline sales. By FY 2021-22, FMCG e-commerce will be in excess of USD 400 billion and comprise 10%-12% of all FMCG sales globally. (Source: Nielsen)

Focus on rural market to achieve sustainable growth

Over 65% of Indias population stays in rural areas and they spend ~50% of their total spending on FMCG products. Hence, rural market, accounting for ~45% of overall revenue of the FMCG sector, is one of the key contributors to Indias FMCG growth story. Rural markets continue to post double-digit growth. People in rural areas are now accessible through e-commerce. This enables them to get benefited from a wide range of products. Consumers in rural India are switching from unbranded, loose products to branded ones. Increased focus of the Government on improving farmers income, digitisation, smaller size packets, rising awareness and expected rise in per capita disposable income is likely to drive growth for FMCG companies in rural India. This gives FMCG players a room to push their soaps, shampoos, biscuits, beverages and packaged staples in Indias villages, at lower price points.

(Source: https://www.ibef.org/industry/fmcg.aspx)

Growing adoption of health and hygiene portfolio

The fear associated with COVID-19 pandemic has led to consumers becoming more health conscious than ever. This has led to increase in demand for health and hygiene portfolio. Companies have launched multiple products and variants in this segment, including hand sanitisers, floor and surface cleaners, disinfectant sprays and immunity-building products.

Industry Outlook

According to Nielsen India, a strong comeback prediction for Rs.4.3 trillion is made in the FMCG industry in 2021. In 2020, rural markets outperformed urban India and became critical for FMCG giants. Brands relied on rural markets to drive growth during the trying times. FMCG witnessed a double-digit growth of 10.6% in Q3 of FY 2020-21 in Rural India, while the bigger cities (>1 Lakh population including metros and Town Class 1) played catch-up. Also, e-commerce is stabilising at a consumption level higher than what it was before COVID-19 struck.

Adapting to the new normal and thus embracing digitalisation has made the sector learn, innovate and rise from disruptions. FMCG brands partnered with e-commerce platforms like Flipkart, Grofers, Big Basket, etc., alternative distribution channels like Udaan and last-mile delivery partners like Zomato and Dunzo to deliver within the comfort of consumers homes.

Consumer habits also evolved with COVID-19 and immunity became the buzzword in the FMCG industry. Marketers reverted by launching a ready-to- eat meal options and immunity-based packaged goods. However, with COVID-19 vaccine now a reality, consumer sentiment is already picking up and the economy is in revival mode. 2021 is likely to augur well for small retailers, leading to an increased sale from local markets and kirana stores.

With immunity being the focus in the new normal, new launches have been made in the health and hygiene basket including categories like hand sanitiser, floor cleaners, toilet cleaners, antiseptic liquids. These new launches contributed to 37% (in value) of all new launches in the COVID-19 period (Nielsen India).

The in-home consumption has increased with the

closure of restaurants and shelter-in-place. Food and beverage categories, particularly perishables, saw strong growth as consumers increased their monthly budget allocation for in-home food and beverages. Therefore, manufacturers are strengthening the product distribution to ensure their availability in the most-demanded categories. While COVID-19 has curtailed economic growth in the FMCG sector, experts are now optimistic that the industry will see an appreciable improvement this year. These could include brands talking about their environmental and sustainability efforts, community initiatives, health impact and most importantly value addition thereby making FMCG industry well-positioned to grow back. (Source: http://www.businessworld.in/article/ Crisis-Brings-Innovations-FMCG-Industry-Outlook- In-2021/19-01-2021-367317/)

Company Overview

Jyothy Labs Limited was founded 1983 by Mr. M. P. Ramachandran in Thrissur, Kerala. Having started with manufacturing a single product and selling in a single district in Kerala, your Company has come a long way. It has undergone a huge transformation over the years, while creating an impact by touching peoples lives in significant ways. Today, it has been established as a dominant player in Indias FMCG industry, with a pan-India presence, well-diversified product basket and multiple brands.

Your Company operates across different market segments of fabric care, dish wash, household insecticides, personal care through its six power brands - Ujala, Exo, Maxo, Henko, Margo and Pril.

Your Companys key differentiator is its ability to understand the pulse of the consumer and delivering high-quality products at reasonable prices. It is also well positioned for unique convenient packaging and extensive distribution network. Its constant aim is to strongly focus on R&D to create differentiated and innovative products that cater to the evolving needs of todays consumers.

Innovation is the key

To keep pace with market changes, your Company aims to constantly develop new products and update the existing ones. Your Companys strategic objective is to drive successful innovations in products and processes consistently and to be updated for future preferences.

It constantly adopts newer techniques and mechanisms to optimise its productivity and optimally utilise resources focussed on delivering products that are value for money and keeping pace with the demand.

Research and Development Initiatives

Backed by strong R&D capability, your Company constantly aims to meet the evolving needs of its consumers and delight them through innovative and value-for-money products. Advanced research techniques have enabled your Company to innovate new product categories, providing simple, yet tangible benefits to its consumers. Your Company achieves this through its three state-of-the art and modern R&D facilities which is supported by advanced instrumentation and pool of experienced scientists.

The aim is to identify the everyday challenges in a consumers life in the existing products and devise suitable solutions that help them overcome these challenges.

Thrust on Sustainable Growth

Your Company has come a long way through progressive development and support from its extensive distribution network of 7,200+ Stock/Sub-stockist across India through which its products are made available across 2.8 million outlets. Your Company has further ensured diversifying operations and has 23 manufacturing plants. This extensive supply chain network insulates your Company from geographical, trade channel and segmental concentration risks.

While your Company continues to add more sub-stockists to strengthen its retail presence, it has also undertaken a unique initiative of Van Coverage to enhance rural coverage. These vans carry lower unit packs ( 5 - Rs.10) of products which find greater acceptance among rural consumers. Further, your Company has enhanced its presence in modern trade, including e-commerce platforms (contactless delivery) where premium products are also made available, thus augmenting sale.

Well-targeted investments in advertising and promotional activities have facilitated it to rapidly expand footprint across India and enjoy a strong franchise with consumers. Constant strive for portfolio agility, flawless execution and financial prudence has further helped to deliver a constant growth even during the pandemic crisis.

With continuous presence over TV and OTT platforms, your Company has enhanced reach to targeted consumers. Your Company also undertook impactful marketing and brand promotion activities relating to Vocal for Local campaign and has successfully strengthened its brand equity alongside attracting new consumers. Its strategic brand launches and brand extensions are aimed at retaining the existing consumers, besides constantly garnering a new set of loyal consumers.

Your Company is placed competitively in the industry and is determined to grow its market share and profitability sustainably through focus on developing top-notch products coupled with extensive advertising and promotional campaigns.

Sustainability Practices

Your Company follows environmentally sustainable practices while it constantly strives to contribute to the nation building and the betterment of the society.

Its values and vision ensure that all its processes, products and manufacturing activities adequately address the present environmental concerns while maintaining a profit-led growth trajectory.

Your Company has also received SWACHHATA AWARDS 2019 recognition for corporate social responsibility initiatives in Puducherry region for undertaking several green initiatives with an aim to achieve energy efficiency and pollution control by implementing Reduce/ Recycle/Reuse programme, robust waste management system, rainwater harvesting, launching solar projects, and plastic disposal recycling process. It is aware of the significance of various stakeholders - employees, suppliers, business partners and the society at large. Besides utilising its profits and resources for its own growth, it earmarks a portion for the societys upliftment and conservation of the environment.

It is committed to source raw materials sustainably and has put in place measures and mechanisms to conserve natural resources. Moreover, your Company is shifting its focus to make organic products which are environment friendly and does not possess any health hazards.

Human Resource

Human capital is key to your Companys growth.

Your Company has a perfect work-life balance approach in the organisational culture. Such culture not only empowers employees through regular salary increments and incentive payout but also keeps them motivated to work. Your Company has adopted employee-friendly HR policies that are designed to provide a safe, conducive and productive work environment as well as promote holistic development.

Its systems and processes nurture a work culture leading to employee satisfaction, persistent motivation and a high retention rate. It has formulated comprehensive and well-structured policies to impart timely skill upgradation and ensure employees growth at personal and professional levels. It is this philosophy that facilitates your Company in aligning its individual goals with that of the broader goals. It promotes an open-door policy and transparent communication with all for one, one for all philosophy.

It ensures equal access to opportunities regardless of gender, age, racial/ethnic background, religion or social status, biases and has established robust policy systems to prevent any discrimination and harassment.

Your Companys SHE (Safety, Health & Environment) Policy ensures safety and health of employees by engaging with them at all levels through consultation, communication and training. Further, initiatives like adopting latest hazard identification control methods and risk assessment are done to strengthen SHE practice.

All employees direct or indirect are covered under Medical Insurance programme which not only provides COVID care but any ailment. Employees are also provided with a facility to extend the medical cover for their parents or in-laws. Your Company has also tied up with a team of doctors to provide online free consultation to employees and their immediate family. Your Company also launched Jyothy Suraksha Portal, which helps the employees to book their online doctor consultation, download their Insurance E cards and provide health updates which are being monitored by central HR Team.

In the era of digitalisation, your Company has invested in a robust HR system SAP Success Factors for all employees internally referred to as JConnect. The system has helped in better engaging employees and equip them with a platform which is scalable, mobile and manage end-to-end employee lifecycle Company also believes in empowering employees and provide them the right tools to work productively.

It continues to invest in upgrading this online employee portals and a mobile apps that can be accessed from anywhere.

Information Technology

Your Company is backed by strong and robust IT system which has helped in streamlining many of its functions and processes. Nearly accurate forecasts of demand has been an edge because of strong IT facilities which in return has helped in gaining control over working capital management. Your Company has undertaken digital adoption across the organisation to reduce human errors, and maintain accuracy and efficiency in the operations.

Your Company has deployed the cutting-edge SAP S/4 HANA platform across all manufacturing units, business processes, distribution centres and warehouses. This platform has integrated functions across various business lines, reduced number of transactions by streamlining operations, and facilitates business insights across functions and roles. Usage of SAP BI/BO & Microsoft Power BI provides better insights through Data Analytics enabling higher sales efficiencies and Digital Consumer Engagement.

Your Company implemented Sales Force Automation (SFA) tool which has played a critical role in improving its on-field sales team productivity and efficiency.

This has helped to generate and communicate accurate data pertaining to retail shop, orders, and delivery to its 2,400+ sales representatives promptly and has yielded positive outcomes.

In FY 2020-21, your Company implemented Continuous Replenishment System (CRS) across India which has helped in reducing the pipeline stock with distributors.

Your Company has also deployed Distributor Management System (DMS). This enables your Company to track orders and related activities such as secondary sales, inventory levels, etc., in real-time across its 7,200+ Stockist/ Sub-stockist.

Your Company has automated its entire freight management chain from manufacturing to distribution which has benefited to become agile in stock management and brand availability.

Your Company during the year refined its Go-to-Market (GTM) strategy. It launched a retailer app to facilitate orders directly from retailers to distributors.

Investment in the automation of packaging of certain products ensuring tamper-proof, clean, uniform and consistent packaging has not only helped in cost optimisation but also improved the final product quality.

In the recent developments, your Company automated the E-invoicing & E-way Bill generation. SAP Success Factors (internally referred to as JConnect) was implemented for all employees. Compliance tool has been set up to ensure deadlines for meeting statutory norms for all departments.

Your Company believes that automation at all levels and functions is required to bring out efficiency and increase productivity at the organisation level and hence believes in journey towards automating every single function and process within.

Financial Performance

Accounting Policy

The financial statements of your Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended. The financial statements have been prepared on a historical cost basis, except for certain financial assets which have been measured at fair value. The discussion on financial performance in the Management Discussion and Analysis relates primarily to the consolidated accounts of your Company.

Review of FY 2020-21 (based on Consolidated financial)

Revenue from operations

Net Revenue from operations registered a up by 11.6% at Rs.1,909.1 Crore in FY 2020-21.

Cost of Goods Sold (COGS)

The Cost of Goods Sold of your Company up by 12.2% at Rs.1,010.4 Crore in line with sales growth during FY 2020-21.

Employee Cost

During the year under review, employee cost grew by 6% at Rs.232.5 Crore in FY 2020-21.

Advertisement and Sales Promotion Advertisement and promotion increased by 0.7% to Rs.123.6 Crore in FY 2020-21. As a percentage to net sales, advertisement and promotion stood at 6.5% in FY 2020-21.

Other Expenses

The other expenses increased by 5.1% at Rs.228.1 Crore in FY 2020-21 from Rs.217.1 Crore in FY 2019-20.

Depreciation

During the year, depreciation increased by 5% to Rs.55.6 Crore in FY 2020-21 as against Rs.52.9 Crore in FY 2019-20.

Finance Cost

For the full year, finance cost decreased by 41.5% to Rs.19.2 Crore in FY 2020-21 as against Rs.32.9 Crore in FY 2019-20 due to a reduction in debts. The Interest Coverage Ratio stood at 13.2 in FY 2020-21 as compared to 6.5 in FY 2019-20.

Margins

Operating EBITDA at 16.5% ( 314.5 Crore) versus 14.7% ( 251.1 Crore), increased by 25.3% over FY 2019-20.

PBT before exceptional item at Rs.258.1 Crore as against Rs.185.3 Crore, increased by 39.3% over FY 2019-20, PAT at Rs.190.1 Crore as against Rs.162.6 Crore, increased by 17.3% over FY 2019-20.

Share Capital

The paid-up share capital stood at Rs.36.7 Crore as on March 31, 2021.

Own Funds

The net worth of your Company stood at Rs.1,390.7 Crore as on March 31, 2021, from Rs.1,199.5 Crore as on March 31, 2020. Return on Equity (excluding goodwill) is at 31.5% in FY 2020-21.

Loan Funds

Net cash/Bank balance for the Company stood at Rs.76.9 Crore as on March 31, 2021, as against net debt of Rs.254 Crore as on March 31, 2020.

Net Block

Net Block for the Company stood at Rs.1,156.9 Crore as on March 31, 2021, as against Rs.1,173.7 Crore as on March 31, 2020.

Net Operating Working Capital

Net Operating Working Capital for the Company stood at Rs.78.9 Crore as on March 31, 2021, as against Rs.162.3 Crore as on March 31, 2020. This translates to 15 days of working capital as against 35 days in FY 2019-20. Current Ratio stood at 1.22 on March 31, 2021, as against 1.63 as on March 31, 2020.

Inventory

Inventory of the Company stood at Rs.278.6 Crore as on March 31, 2021, compared to Rs.225.1 Crore as on March 31, 2020. Inventory Turnover for the Company stood at 53 days as at March 31, 2021, as against 48 days as at March 31, 2020.

Trade Receivables

Trade Receivables for the Company stood at Rs.94.3 Crore as on March 31, 2021. Debtor turnover stood at 18 days as at March 31, 2021 as against 26 days as at March 31, 2020.

Cash and Bank Balances

Cash and bank balances for the Company stood at Rs.193.8 Crore as on March 31, 2021.

Provisions

Provisions for the Company stood at Rs.78 Crore as on March 31, 2021, against Rs.78.3 Crore as on March 31, 2020.

Other Liabilities

Other Liabilities for the Company stood at Rs.97.8 Crore as on March 31, 2021, against Rs.56.5 Crore as on March 31, 2020.

Shareholder Value: Dividend In an endeavour to maximise the returns to its shareholders, the Board of Directors has recommended a dividend of Rs.4 per equity share of Rs.1 each for FY 2020-21. The dividend payout ratio was 77% of PAT as compared to 81.7% in FY 2019-20.

Risk and Mitigation

Identifying and mitigating risk are an inevitable concern for any business. Your Company identifies major risks arising out of various internal as well as external scenarios that may pose a threat to its revenue generation. It has devised effective business strategies and plan ahead to mitigate the risks through its business activities.

Mitigation:

To combat the risk, your Company has a diversified product portfolio that generates sustained sales from either of the categories to balance any uncertain circumstance. It has devised product-specific strategies to ensure continuous growth. Your Company also continues to evaluate the market scenario and engage with consumers to understand their needs and develop right products accordingly. During FY 2020-21, in line with the pandemic scenario, your Company has launched a robust line of hygiene portfolio which has found great acceptance in the market.

Mitigation:

A structured internal control system is in place to ensure all statutory rules and regulations are met. Changes in taxation policy and other regulatory framework are abided within the statutory deadlines to avoid fines and penalty.

Mitigation:

Your Company has put information technology in use capable of forecasting demand based on historical data. The supply chain management system is designed to align raw material sourcing and manufacturing, leading to improved inventory management, optimum resource utilisation and smooth distribution upending the working capital. Your Company has a transport module for service level improvement focussing on channel-wise service to minimise stock outs. Your Company leverages long-term relationships with suppliers to secure raw materials at the lowest cost through better negotiation.

Mitigation:

Your Company aims at manufacturing quality products and offering them at a reasonable price across various modes as per convenience of the consumers. It undertakes extensive promotion and advertising to strengthen its brand value, positioning and recall for the power brands.

Your Company also undertakes extensive R&D activities to launch unique products which have greater reliability and market.

Mitigation:

Your Company encourages new talent and provides specialised training to the sales force. This helps in improving the performance standards and positively contributes towards its growth. HR policies are well-defined for smooth operations to avoid any labour-related issues. Your Company offers performance-based appraisal to keep its Human Capital motivated to work hard.

COVID-19 Impact

Your Company witnessed disruption in operations since the onset of pandemic and subsequent lockdown. However, since then it has seen a gradual recovery on the back of its portfolio agility, flawless execution and financial prudence.

These initiatives have enabled your Company to deliver resilient performance. On the positive side, the demand for institutional business is almost back to pre-COVID levels which is a healthy sign for the future.

Post pandemic consumers demand has changed towards home and personal care category products drastically. There has been a steep growth in demand from rural areas and also improvement in urban consumer trends have been observed. Gradual recovery in Institutional Business (Modern Trade and Canteen Store Department) has been seen.

The pandemic has contributed to two other interesting phenomena across the industry - one, shift in consumer channel preference towards omni channel approach and second, an acceleration in the adoption of digital technology, whereby even the general trade shopkeeper is using basic technologies such as WhatsApp to reach out to consumers. Your Company has focussed on adding new sub-stockists and Van coverage to enhance rural market.

Your Company has laid a detailed SKU and plant-specific sales planning for ensuring hinder-free supply to consumers across India. With the combination of cost optimisation and controlled trade schemes has minimised the impact on the increasing cost of production. Your Company has strived to focus on improving channel partners ROI with lowest possible stock with distributors and frequent servicing at retailers end.

So, accordingly, your Company has realigned its business strategy in sync with this changing environment. Your Company has invested in creating a robust digital infrastructure which has enabled it to be at the forefront and remain resilient. Your Company appropriately leveraged it to drive sales efficiencies and focussing on the digital consumer engagement too.

Diversified Product Portfolio: Your Company intends to gain market share across all brands. Having diversified product ranges gives it an edge to combat disruption in sales of any particular product.

Consumer Trend: Changes in market trend call for an alteration in the product mix of your Company.

Your Company has made new launches on an essential hygiene portfolio that enhances safety, health and hygiene of its consumers. Shift to organic products is also focussed on. Additionally, it has augmented manufacturing and distribution efforts to cater to a growing demand for smaller SKUs of Rs.5 and Rs.10 across all brands to have a greater reach.

Distribution: Your Company, amidst COVID-19 crisis, is aiming higher for secondary sales. It is focussing on strict working capital management by ensuring cash sales without additional credit. It is making use of its data analysis capabilities to improve distribution efficiencies to maintain growth and profitability while gaining shareholders value and market share through online distribution modes via use of e-commerce platforms.