Jyothy Laboratories: Hopeful of a Rural Recovery

15 Feb 2024 , 02:00 PM

Analysts of IIFL Capital Services hosted Mr. Sanjay Agarwal, Chief Financial Officer of Jyothy Labs at IIFL’s 15th Enterprising Bharat- Global Investor’s Conference in Mumbai. Jothy Labs has been an outperformer in the FMCG space with a higher than average market growth, the management aims to further drive growth by investing in rural market, enhancing distribution, increasing Ad spends and launching new products. 

New Product Launches and Competition: 

The management believes entering an existing proven category is more efficient than creating newer category thus would not be looking to create any categories. Company will always enter “relevant” categories which are scalable and profitable. Competition from unorganised players was expected since inflation has cooled off, will response to competition by increasing A&P spends, providing better incentives to distributors, and increasing SKUs.

Focus on Rural India and Increasing Distribution: 

Company remains focused on rural market and will keep investing there even in a poor rural demand environment, management is optimistic about revival in demand due to key reforms made by government like Direct Benefit Transfer (DBT), Improved Physical Connectivity (Road Infrastructure), Rural Electrification, and Improved Digital Connectivity (Jan Dhan, Mobile Connections, Internet Connectivity). Company will be looking to increase the distribution of its regionally successful products to pan India. 

Margins and Working Capital: 

Double digit growth has led to optimum scale which has enhanced margins, company will be reinvesting this enhanced margins by increasing A&P spends, increasing share of voice and increasing distribution. Company has no intention to fund working capital requirements with creditors’ payables, 10-20 days working capital is a comfortable range and will focus on inventory management so as to improve working capital efficiency.