management discussion and analysis


The US witnessed broad-based growth across sectors while the UK gradually emerged from recession during the last fiscal year. Japan experienced high growth on account of its Abenomics policy powered by monetary easing and public spending. Growth in the Eurozone remained uneven, and struggled to gain momentum. Speculation about the withdrawal of quantitative easing in the US led to capital flight and currency depreciation, hurting developing countries in their financial markets.

Most emerging economies adjusted through depreciated currencies and higher interest rates. Going forward, lower commodity prices are good for the emerging world’s commodity importers; so are rising demands for exports from developed markets. However, policy makers still need to re-energise the domestic demand story.

Sector-wise Growth in India %

2009-10 2010-11 2011-12 2012-13 2013-14
I. Agriculture and allied activities 0.8 8.6 5.0 1.4 4.6
II. Industry 9.2 7.6 7.8 1.0 0.7
Mining and Quarrying 5.9 6.5 0.1 (2.2) (1.9)
Manufacturing 11.3 8.9 7.4 1.1 (0.2)
Electricity, Gas and water supply 6.2 5.3 8.4 2.3 6.0
Construction 6.7 5.7 10.8 1.1 1.7
III. Services 10.5 9.7 6.6 7.0 6.9
GDP at Factor Cost 8.6 8.9 6.7 4.5 4.7

Source: Central Statistics Office

For FY 2013-14 as a whole, India’s current account deficit declined significantly to 1.7% of the GDP (Source: RBI Bi-monthly policy statement, June 2014). This was largely due to shrinking import demand, reduced gold imports and revival of export growth. India has created adequate buffers of forex reserves, with an increase in portfolio investments in India.

The RBI has allowed foreign portfolio investors to participate in the domestic exchange traded currency derivatives market to the extent of their underlying exposures plus an additional US$ 10 million. This will improve the depth and liquidity in forex markets.

With sensible reining of expenditures and containing fiscal deficit at 4.6% of GDP, India can now accelerate the pace of reforms in 2014-15. (Source: Department of Economic Affairs). Comprehensive policy actions and revival in aggregate demand should help India move forward on the path to sustained growth.

Structural reforms in China geared to making growth more consumption-driven and gradual tightening of the monetary policy in US, if orchestrated rightly can give a further fillip to global growth.


Persistent headline inflation, especially food inflation at 9.45% year on year in FY 2013-14 (Source: Office of the Economic Advisor) dampened consumer demand and led to decline in manufacturing, services and industrial investment. Agriculture grew at a strong 4.6% (Advance estimates, CSO) supported by a healthy monsoon. The Indian economy grew at a slow pace and registered 4.7% GDP growth.

Continued fiscal consolidation and stable monetary policy will bolster the country’s macroeconomic health and India is poised to grow at 5.4% in 2014. (Source: IMF)

In FY 2013-14, the FMCG sector grew at 12.5% in Q1 but a slowdown hit the industry in Q2 and Q3. The Indian consumer rationalised purchases and total volumes declined resulting in overall growth of 5.9% in Q3. FY 2013-14 ended with FMCG showcasing overall growth of 9.4 percent on the back of just one percent volume growth.

The Indian FMCG Sector

The Indian FMCG market, valued at about US$ 36 billion, has grown steadily year-on-year for several years now—both in volume and value.

In FY 2013-14, the FMCG sector grew at 12.5% in Q1 but a slowdown hit the industry in Q2 and Q3. The Indian consumer rationalised purchases and total volumes declined resulting in overall growth of 5.9% in Q3. FY 2013-14 ended with FMCG showcasing overall growth of 9.4 percent on the back of just one percent volume growth.


Source: FMCG overview, A. C. Nielsen, 2014

Persistently high inflation caused Indian consumer confidence rank on the Nielsen global consumer confidence scale fall to third place in the third quarter of FY 2013-14. However, the last quarter of FY 2013-14 saw both quarterly GDP growth and consumer confidence inch upwards.


Source: FMCG overview, A. C. Nielsen, 2014

The Indian consumer reduced spending in discretionary goods especially personal care purchases by postponing purchases, buying large value-for-money packs keeping an eye on prolonged usage and opting for lower priced product substitutes. Small packs in Washing Powders, Shampoos and Toilet Soaps registered lesser volumes in sales.

The overall sector experienced greater discretionary spending slowdown in urban areas where FMCG growth slowed from 17% in 2012 to 8% in 2013. Rural consumption was more resilient and slowed down at 12%, well below the 21% in 2012. Overall sales growth of Non-Food products dropped from 17% in 2012 to 8 percent in 2013. The companies who derived incremental growth in 2013 did so with a focus on premium offerings, expanded distribution, right pricing, and accelerating innovation.

Consumption Growth Patterns

Growth Value (%) 2012 vs. 2011 2013 vs. 2012
Metro 15 8
ROU 16 11
Rural 21 12

Source: A. C. Nielsen, 2014

FMCG Growth across Town Classes

Geography % Contributions
Metro 27
ROU 21
Rural 33

Source: A. C. Nielsen, 2014

India’s GDP Growth in FY 2013-14


Companies attracted customers with price discount and volume promotions. The opportunity for growth in India continues to be immense across all categories. This fact is also reflected in high levels of competitive intensity in the marketplace.

Among distribution channels, contributions from grocers and chemists covered 72% and 8% of the total sales whereas modern trade contributed 7%.


Thrust on Sustainable Growth

Jyothy Laboratories continued its focus to transition its brands from regional brand to Pan India brand. Supported by a strong distribution backbone, this initiative was reflected in its non-south business growing at a faster pace than its south business. Additionally, positive media investment, strong portfolio performance owning to all Power brands on a growth trajectory aided its performance during the year. The Company has products available in 2.3 million outlets and a direct reach in 400,000 outlets. The Company has increased presence in non-South region with contribution at 56% in FY 2013-14 as compared to 52% in FY 2012-13.

The Company has also invested significantly in the segments of future, and has recruited key outlets that enhanced overall throughputs. Product superiority and building brand affinity through differentiated positioning and a national distribution has enabled Jyothy Laboratories to achieve sustainable growth.

The Company continues to drive category growth across all markets, leveraging the brand core and equity for brand offerings like Margo and Henko. Sustainable growth will be driven by a robust innovation pipeline, increased investments in brands and moving brands from a regional to the national platform.

Consumers’ downtrading to Popular/Mass Segments in 2013


Volume Growth 2012 2013
Mass 4% 9%
Popular 16% (6%)
Premium (8%) (10%)

Source: A. C. Nielsen, 2014


Volume Growth 2012 2013
Mass (14%) (4%)
Popular 71% 12%
Premium 1% 1%

Source: A. C. Nielsen, 2014


Consumer sentiments are likely to remain at status quo in the short term, as growth stays subdued. Discretionary spending has slowed down impacting spending both in urban and rural regions. High levels of inflation will continue to put margins under pressure. As the monsoons remain volatile and food inflation remain at elevated levels, discretionary spending will be impacted further, despite the country having healthy food reserves. This scenario does not augur well for the overall FMCG industry.

Companies have to play to their strengths and understand the Indian consumer’s mindset. They will invest in expanding distribution, increase per dealer off take and introduce diverse products including premium portfolio to grow value while retaining consumers with their mass offerings. Innovation, relaunches and supporting the launches with distribution and execution activities will help them sustain incremental value from the innovations.

Key Industry Trends

Premiumisation has helped manufacturers appeal to consumers with lower price sensitivities and generate value and margins led growth. Even as the popular segment constituted 75% of the business, premium offerings helped to bring value growth. In the difficult economic scenario of 2013, many manufacturers had to pass on high costs to consumers by raising prices or reducing product sizes.

Innovations focused on R&D and on Go-to market efforts in support of product launches were seen with more new brand launches in 2013.

Jyothy Laboratories continued its focus to transition its brands from regional to national. Supported by a strong distribution backbone, this initiative was reflected in its non-south business growing at a faster pace than its south business. Additionally, positive media investment,strong portfolio performance owning to all Power brands on a growth trajectory aided its performance during the year

Growth Drivers

  • India’s long-term growth drivers - urbanisation, young demographics, a vibrant industry and rural consumption.

  • By 2025 the Indian consumer market will largely be an urban story, with 62% of consumption in urban areas. New wealth and consumption will be created in urban areas, but rural households will benefit too, with annual real rural income growth per household accelerating from 2.8% over the past two decades to 3.6% over the next decade.

  • Aspiring middle class will purchase across price points, but FMCG manufacturers could adapt in India’s rapidly growing consumer market by keeping price points low to reflect the realities of Indian incomes, build brand loyalty in new consumers, and hold on to a fast growing consumer base.

  • India’s middle class will swell by more than ten times from its current size of 50 million to 583 million people. By 2025 over 23 million Indians-more than the population of Australia today-will number among the country’s wealthiest citizens

  • Consumption will increase at 7.3% annually to reach ` 69.5 trillion by 2025. ` 18.6 trillion spending by India’s booming middle and upper classes in 2015 will quadruple to over 55 trillion in 2025.

  • Rural Consumption driven by aspirers, attractive rural pockets, shift to discretionary spends for the rural aspirer category.

  • The introduction of Goods and Services Tax will standardise tax levied and help improve consumption demand.

Source: McKinsey Report, 2007


Jyothy Laboratories came into being in 1983 and has grown to become a multi-brand, multi-product company with operations all over the nation. The Company has its presence in the fabric care, household insecticide, dishwash, personal care and other home care segments.

The company has the distinction of making a mark in the virtually non-existent category of liquid fabric whitener. With products that are reasonably priced, conveniently packaged, extensively distributed and supported by strategic communication, Jyothy Laboratories has established a strong presence in the market as well as in the minds of millions of households in India.

Today, Jyothy Laboratories has a pan Indian presence with brands catering to the needs of consumers across the length and breadth of the nation. The group today has a turnover of over ` 1,300 crores. All manufacturing facilities and personnel are sensitised to ensure minimal wastage, promote environmental conservation and maintain high quality standards.


The Company delivered competitive growth, driven by innovation, sharper in-market execution, competitive marketing and strong distribution for all our brands. We have also significantly stepped up investment in advertisement and sales promotion in order to drive penetration and increase usage. Our priorities going forward will be:

  • Category expansion strategy on Ujala

  • Entering high growth face wash market with Margo

  • New and innovative offerings under Maxo

  • Revolutionary product offering from Henko

  • Grow market share in Exo

  • Relaunch of Pril

Jyothy Laboratories: Performance snapshot


The Company consciously ventured into product categories to offer a solution rather than a mere product. Starting from the momentous launch of Ujala – carving out a new product category of liquid fabric whitener – Jyothy Laboratories today manufactures and distributes brands across product categories as diverse as Fabric Care, Household Insecticide, Dishwash, Personal Care and Home care. The Company focuses on key insights from consumers, market research and sustained in-house analytical processes and enable us to offer innovative products while ensuring enhanced value from existing brands.

We have also inked a MoU to establish a joint venture in Bangladesh to manufacture and market Ujala.


Incisive insights into consumer preferences, market dynamics and distribution, winning marketing strategies and focused product positioning, along with sustained R&D led to expansion of the product portfolio and consistent growth.

At Jyothy Laboratories, we understand our customers. We have attuned our distribution strategy to the different types of markets in diverse locations. This customisation of the distribution channel, and the deep insights garnered from the grassroots, focused sales and marketing strategies and persistent efforts have resulted in higher penetration, increased sales and delighted customers. A large field force with over 1,000 sales personnel and a network of over 1,600 distributors ensure a direct reach of over 400,000 retail outlets and an indirect reach of over 1.9 million retail outlets.


Improving supplier relationships for delivery accuracy has helped us gain cost synergies and adopt mutually beneficial least-cost approaches. Improved delivery performance and high customer confidence help to build the trust essential for this kind of activity. Our low-cost distribution with a strong dealer network helps us rationalise costs.

Best practices in our Supply Chain set-up, with the highest standards of safety and positive environmental impact, are followed. The Company follows world class manufacturing and robust technology architecture with centralised management to facilitate cost savings across its supply chain processes.


Accounting policy

The Company follows the Generally Accepted Accounting Principles (GAAP) in India, applicable accounting standards of the Companies Act, 1956 and amended provisions of the same in 2013 for the preparation of its financial statements. The Company uses accrual basis of accounting except in cases of assets for which provision for impairment is made.

Review of FY 2013-14

Net Sales registered a 23.37% growth at ` 1,255.11 crores on standalone basis. Net revenues grew to ` 1,260.18 crores and other operating income, shot up by 180% to ` 5.07 crores.

In the financial year under review, Profit after Tax compares as follows:

(` in crores)

Particulars 2013-14 2012-13
Profit after tax but before depreciation and amortisation of Goodwill,
Copyrights and Trademarks acquired due to amalgamationof JCPL*
150.82 150.82
Depreciation and amortisation of Goodwill, Copyrights and Trademarks
acquired due to amalgamationof JCPL
44.71 44.71
Profit after Tax 106.11 44.04

*Jyothy Consumer Products Ltd.

The following table indicates the segment revenue for the 12-month period from April 1, 2013 to March 31, 2014.

(Amount in ` crores)

Category 2014 2013
Soaps and Detergents 953.24 755.95
Home Care 291.32 244.91
Others 22.65 16.59
Inter Segment Revenue (12.10) (00.07)

Note: Soaps and Detergents include fabric wash, dishwash bars and beauty soaps. Homecare products include Household insecticide, incense sticks and scrubber.

The profitability of Soaps and Detergents segment improved to ` 126.93 crores in FY 2013-14 from ` 76.55 crores in FY 2012-13. The profitability in homecare segment further improved to ` 8.34 crores from ` 7.94 crores in the previous year.

Cost Analysis

Total cost (excluding interest and depreciation) of the Company grew by 22% to ` 1,093.09 crores in the 12 months period ended March 31, 2014 from ` 894.75 crores in corresponding period of FY 2012-13.

(` in crores)

Particulars Year Ended
31.03.2014 31.03.2013
Net Sales 1,255.11 1,017.38
Other Operating Income 5.07 1.82
TOTAL INCOME 1,260.18 1,019.20
Cost of Goods Sold 676.60 567.67
Employee cost 118.66 110.56
Advertisement and Sales Promotion expense 135.36 81.81
Other expenditure 162.47 134.71
TOTAL EXPENDITURE 1,093.09 894.75
Operating EBITDA 167.09 124.45
Depreciation and impairment 61.60 61.65
Finance Cost 53.12 66.08
Other Income 56.23 49.15
Profit before prior period items,
exceptional items and tax
108.60 45.87
Prior period item - 1.83
Exceptional item 2.30 -
Profit before tax 106.30 44.04
Tax expense 0.19 -
Profit After tax 106.11 44.04

Cost of Goods Sold: During the financial year, COGS of the Company increased from ` 567.67 crores in FY 2012-13 to` 676.60 crores in FY 2013-14 due to rise in operations.

Employee cost: Stood at ` 118.66 crores for FY 2013-14 while the corresponding figure for FY 2012-13 was ` 110.56 crores, translating into 7% increase Employee cost as a proportion to total cost was at 10.86% compared to 12.35% in last year.

Other expenses (excluding advertisement and sales promotion expenses) :

Other expenses of the Company include power and fuel, rent, legal and profession, freight outwards, communication expenses, repairs, travelling and other miscellaneous expenses. Other expenses increased by 20.38% from ` 134.71 crores in FY 2012-13 to ` 162.17 crores in FY 2013-14. Other Expenses as a percentage to Net sales moved from 13.2% last year to 12.9% in FY 2013-14.

Advertisement and Sales promotion expenses of the Company increased by 65.46% from ` 81.81 crores in FY 2012-13 to ` 135.36 crores in FY 2013-14 due to increase in advertisement expenditure on Margo, Henko and Pril. Further, advertisement expenditure as percentage to net sales have changed from 8.04% in FY 2012-13 to 10.78% in FY 2013-14 with a view for generating better pull for all the brands.


EBITDA margin of the Company was 13.67 % in FY 2013-14 as compared to 12.33% in FY 2012-13 after spending 10.80% on Advertisement and Sales Promotion. This was mainly on account of benefits accrued due to business model re-engineering undertaken in last year.

PAT stood at ` 106.11 crores as compared to ` 44.04 crores in the previous year on account of better operating profit and lower finance cost.

Equity: The equity share capital (issued and subscribed) of the Company consists of 181,023,496 equity shares of ` 1 each.

Reserves and surplus: The reserves and surplus of the Company stood at ` 862.36 crores.

Own Funds

The net worth of the Company increased by 21.6% from ` 724.02 crores as on March 31, 2013 to ` 880.46 crores as on March 31, 2014.

Return on net worth of the Company for 12-month year ending March 2014 stood at 12.05% as compared to 6.08% for the corresponding period of the previous year.

Loan funds

The debt portfolio of the Company comprises of secured redeemable non convertible debentures amounting to ` 515 crores.

Net block

The net block of the Company as on March 31, 2014 stood at ` 629.94 crores.

Net working capital of the Company stood at ` 54.89 crores as on March 31, 2014.


Inventory of the Company stood at ` 161.19 crores as on March 31, 2014 compared to ` 167.45 crores as on March 31, 2013. Inventory turnover for the Company stood at 87 days for 12 months year ending March 2014 as against 108 days against the corresponding period of FY 2012-13.

Sundry debtors

Sundry debtors for the Company stood at ` 55.63 crores for 12 month year ending March 2014. Debtor turnover stood at 16 days for 12-month year ending March 2014. For the corresponding period of the previous year, the same stood at 39 days.

Cash and bank balances

Cash and bank balances for the Company stood at ` 55.58 crores.

Loans and advances

Loans and advances for the Company stood at ` 703.50 crores as on March 31, 2014 against ` 539.72 crores as on March 31, 2013.

Other liabilities and provisions

Other liabilities and provisions for the Company stood at ` 112.56 crores.

Working Capital (` in crores)
Particulars 2014 2013
Current Assets
Inventories 161.19 167.45
Trade Receivables 55.63 109.96
Loans and advances 48.21 45.37
Other Assets 3.59 4.05
268.62 326.82
Current Liabilities
Trade Payables 110.70 114.31
Other Current Liabilities 35.56 101.90
Provisions 67.47 70.51
213.73 286.71
Net Working Capital 54.89 40.11

Sundry creditors for the Company stood at ` 110.70 crores as on March 2014 against ` 114.31 crores as on March 31, 2013.


The Board recommended a dividend at ` 3 (300%) per share for the financial year 2013-2014 against the dividend of ` 2.5 (250%) per share paid for FY 2012-13.

Presence through non-South business in FY 2013-14



Jyothy Laboratories owes its birth to a constant drive to innovate. This urge to innovate has found expression in every product category, brand and operation in the organisation. Driving and sustaining innovation is critical to addressing the need to offer value for money brands and ensure customer delight.

R&D Initiatives

The R&D centre at Mumbai offers state-of-the-art facilities and is fully geared to pursue sustained experimentation and product development. Our plants are ISO 9001 certified for manufacturing quality. Quality control of raw materials is also ensured strictly.

The R&D facility is enriched with qualified and skilled professionals who have many years of domain expertise and knowhow. Our sustained and systematic R&D initiatives are reflected in unique and disruptive brand characteristics, unique formulations, and varied product offerings and with these initiatives, the Company provides ‘product delight’ to consumers at affordable price points.

The Company has devised a strong NPD pipeline, improvising product quality and innovative formats for Henko brand and innovation in Liquid vapouriser machines in Maxo liquid segment.


The Company believes that a strong sales force (known internally as the ‘white army’) is critical in achieving success. The Company knows that its employees are key to its success. The Company has a 1,000 plus sales force reaching out to 400,000 retail outlets directly and greater than 750,000 households.

Hence, the Human Resource philosophy strongly reflects this belief and has built a vibrant and future ready sales team. Our HR policies and practices are based on fairness, openness and mutual respect.

Insights into consumer preferences, market dynamics and distribution, winning marketing strategies and focused product positioning,along with sustained R&D led to expansion of the product portfolio.

Building an agile and high Performance Culture

There are major benefits of leveraging geography and channel synergies across our core categories. We always emphasise the highest levels of professional ethics, personal decorum, adherence to deadlines, compliance to standards and customer service and imbibe the following attributes across every function of the organisation.

  • Accountability

  • Integrity

  • Commitment

  • Initiative and Positive Attitude

Employee Engagement

Our employee engagement exercises foster a fusion of talent, attitude and excellence. The Company is charting an ambitious growth path for its brands and has taken many initiatives and made investments into empowering its sales and distribution teams and we have also upgraded our HR processes. We have benchmarked our HR practices and understand internal perspectives from employees’ feedback to constantly improve work processes.

Our work culture empowers employees, promotes team building, encourages new ideas and motivates performance.

Employee safety at all our manufacturing plants is ensured by the Company.


Strong Investments in Sales IT systems

The Company has demonstrated robust year-on-year performance. It manages its increasing distribution network of more than 1,600 stockists serviced through 40 locations using a robust IT backbone to buffer the growing business infrastructure and ensure faster rolling out of critical business applications.

We have created and deployed our own centralised ERP covering all the business functions across Finance, Inventory Management/procurement, Transportation/Logistics and HR & Payroll.The accessibility is achieved via MPLS network to the factory locations/office locations across country. The connectivity has also been provided through VPN which can be connected through any locally available broadband connection, hence reducing the cost of connectivity. MS Business Intelligence Layer for Sale has been deployed on top of ERP, enabling us to slice and dice the data for analysis.

Supply chain planning automation suite “Disha” seamlessly connecting to the main ERP has been deployed which helps the business to cover Demand Forecasting, Despatch/Production and Material Planning functions.

“Lakshya”, Jyothy Secondary sales system has been implemented to track distributor secondary sales and inventory tracking. Most of our third- party manufactures are connected via “Connect”, giving us daily production and despatch compliance at the third parties.

Cost Synergies and Best-in-class Practices

IT has helped the organisation to enable timely information sharing and centralised processing of data.

  • Real-time market intelligence helps strategic sourcing and tracking movement of goods and products all over the country, knowing about customer preferences and complaints, offering discounts in certain markets.

  • Optimised use of IT resources by streamlining IT administration and bringing savings in manpower costs. Centralised administration and ease of management has helped the Company to address issues which crop up, from one single location in Bangalore.

  • Cost synergies tracking ahead of plan – across our supply chain and support functions.

  • Demand Driven Supply Chain, Lean Inventory Management, Six Sigma and Low Cost Automation.


The Company’s commitment to the world surrounding us extends beyond the bottom line and is embedded in our business philosophy. We recognise that business decisions should give due consideration to the interests of stakeholders, including shareholders, customers, employees, suppliers, business partners and local communities. Jyothy Laboratories is committed to sound corporate citizenship in all aspects of our business. Our CSR initiatives are designed to harmoniously blend business and social interests – driven by mutual goals as identified by our stakeholders. We depend on sustainable sources of raw materials, and are committed to minimising the environmental footprint, improving sustainability throughout our value chain.


As the Company scales up, it is exposed to an increasing degree of risks. These adversely affect our operating performance, cash flows, financial performance and overall sustainability. The Company continuously monitors risks in the environment with an active risk management strategy. Risks identified are:

  • Macro-economic conditions in the country and their impact on employment, inflation and consumer demand. To counter this, the Company follows a diversified product strategy understanding the cash flow cycle of Indian consumers.

  • The Company also ensures it meets all compliance and regulatory pressures including changes to tax laws.

  • Increasing cost of raw material, transport and storage-The Company is able to leverage on the benefits provided by its scale. Further, the Company has committed staff for vendor management and purchases are made through request for quotation format to avail the best prices.

  • Supply Chain management – The Company has introduced a scientific process of demand forecasting using Information Technology and this is aligned with strategic sourcing of raw material and improved manufacturing leading to better inventory management and can easily service distributors.

  • Competitive market conditions and new entrants to the market – The Company is investing in advertisements and promoting brand awareness. Six power brands have been identified which are being marketed aggressively with new communication.

  • Labour shortages and attrition of key staff – Rallying its sales force, the Company motivates its sales force as they are crucial to success or failure in achieving business goals

  • Integration risks for acquired companies – The Company follows a dispersed manufacturing model, to reduce logistics cost, a major factor in successful integration and turnaround of Henkel India’s operations. Having restructured and made business processes more efficient, the Company continues to implement a unique integrating strategy for pushing brands more into rural areas, where it has a strong presence and also increasing its reach in urban areas.

  • Seasonal fluctuations – The Company has introduced a well-diversified product portfolio to counter seasonal ups and downs in any one product category.


* Source: A. C. Nielson for year ended December 2013


* Soaps & Detergents include fabric wash, Dishwash bar, beauty soap

# Homecare includes Household Insecticide, incense sticks & scrubber