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Jyothy Labs expects to be debt free by March 2021: Ullas Kamath

Promoters sell 4% stake to raise Rs 260 crore to reduced pledged shares to 6%

ET Now|
Updated: Nov 01, 2019, 03.39 PM IST
Ullas Kamath-Jyothi Labs-1200
4% stake sold for Rs 260 odd crore to be used to reduce debt against pledged shares. From 67.1%, promoters’ stake will come down to 63%. The company and promoters will be debt-free by March 2021., says Ullas Kamath, Jt MD, Jyothy Labs. Excerpts from an interview with ETNOW.

Would you like to offer a comment on this block deal wherein the promoters have sold about 4% stake in the company? What led to it and post that, how is the shareholding looking like and what are the future plans in this regard?
The promoters had invested the money in the company in 2012-13 when we acquired Henkel’s stake and that is one which had taken the money against the shares of the promoters. Promoters have sold that to the class investors -- both domestic and financial -- today in the morning and it is 4% worth Rs 260 odd crore. We will be paying off the debt which was there against the shares. With that, now only 6% of the promoters stake will be pledged shares. Rest will be paid off with this transaction and from 67.1% now, promoters’ stake will be coming down to 63%. The company and promoters will be debt-free by March 2021.

The 25% promoter pledge number will come down to 6% is that correct?
6% that is right.

Will the entire fund-raising go towards reduction of debt?
Entire money will go towards the reduction of debt only, nothing else. In the past also, when they took the debt against the shares, it was only to invest in Jyothy Labs. They had got 8% stake when they invested four years back and out of that, 4% they sold off now to bring down the debt level drastically. Now only 6% is like under debt. We are comfortable with that. A group of investors both domestic and foreign financial institutions have approached us. We felt that it is good to sell to the class investors and they are all AAA investors and we are very happy to have them as our shareholders. So, we sold 4% shares to these marquee investors.

Good luck with the debt reduction plan. It was something that the Street was talking about and watching very closely. What exactly are the future growth plans from the current level? What is the trajectory is looking like in terms of volume growth and demand from smaller markets?
In the first quarter, volume growth was about 5%. The second quarter volume growth went up to 9% and are looking good at this point in time. I am sure the second half of this current fiscal will see a double digit volume growth. They are working towards that and it looks doable. As far as the company’s middle term and long term goals are concerned, we want to consolidate whatever the brands we have and increase the market share by spending a couple of percentage points more on advertisement. By March 2021, our goal is to make our company and promoter debt free. Then we can leverage the balance sheet for inorganic growth which will happen in 2021 and that is what like immediate goals so what we have set up for us.

In the near term, over the next couple of quarters, how do you see demand play out? Is the pain over when it comes to consumption slowdown?
The pain is not over. It is still there. I am able to see that pain but we are not going down. Industry is not going south, it is going north, but slowly. I would say that second quarter was a shade better than the first quarter; third quarter would be better than the first and second quarters. It is a good indication that probably in a couple of quarters we should be out of so called slowdown. FMCG is one sector which recovers faster than any other sector because it is a daily requirement. People need to buy the detergents and toilet soaps and things like that. So recovery will be faster in FMCG which we are witnessing first. As of now, October has been better than September. I am confident that though it might take a couple of more quarters, but sooner or later, we will be out of the slowdown.

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