Sunday, 11 February 2018

Jabong and Myntra comes together

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The marriage looks to be doing fine, however why was JABONG oversubscribed within the initial place? the solution is within the opaque laws relating to foreign direct investment in e-retail.When a corporation that’s been bought out by another goes on to amass a corporation that’s on the verge of being bought by another company ... things ar about to get quite a bit confusing. To those that haven't been following the dizzying activities in Planet E-Commerce, Flipkart bought Myntra in 2014, and Myntra bought Jabong in Gregorian calendar month 2016. Oh, the excitement around that point was that Snapdeal, the opposite e-retail biggie, was on the verge of shopping for Jabong, once Myntra snatched it away.

Now, abundant of the drama encompassing the get has been lined in dreary detail. Did Myntra pay an excessive amount of for Jabong? Did Snapdeal even have the time to shop for another company? What was Flipkart’s massive game? so on. Here’s the issue. Myntra spent $70 million (then Rs 449 large integer) to shop for a corporation that reported  revenue of Rs 902 large integer in 2015-16 and internet loss of Rs 362 crore. an equivalent year, Myntra reported  consolidated revenue of Rs one,031.8 large integer and loss of Rs eight23 large integer.
Why did investors Rocket and Kinnevik sell a corporation that gave the impression to be leaky under peers within the industry? the popular narrative revolves around company governance violations at Jabong and also the disputable sale of GoJavas, the supply arm of Jabong, to Snapdeal in 2015. (Snapdeal has since oversubscribed its stake in GoJavas to AN entity named columbiform bird specific and filed a grievance with the Economic Offences Wing against former senior executives of QuickDel supply, the corporate operative GoJavas. That’s a story for an additional day.)

Of course, company governance problems might have vie a region. however the approach Jabong was born by its investors looks a lot of sort of a robust case for cleanup up the litigious company structures of Indian e-commerce firms. These advanced structures ar the results of the present rules governing foreign direct investment (FDI) in e-commerce firms. For nearly a decade, the law allowed FDI solely in business-to-business e-commerce sites and not in e-retail, that is business-to-consumer. Last year, the govt allowed FDI in e-retail, however solely in firms following the marketplace model. That is, the corporate provides a platform for sellers and consumers, and doesn't sell its own merchandise.

Companies like Flipkart, Myntra, Jabong, Snapdeal and a bunch of others grew at a time once the FDI norms were less clear. to confirm that they got adequate funding, they got wind of difficult webs of firms that allowed them to toe the road of FDI rules and still raise foreign capital.

Here’s however that usually worked. One company registered would be the owner of the name and also the name and would operate the location. Another, with no connections with the primary on paper, would supply merchandise from vendors and makers. A third, unrelated to the opposite 2 firms, would operate warehouses and take possession of the supply operations.

This is the model that Jabong, supported in 2011, followed. The customer-facing half was Jabong, that was pass by Jade eServices; Rocket web endowed directly in Jade. Xerion Retail was the first vendor and in hand by a promoter United Nations agency had links with the Rocket web Asian nation management. Jabong additionally had an inside supply division, then referred to as Javas. making such a structure enabled Rocket web and Kinnevik to speculate nearly $350 million (Rs a pair of,211 crore) into Jabong until 2014. an identical scenario existed in most different e-retail firms that relied on FDI (and United Nations agency didn’t, particularly back then).
All of this failed to escape the attention of the law, of course. Between 2012 and 2014, Indian e-commerce corporations were more and more being subject to investigations from the social control board, the govt agency that appearance into violations of foreign investment rules. just about each e-commerce biggie was investigated, from Amazon, to Flipkart, to Myntra; until date, as so much as we all know, there’s been no word on these investigations being all over.

Rocket web declined to comment once asked concerning this. however sources at Jabong, United Nations agency asked to stay anonymous, say that Rocket web started reviewing its investment in Jabong round the time of the German company’s commerce on the city exchange.

Whatever Rocket’s arrange were, one issue is turning into more and more clear: Jabong might not have gotten into bother then be oversubscribed if not for its difficult structure of firms. Here’s why. tho' Javas was created as a part of the Jabong network, in 2013, it became AN “independent entity” below a corporation referred to as QuickDel supply. On paper, QuickDel had no relation with Jabong, or to be specific, Jade or Xerion. however because the Ken reported , Jabong co-founder Praveen Sinha got five hundredth in QuickDel presently once its origination. Sinha was Jabong’s director then. Later, QuickDel applied to register the trademark GoJavas.

Later, Snapdeal took a stake in QuickDel. Rocket, however, wasn't a part of either the creation of QuickDel or the investment by Snapdeal.
None of the parties would maintain record concerning this incident, and like everybody else, we've pieced the story along from what’s out there publically. AN anonymous Twitter user going by the handle of Unicon cake printed a tweet concerning Rocket taking legal proceeding against Sinha for skimming off Rs one hundred large integer from Jabong. That tweet has since been deleted and Sinha has apparently filed a case against the user. however the harm was done.
According to media reports, Rocket initiated what has been referred to as Project Flush, AN audit by PwC in Sverige. The Project Flush report was leaked to the media by Unicon cake, and that we are unable to severally verify if this did so happen. Jabong issued a press release that said: “All relevant parties had met on this matter and all over that no price transfer went on and therefore all matters referred within the alleged report stand closed.”

Much of this is often insinuation and trade gossip. What matters is that there was a convoluted arrangement in situ relating to the GoJavas sale. and far of this might are avoided had the rules not been as advanced. Here’s the issue to recollect. whereas the govt allowed FDI in e-retail from last year, the rules stay restrictive. so the company structures stay as confusing. below this set of rules, one hundred FDI is allowed in e-commerce entities operative below a marketplace model wherever they are doing not have any possession over the inventory. Further, the marketplace must make sure that no vendor is allowed to sell quite twenty fifth of the overall sales on its platform during a fiscal year. The marketplace cannot directly or indirectly influence the rating of the merchandise oversubscribed on its platform. Further, one hundred FDI in traveler services through AN automatic route—as against on AN approval-basis by Foreign Investment Promotion Board—came in situ solely in mid-2013. What has resulted is that the spawning of recent sellers with ambiguous past histories. to Illustrate, over the course of researching for this story, I ordered a variety of merchandise like bedsheets, clothes, and shoes from Myntra. All the merchandise were repaired by 3 sellers—Savadika Retail, Konde merchandise & Services, and school Connect Retail. in step with filings with the Registrar of firms, these entities have emerged within the last year and ar promoted by people that don't seem to possess any previous affiliation to the retail business. In fact, one in every of the sellers is promoted by someone whose profession is explicit  as ‘Home Maker’.

Yes, the govt will levy penalties of billions of bucks if it takes AN aggressive stand on this, say lawyers. however equally, most of the lawyers I speak to mention that e-commerce has assumed the stature of AN trade that’s “too massive to fail”. “I don’t believe that the lawmakers can ever maintain a molestation of e-commerce corporations. Today, these ar the businesses making thousands of jobs within the country, attracting foreign capital, and creating merchandise cheaper for purchasers. In time, rules can merely ought to be relieved with relevance each e-commerce and retail,” says a Mumbai-based attorney on the condition of namelessness, since he's employed with many e-commerce firms.

While the govt has smart reasons to safeguard e-commerce and to limit FDI into multibrand retail and e-commerce, this rules ar “too restrictive” in comparison to similar economies, says Vinay Joy, associate partner at business firm Khaitan & Co. “Relaxation of the regime, {for instance|for example|as AN example|as an instance|to Illustrate|parenthetically|let's say|maybe} permitting one hundred FDI below the automated route in e-commerce firms with an inventorybased model, can possibly increase business efficiencies,” he says. However, he adds that “there ar fairly valid reasons to continue with economic policy during this sector”. one in every of the large reasons, particularly for a government that’s promising jobs for all, is that a liberal FDI regime poses a risk for unorganised retail sector jobs.

Others don’t get this argument, spoken language Indian e-commerce corporations ar robust enough to contend against their foreign counterparts. “FDI has not killed businesses in Asian nation, however has helped them reinvent themselves and become stronger victimization the most effective practices introduced by their foreign counterparts,” says Akash Gupt, partner and leader, regulatory, at PwC Asian nation. “History bears testimony to the very fact that with their long commitment to the Indian market, several foreign firms have given North American nation a number of the foremost picture brands, that haven't simply contributed to India’s GDP and growth, however became a region of our success story. there's enough empirical proof to demonstrate that it's created higher competition within the market, albeit with increased client expertise.”

Meanwhile, moving off from the regulative morass, the new Myntra (plus Jabong) is hopeful of turning Earnings Before Interest Taxes Depreciation and Amortization (earnings before interest, tax, depreciation, and amortisation) positive “soon”. Ananth Narayanan, corporate executive of Myntra and Jabong, says his firms see a lot of customers than Shopper’s Stop and mode combined. Today, the Flipkart group’s fashion businesses—Flipkart Fashion, Myntra, and Jabong—together account for on the point of seventieth of the $3.5 billion marketplace for on-line wear and textile searching.

Like any proud leader, Narayanan isn’t back to list out the operational enhancements of each Myntra and Jabong over the years. “The last 2 years are fabulous,” he says with modesty. “Myntra accustomed be valued at $350 million, with double-digit negative Earnings Before Interest Taxes Depreciation and Amortization and negative unit social science. currently Myntra and Jabong can finish this year at $1.2-1.3 billion valuation with AN exit run rate of nearer to $2 billion. each Myntra and Jabong currently have positive unit social science, and hopefully can presently hit Earnings Before Interest Taxes Depreciation and Amortization gain, which might be the primary during this trade.”

Narayanan is optimistic, as is Gunjan Soni, chief selling officer additionally as head of Jabong. they need reason to be. within the half-moon of this business enterprise, “sales grew five hundredth. For a corporation wherever sales growth was fastness down, a five hundredth growth are a few things folks here failed to assume would be doable. the expansion momentum is sustaining and currently the main target is shifting towards attaining gain,” says Soni.

Flipkart looks to possess done the somewhat tough accomplishment of desegregation each Myntra and Jabong whereas still maintaining the distinctive brands. one in every of the large reasons for Jabong’s success within the new theme of things has been the very fact that it will ride on the supply divisions of Myntra and Flipkart— Myntra supply and Ekart. Narayanan says the move to Myntra supply was significantly smart for Jabong as a result of the supply player has the bottom value for delivery of fashion merchandise, with the whole system not handling large merchandise the least bit. Already, forty fifth of Jabong deliveries happen through Myntra supply, concerning half-hour through Ekart, and also the rest through third-party supply services.

Also within the works is AN exercise to dovetail school efforts. “We have gotten the school stacks to come back along. the rationale for that's if you have got a bigger technology team, you're able to rent higher talent. you'll be able to additionally leverage edges on the platforms of each brands. within the next few months this could be complete,” says Narayanan.

A Myntra exponent adds: “While discounts and sale events as a proposition ar about to continue, we tend to ar ever-changing the combination towards newer fashion and therefore seeing reduction on the average discount levels, that naturally tends to be higher for late-season merchandise.”

Which is all excellent news for the 3 brands— Flipkart, Myntra, and Jabong. The challenge now could be not simply to grow and switch Earnings Before Interest Taxes Depreciation and Amortization positive, because the company hopes. the $64000 challenge are going to be for this e-commerce conglomerate to navigate the murky waters of regulation.

The problem of outdated rules for web based mostly businesses isn't peculiar to Asian nation. during a recent article, The social scientist chronicled an identical downside in China, that has prevented the country’s largest e-commerce corporations to be in public listed on Chinese stock markets. Asian nation has been late to the e-commerce revolution, partially because of the dearth of web access. however in cases like this, being late will facilitate lawmakers not build the mistakes their international peers have created. India’s e-commerce could be a vivacious house jam-packed with new concepts. Indian lawmakers ought to notice how to confirm rules don't strangle this resonance and originality.
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Why markets are on a free fall after Spending introduction: Clarified

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As far back as the Association Spending plan was introduced on February 1, the Indian securities exchanges have been in a spiral, causing alarm among financial specialists who have so far appreciated a bull run. 
As much as Rs 9.6 lakh crore of financial specialist riches was wiped off in only three working days with the benchmark Sensex losing 2,164 focuses. On Tuesday, both the Sensex and the Clever fell 3.5 for each penny, their greatest intraday fall since August 2015. The Sensex fell by more than 113 focuses today. 
Worldwide CONCERNS 
While worries about the long haul capital increases impose, declared in the Financial plan, and the administration slipping on monetary teach (with more slippage expected in 2018-19) were reasons, the bigger reason has been the tremors in the US securities exchange that has sent shockwaves crosswise over value markets around the world. 
Europe's securities exchanges too tumbled by more than 3 for every penny in opening arrangements on February 1. The US securities exchange ricocheted back on Tuesday, yet European markets proceeded with their fall. 
The US economy has been on a bounce back, with the business rates recuperating from the droop in September caused by the twin tropical storms. The nation is likewise seeing high limit usage of its industrial facilities, bringing about higher yield. 
In any case, what might have been a reason for cheer has raised worry. Financial specialists expect that the positive numbers would goad swelling, and prompt a loan cost climb, making capital more costly. This has likewise spooked the security markets, bringing about higher security yields. 
"Any turbulence in the security markets will make consequential convulsions in value markets," says Ajay Bodke, President and boss portfolio administrator at Prabhudas Lilladher, a financier. Higher security yields will make it more costly for firms to get capital internationally. 

Local CONCERNS 
In India, there are more factors that have dulled slants and added to the business sectors crash. Raw petroleum costs have been on the bubble, crossing USD 70 a barrel in the worldwide market and debilitating to swell India's import charge. 

UNDERSTANDING Business sector Estimation 
There are worries about enlarging current record shortage (when the nation imports more than it sends out), higher expansion and the administration's monetary administration, which keeps on causing vulnerability in money markets," says Bodke. 
As anyone might expect, the Hold Bank of India (RBI) has clutched financing costs in its money related approach survey on today. Five of the six individuals from the fiscal strategy panel voted for keeping rate unaltered, while one part, M D Patra, pull for a rate climb of 25 bps. 
Buyer value swelling had hit a 17-month high of 5.21 for every penny in December. RBI has climbed the swelling gauge for the final quarter to 5.1 for each penny, contrasted with 4.3 to 4.7 for each penny for the second 50% of 2017-18. 
Adding to the worry is the burden of 10 for every penny impose on long haul capital increases from offering shares held over a time of one year. Specialists expect that a proceeded with droop in the market could annoy the administration's designs of raising Rs 20,000 crore from the market through the long haul capital additions charge. Numerous vibe the planning of presentation of the expense isn't right, given the lofty fall in the worldwide markets. 
The silver coating, in any case, is that the Indian corporate area has been seeing a restoration. Better corporate profit could help enhance opinions in the business sectors. The request book of a few organizations, for example, Larsen and Toubro and Thermax is additionally looking better. Yet, that by itself can be not really a comfort for a market that is spiraling down.
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Friday, 9 February 2018

Beware of FAKE Reserve bank of India Website

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NEW DELHI: The Reserve Bank of India or RBI on Thursday issued a notice cautioning the citizens about the fake websites created with a layout similar to the central bank's official website. One such website (www.indiareserveban.org), the Reserve Bank said, contains a provision for "Bank verification with online account holders" which appears to have been created with a fraudulent intent of obtaining personal and confidential banking details of customers of banks.
The fake website asks for the customer's ID, PIN, email address, phone number, bank name including others details. The website has many similarities with the original one including a blue motion ticker "FAQs for KYC and Mint Street Memos".

"RBI does not hold any accounts for individuals and never asks 

for personal information such as bank account details, passwords, etc. The Reserve Bank cautions members of public that responding online on such websites could result in compromising crucial personal information that may be misused to cause financial and other loss to them," RBI further stated in its notification.

RBI also "cautioned about existence of websites such as www.rbi.org, www.rbi.in etc." which may appear similar to the website of RBI. However, these websites have no affiliation with the central bank, it added.

The official website of RBI is with the URL, www.rbi.org.in. The Reserve Bank has been consistently alerting customers about the fake websites, emails asking to transfer funds or for bank account details in the name of a lottery, fictitious job offers, etc fraudulently luring and cheating customers.


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Auto component maker Bosch wants govt clear policy for Electric Vechile

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NEW DELHI: Auto components maker Bosch said that the government needs to chart out a clear policy and work with everybody in the ecosystem as it pushes car makers to work towards electric vehicles by 2030.
 The government wants to see all vehicles in the country ply on electricity rather than gasoline and diesel in an effort to reduce pollution but the path towards that goal is riddled with challenges which include the high cost of battery, setting up of charging stations, and steady supply of electricity across towns and cities.
  


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Alkem Laboratories profit down by 23% for the Quarter3

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NEW DELHI: Alkem Laboratories today reported a 23.44 per cent decline in its consolidated net profit at Rs 180.87 crore for the quarter ended December 2017 on higher tax expenses.
The company had posted a net profit of Rs 236.26 crore during the same period of the previous fiscal, 
Alkem Laboratories said in a regulatory filing.

Total income during the quarter under review stood at Rs 1,765.05 crore. It was Rs 1,507.32 crore in the corresponding quarter last fiscal.

"Amidst challenging regulatory environment and competitive landscape, we have not only achieved robust revenue growth but have also complimented it with improvement in our profit margins," Alkem Laboratories Managingdiv Director Sandeep Singh said.

The company declared an interim dividend of Rs 6 per equity share on face value of Rs 2 per share for the financial year 2017-18.

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Spicejet announces to waives off cancellation and refund charges

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MUMBAI: Sighting the ongoing crisis which has emerged in Maldives, low cost carrier Spice Jet has announced waivers on various charges to minimize the impact on the passengers.
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Stocks to benefit from Modi’s rural focus policies

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The Modi Government is actively focusing on reviving the rural economy. The government has undertaken many initiatives in order to improve consumption, infrastructure and job opportunities in the rural parts of India. Various programs have been designed by the Government to fulfill the rural requirements. In order to double the farm income by 2022, the government has allocated Rs1.07 lakh crore for expenditure on rural development, out of which Rs.48,000cr is allocated to MNREGA for FY2017-18. 
At present, as per the media articles, India has ~4 crore un-electrified rural households and the Government targets to provide electricity to every village under its Deendayal Gram Jyoti Yojana. Moreover, the Pradhan Mantri Awaas Yojana (PMAY) plans to provide shelter to people in rural India.
We believe that with increasing rural income levels in the coming years, the rural consumption will get a boost, which in turnwould prove positive for the Indian business scenario. We have chosen some stocks that are likely to benefit from the pick-up in rural economy and are good investment bets from a long term perspective.

Mahindra & Mahindra Financial Services (MMFSL)

MMFSL is one of the leading non-banking finance companies in India, which focuses on the rural and semi-urban sectorsand is the largest Indian tractor financier.Its AUM mix comprised of auto/UV (28%), tractors (17%), cars (22%), CV (12%), pre-owned cars (9%) and SME (12%) as of September 2017. AUM is expected to grow at 17% CAGR over FY17-19E on account of pick-up in rural economy supported by average monsoon in the last two years.. NCDs are forecasted to be ~60% of funding mix in FY19E (vs. 47% in Q2FY18). This will lead to lower cost of funds and margin expansion by~130bps to 8.1% in FY19E. Better collection efficiency via rural cash flows would reduce GNPA to 8% in FY19E (vs. 9% in FY17). We see an upside of 16% from CMP of Rs.475 from one year point of view.
  
Year
NII (Rscr)
Net profit (Rscr)
NIM (%)
P/BV (x)
ROE (%)
FY17
3,790
511
7.6
3.6
6.8
FY18E
4,683
753
8.2
3.2
8.9
FY19E
5,511
1,061
8.4
2.8
11.0

Hero MotoCorp

Hero MotoCorp Limited (Hero), the largest manufacturer of Motorcycles in India, enjoys ~53% market share (Q2FY18 domestic sales volume data). It nearly derives half of its total revenue from rural India.The total volume growth in motorcycle was 13% yoy, and in two-wheeler (2W) was ~11%yoyin Q2FY18. Hero is planning new scooter launches to increase market share in that segment and has outlined Rs25bn capex plan over next 2 years. A satisfactory monsoon, Government’s push to double farm incomes and rising urban incomes are strong triggers that will aid volume growth for the company. Hence, we estimate consolidated revenue and PAT CAGR of 12% and 9% respectively over FY17-19E. Exports comprise only 2.3% of total volumes. Despite Hero being a late entrant into the export market, it plans to double the number of countries that it exports to(from 20 to 40) over next few years.We see an upside of 15% from CMP of Rs.3,804 from one year point of view.

Year
Net Sales (Rscr)
OPM (%)
Net Profit (Rscr)
EPS (Rs)
PE (x)
P/BV (x)
FY17
28,475
16.3
3,377
169.1
22.5
7.5
FY18E
32,224
16.3
3,717
186.1
20.4
6.4
FY19E
35,867
15.8
4,041
202.4
18.8
5.5

 

Dabur India

Dabur is one of the largest FMCG companies in India. Dabur’s business is divided into four areas i.e. consumer care, foods, retail and international business. It is a likely beneficiary of rural expansion and new product launches. We expect revenue growth to be driven by increasing rural reach and market share gains in juices and toothpaste categories. Dabur plans to penetrate ~60,000 villages (particularly in South India) in near term to capitalize on revival in rural consumption (~45% of revenue). Further, new product launches in hair care, fruit drink and ayurvedic segments are likely to support volume growth.It expects GST to be positive for its portfolio, except for Ayurvedic products where tax levied has risen by 5%. Its recent acquisitions in African market in personal and hair care segments and strengthening online presence with large e-retailers (Amazon) would boost profit. Thus, we expect FY17-19E sales and PAT CAGR of 6.0% and 8.2% respectively.We project an upside of 16% from CMP of Rs.355 from one year point of view.

Year
Net Sales (Rscr)
OPM (%)
Net Profit (Rscr)
EPS (Rs)
PE (x)
P/BV (x)
FY17
7,592
19.9%
1,277
7.3
49.0
12.9
FY18E
7,800
20.3%
1,326
7.5
47.1
11.0
FY19E
8,518
20.3%
1,494
8.5
41.8
9.5

 

Rallis India

Rallis India, a member of Tata group and a manufacturer of pesticides, fertilizers and fine chemicals, stands to benefit from the launch of ‘Rallis Samrudh Krishi’ by improving the quality and yield of the crops. This is a digital initiative, which will help the company to provide end-to-end Agri Solutions to Indian farmers. The company aims to increase market share of Non-Pesticides portfolio (NPP) going forward. Rallis plans to launch new products in cotton, rice, wheat and hybrid cotton segments. Rallis India also aims to increase its focus on plant growth nutrients to support sustainability of crop yields. The management is optimistic on NPP and expects it to contribute 40% to revenue (currently 31%) over next few years. Also, the company is targeting ~20% yoy increase in sales from Metahelix (subsidiary company) backed by adequate seed supplies. Thereby, we see revenue CAGR of 9.3% over FY17-19E. It is virtually a debt free company, which lends financial stability. We see an upside of 17% from CMP of Rs.274 over a period of one year.

Year
Net Sales (Rscr)
OPM (%)
Adj Net Profit (Rscr)
EPS (Rs)
PE (x)
P/BV (x)
FY17
1,772
14.8%
170
8.8
31.3
4.8
FY18E
1,863
15.4%
178
9.2
29.9
4.4
FY19E
2,117
16.2%
222
11.4
23.9
3.9

 

Jyothy Laboratories Ltd

Jyothy Laboratories Ltd (JLL), present in soaps and detergents for homecare segment, is expected to rebound post demonetization and GST. JLL has transitioned from a south based player to a pan India company and has multiple drivers that would enable it to grow its market share in respective categories. JLL’s portfolio of six power brands – Ujala (fabric whitener), Exo (dish bar), Maxo (household insecticides), Henko (fabric detergent), Margo (soaps) and Pril (dish wash) contributed 87% to revenue in FY17. Ujala enjoys ~77% share in niche fabric whitener segment. We believe, owing to JLL’s power brands, newer products (toilet cleaner) and passing of GST benefits, volume growth would get a boost. We expect the company to post revenue CAGR of 7.3% over FY17-19E. We project an upside of 20% from CMP of Rs.388 over a period of one year.

Year
Net Sales (Rscr)
OPM (%)
Net Profit (Rscr)
EPS (Rs)
PE (x)
P/BV (x)
FY17
1,683
15.1%
208
11.5
33.8
6.4
FY18E
1,723
15.5%
164
9.1
42.8
5.6
FY19E
1,936
16.7%
214
11.8
32.8
4.8


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