Stock Review: Jyothy Laboratories

 

Jyothy Laboratories has also joined the league of midsized companies like Dabur, Godrej Consumer Products, Marico and Emami who plan to expanding through the inorganic route.

Last week, Jyothy Laboratories picked up a minority stake in Henkel India. Now, its 75% subsidiary Jyothy Fabricare Services (JFSL) has acquired 100% stake in Delhi-based laundry player Diamond Fabricare. The acquisition, for a net cost of . 30 crore, will be EPS accretive from April 2011.

Diamond Fabricare, the Delhibased laundry major, operates 62 outlets across Delhi, Noida, Gurgaon and Ghaziabad and has an annual turnover of . 10 crore. It is breaking even this fiscal. Through this acquisition, the Bangalore-based JFSL will be able to expand its presence in Delhi and adjoining regions. The market gave thumbs up to the development; Jyothy Laboratories' stock closed 2.3% higher on Tuesday.

JFSL may announce further acquisitions in the coming weeks. The company wants to expand to four more cities of Mumbai, Pune, Hyderabad and Chennai by June 2011. JFSL is likely to look at the acquisition route to expand its footprint in Mumbai and Pune. In Mumbai, the company is likely to buy out a firm with a network of four outlets and organically expand from thereon. Funds for this organic and inorganic expansion will be available from the Rs 100 crore IL&FS has paid for a 26% stake in JFSL.

JFSL is breaking even this fiscal at an annual turnover of . 10 crore. Following its expansion across cities, the company expects to close the next fiscal year with a turnover of . 50 crore and a profit of . 10 crore.

It took one-and-a-half years for Jyothy Labs to establish JFSL as an institutional laundry player and Fabric Spa as a premium brand in the laundry service business.

The inorganic route chosen by the . 632-crore Jyothy Laboratories for JFSL is a smart one, as it will grow its laundry service much faster and farther and at the same time killing competition, too.