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Sunday, September 11, 2011

Jayant Agro: March 2011 Annual Report Result Review.

Jayant Agro Organics published its Annual Report for year ending March 2011 on Sept 8,2011. Due to green initiatives by the Govt. Electronic copies of the annual report are being provided. An electronic copy i.e. pdf version of the document is available in company website (link).

The presentation has improved with coloured pages to highlight the must read sections. The Chairman's message to shareholders gives us a brief overview of Jayant's achievements and major milestones. It also provides us a perspective about the long term value creation by Jayant agro.
- Jayant Agro was started in 1993 with sales of 13.07Cr and in 2011 Jayant agro sales were 1175.26Cr a sales growth of 8992% in 18 years.
- Jayant Agro's  networth increased from 3Cr to 116.65Cr a growth of 3888.33% in 18 years.
- Cumulative dividend payout has been 42.16Cr (including dividend tax) in EPS terms dividend worth Rs 103.31 per share has been distributed (based on Original share of Rs10)

Another important milestone was the separation from the parent company in 2002. From my personal understanding of Jayant Agro's history. Parent Company was "Jayant Oil and Derivatives" which was started in partnership. The partnership between  "Kapadia's and Udeshi's"   family fell through and we had 2 separate companies "Jayant Agro Organics" and "Jayant Oil and Derivatives" now renamed as "BIOTOR Industries Limited" (Pvt. Company)

The list of end user products where Castor oil and its derivatives are used is listed. 

A document which is worth mentioning is Jayant Agro's 18 years financial figures. which indicates a consistent dividend payment policy. The company also did give out a bonus .. but the timing looks like its related to the separation effort between the owners.

Capital Expenditure:
Lets look at the Consolidated Capital Expenditure of Jayant Agro and its subsidiaries

1. In past 5 years 2007-2011 Jayant Agro and its subsidiaries have spent 83.34Cr that's an average of:  16.67Cr every year.
2. The maximum amount of money has been spent in expanding "Castor Oil" capacity. I would say backward integration to secure seed crushing and solvent extraction capacity.
3. The major derivatives capacity expansion project was the year 2010 "Sebacic Acid" plant which has incurred capital expenditure equal to 50% of all derivatives capacity expenditure for the past 5 years.

Things of concern are: Ihsedu Speciality Chemicals Pvt. Limited has still not stabilized its production process. The "high value add complex derivatives production system is still not into commercial production and as we are aware the JV partner Mitsui has been bought out by parent company ie.Jayant Agro  which could mean (My understanding) the problems are not that easy to fix and could take more time. This project status I think is the most important development for Jayant and something the shareholders should ask in forth coming AGM.

Positive outlook is the growing revenues of Jayant and its other (backward integration) subsidiary "Ihsedu Agrochem Pvt Limited"  Ihsedu Agrochem has reported March 2011 sales of 279.47Cr and PBT of 9.36Cr.
Jayant agro had bought Gujarat Agro Industries Corporation Limited Castor seed crushing plant in Banaskantha and established Ihsedu Agrochem Pvt. Limited to operate the same. Banaskantha is the largest castor growing district in Gujarat responsible for approximately 20% of Gujarat's castor seed production.

I was also looking at the castor oil exports data from India.

The numbers in "Red" are Jayant Agro Organics consolidated "Castor Oil" export numbers. As we can see Jayant is responsible for 25% or more of all Castor oil exports from India. Also almost 50% of Jayant Agro sales are related to castor oil derivatives. It would be safe to assume Jayant Agro's share in Castor oil and its Derivatives on an all India level is anywhere between 25-35%.

Conclusion: Jayant Agro Organics is trying to reach out to the shareholders with an annual report which is easier to read highlighting the important points so that investors have a better understanding of  Jayant Agro and castor oil in general. Fundamentally Jayant Agro has been increasing capacity both at the back-end (seed crushing and solvent extraction) as well as at the higher value added castor oil derivatives segment.  The recent increase in profitability looks like  is because of better control over its castor seed/oil processing capabilities. As we are well aware the sebacic acid derivative plant is still not fully functional and is a cause of concern. Any positive news about the sebacic acid plant entering into commercial production should improve Jayant Agro's fortune for the better.


Anonymous said...

Dear Prahalad, Would appreciate if you could give your views on Gitanjali Gems & Diamond Power

What'sUp Prahalad said...


Gitanjali Gems is a good company but it is expensive.. good price to enter is around its 52 week low of close to 200

diamond power is also fairly priced .. though close to 52 week low.. I would prefer universal cables.. as a cheaper alternative..

=happy investing