Jayant Agro Organics: Sept 29,2011 AGM report.

Attended the Jayant Agro Organics AGM in Mumbai today Sept 29,2011. The AGM was scheduled for 9:30am.There were quite a few people considering that Jayant has only 6000 odd shareholders.

Quite a few people were upset coming early in the morning during market trading hours to attend the AGM.

Around 5 shareholders got onto the podium to bring up their view points.

1st shareholder started out with a bang.. mincing no worlds and outright frank in his language A bit to sharp.. he acknowledged the good results of Jayant Agro Organics.. but pointed out concerns such as 

- lower dividend payouts.. payouts had increased by about 50 lakhs (over last year) while Jayant made about 10Cr additional net profit over last year.

- Advantages of paying out higher dividends was mentioned.

- Interesting points were put forward with suggestions to the management to approach Mutual funds flush with funds so that mutual funds also invest in Jayant increasing its stock price. Right now Mutual fund ownership is just 7200 shares.

- Concerns were raised about huge interest payments (22.78Cr)  and debt levels (230.36Cr)

- Concerns were also raised about Forward contracts of 253.9Cr

- Concerns were raised about funds loaned to subsidiaries and what rate of interest was paid.

- Concerns raised about "Ihsedu Specialities Limited" which has been doing "Trial production" for past 1 year?? with close to70Cr of assets

I am sure I have forgotten a few more but the gentleman practically covered every point that was there.

2nd shareholder also appreciated Jayant agro for its results and wished the chairman of Jayant Agro Mr Vithaldas Udeshi a speedy recovery. He was more pleasing in his speech and appreciated the fact that  Jayant Agro had provided us with an 18 yrs financial history and that we now also have a list of end products that use castor listed out clearly. He was appreciative of the management in the good progress made by Jayant to report 1000Cr turnover in such a short duration of its existence. More information was sought about "Sebacic acid" its uses and future growth of the company. Castor meal being sold as fertilizer and if there is any liability of taxes as fertilizers are taxed. Hybrid Castor Seeds business also needed some colour..

The other shareholders also brought up similar points .. question of dividends.. bonus .. Ihsedu Specialities Chemicals status.. more info about how castor seeds price changes impact Jayant +ve co-relation or negative corelation. Question was raised about how many kg of castor seeds are required to produce 1kg of castor oil
What was Jayant Agro's share in the Castor market in India. what would be the impact to topline when the sebacic acid plant of 8000MT goes onstream. What do the year end numbers look like? since 6 months are already passed for 2012

Management answers:
I must state the management was a little out of sync with shareholder demands. The floor management for the AGM was tardy at the best. Most of the answers from the management was done by Vikram.V Udeshi  (CFO)..
Debt was short term debt taken primarily for working capital related activities. Since the volume of business was increasing substantially the working capital requirements and hence interest payments would increase in the future also. Since long term Debt/Equity was around 0.40 the debt equity of 1.4 or so should not be of concern as its primarily working capital related.

Forward contracts worth 253.90Cr was for hedging and not "Naked open ended contracts" these are for protecting the exchange fluctuations and represented 10-15% of total business. Future contracts was not speculative in nature..

Management said there was an increase in dividend payment and going forward there will be gradual increases in dividend payouts.. It has to balance between capital expenditures and payouts to shareholders.. The management said they would be most happy to announce higher dividend payouts as they would be the largest beneficiaries..  Management will first take care of capital expenditure and then as the capacity stabilizes they will look at dividend distribution and bonuses..

About loans to Subsidiaries the management said that interest was being paid for the loans given to subsidiaries and interest was around 10-12% and mentioned in the books.

The accounts were not double counting the sales and internal consumption was not being considered.

About Ihsedu Specialities chemicals .. the JV partner Mitsui's stake has been bought and the continuous processing plant should be stabilized in 4 months time frame as some equipment delivery was expected before continuous production can be started..

With Regards to topline impact of 8000MT Sebacic acid plant the management said it would add around 200Cr to topline.

With Regards to Ihsedu Agro Chem .. Its a subsidiary which is concentrating on backward integration of seed crushing and castor oil and its derivatives.. The management has no plans to merge Ihsedu Agro chem with Jayant Agro.

Seed requirement for 1 kg of Castor oil is 2.2 to 2.4 kg. I personally feel thats solvent extraction process based but cold pressed Castor oil would have a oil to seed ratio of 30%.

Jayant is the largest player for castor in India but the management would not like to make a statement.

Food served was: Veg sandwich, Paneer Sandwich, Vada, dahi-vada (kind off), idli, gulab jamun, sambar, tea cofee.

I felt the underlying tone of the shareholders was bullish. There were heavy weight (Senior) Gujju bhai investors .. yes the meeting could have been more well managed.. Next meeting room needs to be larger for sure. It has to be set closer to the beginning of the AGM season and not at the very end. Also preferably after trading hours.. and yes Pls higher dividend payouts!!

Pls Note: These are not recorded minutes and I donot guarantee that anything mentioned here is true or false. It is what I heard or interpreted or thought the management  and shareholders were saying.
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