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Tuesday, May 07, 2013

Jayant Agro: Falling Export/Sales number.. Worried?

I was just trying to understand the Sales figures of Jayant and why they have been dropping in recent quarters..
Sept 2012 Sales: 360.67Cr (Sept 2011: 490.06Cr)
Dec 2012 Sales: 323.58Cr (Dec 2011: 403.18Cr)
The drop in sales is definitely of concern specially when till March 2012 Jayant had clocked 500% profit growth and 400% sales growth in past 5 yrs
Consolidated Sales/NP numbers.
March 2007 Sales 462.49Cr Net Profit: 6.76Cr
March 2008 Sales 605.96Cr Net Profit: 9.51Cr
March 2009 Sales 875.86Cr Net Profit 7.49Cr
March 2010 Sales 904.01Cr Net Profit: 12.47Cr
March 2011 Sales 1,175.26Cr Net Profit: 24.92Cr
March 2012 Sales 1,832.26Cr Net Profit: 31.35Cr

9 months ending Dec 2012 Sales: 1147 Cr Net Profit: 28.6 Cr
Current Market Cap of the company is: 135.15Cr.
Is the Jayant Agro Story Over??

Did some digging on the internet and ..voila!!

The Director General Of Foreign Trade (DGFT) passed a new resolution with regards eBRC (electronic Bank Realization Certificate)

Story: Exporters used to export stuff and the cash used to be received by Banks. The Exporter was then responsible for getting the Bank Realization Certificate from the Bank and submit it to DGFT to claim export incentives..

According to new rules.. as soon as the banks receive the money.. The bankers are now responsible for sending Bank Realization Certificates to DGFT and exporters then will update the data on DGFT to claim export benefits.. This would make the process paperless as well as improve process flow.. this is known as "eBRC" (my understanding from publicly available information)

From August 2012 it is mandatory that all export BRC should use this process
It is now the responsibility of the bankers instead of exporters to submit eBRC to DGFT.

As with any new idea there were teething problems.. getting the information right..and having the banking foot soldiers upto the task.. 

look at the eBRC data I have collected from DGFT for Jayant.

Used: these are BRC that have been used to claim export incentives

Available: These are BRC that have been uploaded by banks and available for exporter to claim incentives from DGFT

Cancelled: These are BRC that have been cancelled by the banks due to error in data..

PN: this is data as of May 5 2013.

August 2012: 
- only 30 export incentive requests have been submitted by Jayant successfully.
- 135 incentive request are available for which jayant has yet to submit incentive claim with DGFT
- 39 requests were cancelled due to error in eBRC data by banks..
Conclusion: It was a dismal month for Jayant as far as exports and export related incentives.

Sept 2012:
- export incentives successfully submitted by Jayant Agro has doubled as compared to August 2012 but as you can see its still a far cry from other subsequent months data..
- very sharp drop in available BRC .. looks like exports were being shutdown just to clear old backlog..
- 40 request cancelled
Conclusion: Looks like DGFT, bankers and exporters are all fighting to report better metrics.. which means stop new orders.. clear old backlog.. reduce errors/cancellation

Oct 2012: 
- 134 export incentives submitted .. which is 100% increase over Sept numbers
- Available eBRC to claim incentives is very high at 75 which means even exports are trying to clear the backlog and still learning to submit the eBRC for export incentives request.
- 86 cancelled request.. looks like still some more training required..
Conclusion: eBRC are being submitted by bankers to DGFT and exporters are also trying to submit incentives but system still has bottlenecks..

I think you get the picture.. 

fast forward to March 2013 Jayant Agro has successfully submitted 188 requests for export incentives to DGFT
Jayant still has 139 request more that need to be submitted..(maybe due to want of data..)

Other important observation is: For the Quarter Jan-FebMar 2013 there are: 656 (Used + available) eBRC
There are 90 days and that translates to 7.2 BRC per day!! WoW!!
So Jayant has been busy exporting consignments of castor oil and its derivatives on a daily basis.

Conclusion: new regulations specially making it mandatory that all BRC will be submitted electronically as eBRC by the banks was the underlying reason for drop in export numbers.. I am sure this was the reason for sharp fall in export numbers reported by India as a nation..  Jayant as we have seen is doing just fine..

PN: This is my interpretation based on review of publicly available information.. Please do your own deep dive before jumping into any conclusion.


Anonymous said...

WhatsUP Ji,

Thanks for doing painstaking research on eBRC. Question is, with these new processes, will JAOL report better numbers? Also, does the backlog gets reflected in coming quarters leading to bumper numbers?

What'sUp Prahalad said...

Anonymous ji:

exactly my thoughts..

1. with paperless process, it surely will result in better reporting in the future..
2. Yes backlog should get reflected .. it takes minimum 1 month from export of consignment to receiving cash with bank maybe another 15 days to process it for export incentives..

so there is a built in 60 days timeline in the process after shipment of products..

So we might see good numbers for the next few quarters just by backlog..

So yes we could see better reporting of sales numbers as its become more transparent..

Backlog will result in next few quarters being much better ..

=happy investing

Anonymous said...

Falling Export/sales number --> BRC is needed for claiming export benefits. However whenever exports are done by the company it has to be accounted as sales in the books of accounts irrespective of BRC process whatsoever (paper based or paperless. So falling exports/sales number is not a concern? What is your unbiased opinion - are there any corporate governance issues? Any chances of disputes due to demise of Chairman and as it family run business?

What'sUp Prahalad said...

Anonymous ji:

Frankly speaking its a little complicated.. last year I wrote to the management stating that DGFT numbers show that Exports were x amount in one quarter.. while Jayant reported Y where Y<x..(Y less than X)

Management said that my numbers are wrong because the dgft numbers include export's done for a year rather than 1 quarter..

Looking at eBRC records I can see that some eBRC have shipping date of 1 year back... so what the management said to me stands true..

product shipped and money received extends from 1 to 12 months.. so dgft numbers do reflect more than 1 quarter of sales..
Similarly Export incentives.. from what I saw from annual reports .. every 4-5yrs Jayant settles all export incentives.. and for the period inbetween it keeps on accumulating export incentives in its accounting books..
From all the info I have gathered and from my interaction with management.. I think the mangement is quite clean.. but 1-2% net profit margins are really really low.. and difficult to digest..

Conclusion: Business is good, management is Fair and business environment is improving as Jayant has created a moat around itself ..

As company grows beyond certain limits we need professional management and that also means stock options and other incentives for employees.. certainly stocks will not be granted at such cheap rates.. so as the business expands and as govt makes everything electronic.. we can expect Jayant to be more compliant and efficient with improving margins..

PN: these are my personal view points based on publicly available information.. please do your own deep dive before investing

=happy investing

Anonymous said...

WhatsUP Ji,

Do you read Zero Hedge ?

What'sUp Prahalad said...

Anonymous ji:

used to read it before.. I think I need to start reading again..


=happy investing