Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leadership

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Link to detailed 9-page report on Q3FY12 as well significant Management changes Update on Jubilant Industries :



http://www.scribd.com/doc/80464669



Contents of this Note :










New Management Structure of Jubilant Industries Ltd. w.e.f. 1st Feb. 2012 Page 2-3










In-principle Approval from Allahabad High Court for Retail Business Merger Page 4-4










Q3FY12 as well as 9'Month'FY12 Result Highlights Page 4-5










Revision in FY12e Numbers of Jubilant Industries Ltd. Page 5-7










Operational Hypermarkets in Bangalore of all Major Retail Chains Page 7-7










Conclusion ( JIL on verge of a Significant Rerating ) Page 8-8

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Important Portions of the 9-page Report Reproduced in this and next posts for quick and easy reference by members :

Management Overhaul



The New Management Structure of Jubilant Industries Ltd.
w.e.f. 1st February 2012



In run-up to the merger of retail business finally taking shape, the promoters have done significant changes at Board, Senior- as well as Mid- Management levels to prepare the company for a smooth and exponential scale-up. We will highlight here the key Board as well as Senior-level Management inductions.



At Board level :

(a) Mr. Shamit Bhartia, the key brain behind Jubilant Bhartia group's two retail ventures, viz., Dominos Pizza (under Jubilant Foodworks) and Total Mall-cum-Hypermarkets (to-be-merged with Jubilant Industries) has been inducted into the board.

(b) Dr. Ashok Misra, Head of Intellectual Ventures as well as an Advisor to Aditya Birla PE who is also on board of Reliance Industries Ltd. has been inducted into the board.



At Senior Management level :


(a) Mr. Videh Jaipuriar, ex. Vice President Food Business of MNC Bunge India as well as ex. Vice President of VIP Industries is inducted as CEO of listed Jubilant Industries.

(b) Mr. Raman Mangalorkar, ex. Head Consumer and Retail Practice, Asia Pacific at AT Kearney, the renowned global management consulting firm, who has over 15 years of industry and consulting experience with international corporations in the Retail, Consumer Products and Sports & Entertainment industries and whose areas of expertise include designing growth strategy, transforming supply chain and managing large scale program in Retail and Consumer industries has been inducted as Head Retail Division.
It is worthwhile to note here that, in his career, Mr. Mangalorkar has co-authored many key retail- industry publications including “Retail in India – Getting Organised to Drive Growth”, “Making Procurement a Priority”, “Can Department Stores Stage a Comeback” and “The New Sports Consumer”.


The key thing to watch for in the corporate structure depicted above is the fact that not a single division is ignored with each division rested in able hands who can enable the scale-up and growth of respective division. The most difficult cash-consuming division, viz., Retail is crowned to one of the most experienced person from the industry who himself has authored many publications of the industry and has been a consultant/advisor to many Retail firms' top management advising them on scale-up & profitability issues.

Appointment of ex. V.P. Bunge India & VIP, Mr. Jaipuriar, who has expertise in handling multiple strategic business units and turning each Unit into a separate profit-centre, as CEO of the main listed entity, Jubilant Industries, signifies the will of the management to see each division of the company reach formidable scale and profitability in future. Both these appointments (of Mr. Jaipuriar & Mr. Mangalorkar) will help the company create its credible brand-identity in the marketplace pretty fast as each one is expert in his own sense as far as branding goes.

Appointment of Mr. Shamit Bhartia & Dr. Ashok Misra at board level will provide the much needed guidance to the able senior level management team and will ensure that the management doesn't chart into wrong direction at any particular point of time.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Q3FY12 (9'Months'FY12) Results' Highlights

On 14th January 2012, Jubilant Industries Ltd. announced its results for Q3FY12 (9'Month'FY12). The results surpassed our estimates by quite a wide margin. Given below are the highlights of the results :



(1) Consolidated Revenues (excluding Retail business) for Q3FY12 grew by 28.3 % YoY to stand at Rs. 178.22 cr.. For 9'Month'FY12, consolidated revenues (excluding Retail business) grew by 8.3 % YoY to stand at Rs. 482.85 cr.. It is worthwhile to note here that this 8.3 % YoY growth on 9'Monthly basis has came inspite of non-inclusion of subsidy income for opening stock of SSP fertilizer and raw materials due to DOF's Office Memorandum dated 11th July 2011 which is being contested by the industry. In absence of such directive, revenue would have been higher by Rs. 13.58 cr. for 9'Month'FY12 to stand at Rs. 496.43 cr.

(2) Consolidated EBITDA (excluding Retail business) for Q3FY12 grew by 113.8 % YoY to stand at Rs. 23.82 cr.. For 9'Month'FY12, consolidated EBITDA (excluding Retail business) grew by 20.8 % to stand at Rs. 52.38 cr.. It is worthwhile to note here that this 20.8 % YoY growth on 9'Monthly basis has came inspite of the non-inclusion of subsidy income for opening stock of SSP fertilizer and raw materials due to DOF's Office Memorandum dated 11th July 2011 which is being contested by the industry. In absence of such directive, EBITDA would have been higher by ~Rs. 9 cr. for 9'Month'FY12 to stand at ~Rs. 61.38 cr.

(3) The key highlight for the quarter was the strong performance of company's Agri segment which grew its revenues by 42 % YoY & 23.7 % QoQ. Key offering of the company, viz., SSP fertilizer (Brand – Ramban) seems to have fared exceedingly well in Q3FY12 mainly because of unprecedented price rise of other alternatives like DAP and MOP. With urea price-rise round the corner and no immediate significant respite seen from high-prices of DAP & MOP, SSP demand is projected to rise exponentially to touch 5.9 mn. MT from current 3.6 mn. MT. by 2017 (source – Fitch Fertilizer Sector Report dated 27th Jan. 2012). It is worthwhile to note here that this projected 64 % rise in SSP demand over a 5-year time period, is the highest amongst entire fertilizer pack and this puts Jubilant Industries into a very sweet spot as its SSP brand Ramban is currently the fourth largest SSP fertilizer brand of India.

(4) The growth in 'Performance Polymers' segment (which includes Consumer Products-Jivanjor Brand , Food Polymer-SPVA and Latex) continues with a 35.3 % YoY rise in Q3FY12 and a 34.4 % YoY rise in 9'Month'FY12 revenues. Apart from growth in revenues, the more heartening thing about the segment's performance is an exceptional rise in EBITDA which has grown by 71.2 % YoY in Q3FY12 and by 53.1 % YoY on a 9'Month'FY12 basis. EBITDA margins of the segment have touched a historical high figure of 13.94 % --- a sequential QoQ 209 basis points expansion and YoY 292 basis points expansion.

(5) The growth in 'Performance Polymers' segment can be largely attributed to better capacity utilisation of the expanded capacities, healthy order-flow in Food Polymer segment as well as successful new product launches in Consumer Products segment. It is worthwhile to note here that company enjoys a strong market-leadership position in each of its operational segment with its Consumer Products segment brand 'Jivanjor' standing second after Pidilite; its Food Polymer segment being the third largest in the world; and, its VP Latex brand being No.1 brand in India.

(6) Company has not given Q3FY12 as well as 9'Month'FY12 numbers of Retail business that is to be merged with the company because of pending court approval and the matter being subjudice.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Rivision in FY12e Numbers


The exceptional performance of Agri-segment in Q3FY12 as well as better-than-expected EBITDA margins of both, Agri & Performance Polymers segments reported in Q3FY12, have necessitated a revision in our FY12e numbers that were given alongwith Q2FY12 Update Report on the company.

While revising our FY12e numbers, we have also thought it prudent to take into consideration the possibility of pressure on margins in Retail segment of the company as our ground-checks suggest that company has gone for an aggressive promotional-campaign (most aggresive in Bangalore as compared to competition) as well as offered an equally aggressive discounts on varied products to counter the possible slowdown impact as well as raise the scale of operations fast.

The revised FY12e numbers are provided below :


( fig. in ` cr. )
Revised FY'12e
Previous FY'12e



Revenue


Agri & Consumer Products (ACP)
( Ramban & Jivanjor Brands )

Industrial Products (IP)
( Food Polymer & Latex )

Retail
( Total Mall cum Hypermarkets )

426


195


410

426


195


410





Total Revenue




1031


1031



EBITDA



Agri & Consumer Products (ACP)
( Ramban & Jivanjor Brands )

Industrial Products (IP)
( Food Polymer & Latex )

Retail
( Total Mall cum Hypermarkets )

41.2


22.5


(- 32.8)

36.2


21.4


(- 24.5)





Total EBITDA




30.9


33.1


In our above given estimates for current fiscal FY12, by taking a conservative approach, we have kept our revenue projections for each of the segment intact. We have only factored in better-than-previously-anticipated EBITDA margins for IP & ACP businesses as also possibility of lower-than-previously-anticipated EBITDA margins for Retail business because of the cost-pressures on account of promotional expenses.

It is worthwhile to note here that we have assumed only Rs. 11.32 cr. EBITDA to come from current core businesses (IP & ACP) of JIL in Q4FY12 as against Rs. 13.73 cr., Rs. 14.83 cr. & Rs. 23.82 cr. EBITDA reported by the current core businesses (IP & ACP) in Q1FY12, Q2FY12 & Q3FY12 respectively. This is because, we have thought it prudent to factor in any adversities that might arise in Agri segment in the last leg of Rabi season which is not turning out well so far. However, while arriving at these projections, we have not factored in any positive outcome on contested subsidy issue (on opening stock) and if it turns out in favour of the industry, either fully or partially (which is the most likely outcome), then it will straightaway add ~Rs. 6-9 cr. to FY12e EBITDA.

With regards to Retail business, as said before, our ground-check suggests that the company has gone for an aggressive push of its rechristened brand “Total Superstore” and is currently one of the most aggressive campaigners in local Bangalore as compared to competition. To snatch the market-share from competition as well as to attract more footfalls, company has also gone for an aggressive discount offerings across most of its products. Both these factors combine are expected to put pressure on margins but will help the company wither the slowdown impact quite comfortably. In fact, we feel that the projected Rs. 410 cr. topline for Retail business is on a conservative side and the company is expected to beat this figure quite easily in FY12. However, as a matter of prudence, in our estimate for Retail business for FY12, we have not factored in any positive impact that could arise from aggressive promotional moves of the company.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

As we are discussing the Retail business of JIL here, it is worth to have a look at company's positioning in Bangalore market vis-a-vis its competition. The best way to judge the positioning is to have a look at total operational Hypermarkets of all major Retail chains in Bangalore :




Hypermarket Brand
Hypermarkets Under Operation in Bangalore
(as on 15th January 2012)


Big Bazaar
(Pantaloons)
14
Total
(Jubilant)
5
Star Bazaar
(Trent)
4
Spar
(Max)
3
Spencer Hyper
(CESC)
2
Hypercity
(Shoppers Stop)
2
More
(Aditya Birla)
2
Easyday Market
(Bharti)
1
Reliance Mart
(Reliance)
1


From above, its evident that JIL enjoys 2nd largest positioning in one of the fastest growing retail market, viz., Bangalore and the local expansion will enable it to achieve profitability much quicker than its competition. To add, the mall-cum-hypermarket format which JIL is adopting for its retail venture is one of the most derisked one as other retail chains are mostly dependent on mall-owners for opening of their hypermarkets as well as attracting footfalls there, whereas, JIL, being the entire mall-lesse itself, has good hold on opening of its hypermarkets as well selecting right tenant-mix as per locality flavours and its own product-mix so as to attract more footfalls to its hypermarkets.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Conclusion :


Exceptional Q3FY12 Results as well as significant senior-level management changes call for an immediate rerating of JIL. The only factors which are holding-up such significant rerating are :

pending Retail business Merger,

lack of Clarity on Retail Division financials,

low IR-initiatives by the company because of subjudice merger matter,

silent-period for management before final merger is through and therefore lack of clarity on future-direction of each of the business division


Having known these above factors, can the investment decision in favour of JIL be held-back by a prudent investor ?
--- The answer is a clear NO
as these are the only factors which provide an ample opportunity for a prudent investor to invest in a promising company like JIL and with in-principle court approval received for Retail business merger and the final formalities likely to get completed in the month of February 2012, its just a matter of time before which actual significant rerating would start and take JIL to tade at a resonable level irrespective of the market conditions ;


And what is this reasonable level ?
--- As explained in detail in our first IC Report on JIL, any of the way we look at it, whether from core businesses point-of-view or post-merger consolidated entity point-of-view, Rs. 325 is the minimum rate JIL needs to trade at below which it will look undervalued to any prudent long-term investor.


To conclude, we maintain our earlier view that Jubilant Industries Ltd. is a rare Investment Opportunity (undergoing a Special Situation) wherein all the ingredients are present like :

credible and most efficient management,

presence in lucrative and growing operational segments,

established leadership position in each of the operational segment with No.1 or No.2 positioning,

scalable business model,

strong visibility of exponential future growth in financials


and, inspite of presence of above ingredients, the company is available at a valuation which can only be termed as mouth-watering. Company is on verge of a significant rerating and the rerating process should start sooner rather than later.



Link to our 18-page detailed Research Note on Jubilant Industries Ltd. dated 26th September 2011 :
http://www.scribd.com/doc/66376263


Link to our 5-page detailed Q2FY12 Update on Jubilant Industries Ltd. dated 10th November 2011 :
http://www.scribd.com/doc/72648144


Link to our 14-page Event Update (Retail Business Merger Approval) on Jubilant Industries Ltd. dated
12th December 2011 :
http://www.scribd.com/doc/75419915

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Retail Business Merger Finally Completed.... 27/02/2012 Record Date fixed for Share Allotment



Jubilant Industries Ltd has informed BSE that pursuant to Clause 4.1 of Part C of Section II of the Scheme of
of arrangement among Enpro Oil Private Limited (EOPL), Jubilant Industries Limited (JIL) and Jubilant Agri and Consumer Products Limited (JACPL) and their respective shareholders and creditors ("Scheme"), the Board of Directors of EOPL, in consultation with the Restructuring Committee of Board of Directors of JIL, has fixed February 27, 2012 as the Demerger Record Date for allotment of fully paid-up equity shares of face value Rs. 10 each of JIL to the shareholders of EOPL as on the Demerger Record Date.

Subsequent to the Demerger Record date, the equity shareholders of EOPL will be issued 10 (ten) equity shares of face value Rs. 10 each credited as fully paid-up in JIL for every 22 equity shares of face value Rs. 10 each held by them in EOPL, as on the Demerger Record Date. Accordingly 38,35,348 new equity shares of face value Rs. 10 each will be issued and allotted by JIL.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Jubilant Industries Limited announces a price increase upto 10 % per MT [Wet] or as contract allow , for its Encord Grades of VP & SBR Latex , with effect from March 1st, 2012.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Promoters buy 0.57 % equity from the open market at a rate of Rs. 252.50 per share. A strong signal of gross undervaluation of the company on the bourses as well as promoters' belief and trust on the growth prospects of the company - Jubilant Industries Ltd..

http://www.bseindia.com/xml-data/corpfiling/AttachHis/Jubilant_Industries_Ltd_060312_SAST.pdf



Rgds.

 

[maheshi]

Re: Jubilant Industries -FY12e 850 cr. Revenues -US$ 3 bn. Group Backing-World-Leader

Premji fund buys 5% in Trent


Azim Premji, the billionaire chairman of Wipro, is once again turning his attention to the retail sector. His investment fund, PremjiInvest, has bought nearly half the shares on offer in the recently concluded qualified institutional placement (QIP) of the Tata group’s listed retailer Trent.

An earlier investment in the failed retailer Subhiksha had come a cropper.

PremjiInvest has invested Rs 122 crore in Trent which runs the Westside chain and the Star Bazaar chain, according to a Trent disclosure to the Bombay Stock Exchange (BSE) on March 16. This makes PremjiInvest, with 4.91 per cent, the second largest shareholder after the Tatas who have 28.6 per cent in Trent.

PI Opportunities Fund - I bought 1.33 million of the 2.74 million shares on offer in the QIP.

The shares were sold at Rs 912 apiece last week and the issue was reportedly subscribed over two times. PI Opportunities Fund- I is venture capital fund registered with Sebi.

“Trent is a good fit for PremjiInvest since Wipro has a huge cash pile and Trent is publicly listed and a Tata company,” said Harminder Sahni, managing director of Wazir Advisors.

Standard Chartered Securities (India) and JM Financial Consultants were bankers to the issue.

Other shareholders in Trent include the Xander group’s Siddhartha Yog, Norway’s Sovereign Wealth Fund and Government Pension Fund Global, as well as mutual funds and insurance companies.

For the nine months till December 2011, Trent reported a 21.6 per cent increase in sales to Rs 659.32 crore although its net profit slipped by 18.5 per cent to Rs 27.74 crore.

“Wipro is keen to invest in Trent because they can liquidate stake easily as it’s a listed firm. We should also not forget that Wipro has a big consumer products business and hence understands consumer- facing businesses,” said Devangshu Dutta, chief executive of the consultancy Third Eyesight.

Trent owns and manages a string of retail chains in formats such as Westside (lifestyle retail), Star Bazaar (hypermarket chain), Landmark (books and music chain) and Fashion Yatra (family fashion store). Trent also has a joint venture with Spain's Inditex group to develop Zara Stores in India.

According to its QIP prospectus, Trent said it plans to use the funds for expansion, including setting up of retail stores and investments in certain retail real estate developments. The funds would be also utilised to meet working capital requirements.

Recent investments made by PremjiInvest include a 7 per cent stake purchase in ethnic retailer Fabindia and fund infusion in cancer care chain HealthCare Global. Shares of Trent closed up 1.18 per cent at Rs 942 on Tuesday on the Bombay Stock Exchange.

PremjiInvest had bought 10 per cent in Subhiksha from ICICI Venture in 2008 for Rs 230 crore. The Chennai headquartered retailer chain ran out of cash and went bankrupt and out of business.

Subhiksha closed its nationwide network of 1,600 stores and defaulted on loans, vendor payments and staff salaries. In 2009 PremjiInvest sent legal notices to six serving and former directors of the retailer, charging them with not performing their duty and keeping investors in the dark about Subhiksha’s financial status.