Rationale

 The rating reaffirmation continues to favourably factor in the established position of Jyothy Labs Limited (JLL) in the domestic fast-moving consumer goods (FMCG) industry, its diversified product portfolio spanning across the four major categories of fabric care, dishwashing, household insecticides (HI) and personal care and its established market position in the post-wash segment (under Ujala brand) and the dishwashing segments (under Pril and Exo brands). Moreover, it has demonstrated healthy revenue growth across all segments in 9M FY2022, supported by recovery in demand in the rural markets, supported by increased disposable income due to various government programs. While due to inflationary conditions, the entire industry is facing pressure on profit margins, JLL has been able to strengthen its market position in key categories in 9M FY2022 driven by its diversified product offering and growing brand awareness among its key consuming markets. Going forward, ICRA expects the company to sustain its healthy revenue growth in line with the industry trends by leveraging its diversified brand presence across the segments. The company's financial profile is strong, characterised by robust capitalisation and coverage metrics and strong liquidity profile. ICRA notes that the FMCG industry is characterised by intense competition across the product categories wherein JLL operates. While it has a dominant market presence in the post-wash and dishwashing segment, its market position in detergents and personal care segments is relatively modest, thereby limiting the pricing flexibility to an extent. Moreover, the company has witnessed a sharp decline in its operating profit margin (OPM) to 11.6% in 9M FY2022 from 17.2% in 9M FY2021 due to disproportionate rise in raw material prices, given the linkage to crude oil (for detergents) and palm oil (for personal care). The increase in raw material prices continued in Q4 FY2022 as well and is continuing in the current fiscal too. While the company has been taking price hikes in judicious manner to counter the rise (majorly in categories where it enjoys leading market share), given the competitive intensity under which it operates, a full pass on of rise in input costs will continue to remain a challenge. Further, any sizeable debt-funded organic or inorganic expansion would remain an event risk. The impact of the same on the company's business and credit profile would be monitored on a case-to-case basis.