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Jubilant Industries @ Rs 290 reaches target set in March 2011 last year…up 70% + from Rs 171 when recommended strongly last year in March…while Sensex drops 5%…Bottom Up for Alphas…Pointless to concentrate Mind and Money Resources on Indices

Being saying this for a while now….Bottom Up as Top Down may not produce strong returns in the short term….this is being indicated even now….be Stock Specific,rather than bet on Indices…keep a longer term perspective…You begin with Rs One Lakh and whore it technically or fundamentally on the bourses every single day,churning trades in and out to end the year struggling to preserve the Capital itself ! …your Broker’s mighty pleased…not you !….The Other Option is to risk a specific stock for portfolio selection and give it time to flower so that you get a nice alpha  return on your principal over time…. 

In March 2011,a year ago,I had strongly recommended JUBILANT INDUSTRIES @ Rs 171 as a SS Scriptech Stock Select with a target of Rs 250 to Rs 300 in the ensuing 12 months…..It touched Rs 300 last month and is now @ Rs 290….appreciating 70% in  a year and meeting target set…in the same period the Sensex has lost a 1000 points or over 5% end to end reacting from 18200 then to 17200 now

The Idea of this Blog is not to Boast on this Selection,but emphasize the Other Option of being Stock Specific and giving it time to flower….going Bottom Up to seek Alphas…and not focussing your resources of both,Mind and Money on Indices  

Reproducing the Recommendation Template below…why I liked Jubilant Industries @ 171 in March 2011 

SENSEX : @ 18200     NIFTY : @ 5450


Jubilant Industries Ltd (JIL) looks good at Rs 171… it’s a SS 2 Stock Selection….It’s been listed on BSE and NSE for a month now registering a High of Rs 300 and a Low of Rs 100 on the day of listing itself on February 14,2011

There are four straight catalysts that may push JIL towards the target range inside the next few months

  • Recently the Agri Products(single super phosphate and agro chemicals for crop protection) ,Performance Polymer(Food Polymer-Solid PVA…VP latex and SBR Latex….consumer and application polymer products) and IMFL  Divisions got demerged from Jubilant Life Sciences Ltd (JLSL) into JIL….JIL listed last month…Not many are aware of this new listing..they soon will be….the demerger share ratio was 1:20…every shareholder of JLSL,and there were 25285 of them,got 1 share of JIL of FV Rs 10 for every 20 shares of JLSL of FV Rs 1 held by them  
  • JIL has no debt currently although it has an enabling resolution to borrow upto Rs 500 crs
  • JIL had a networth of Rs 275 crs,excluding defered tax, at September 30,2010 It grew to Rs 282 crs at December 31,2010 and is likely to cross Rs 290 crs at March 31,2011….Equity is Rs 8.01 crs of FV Rs 10 while Reserves are expected to cross Rs 280 crs this month end…this should result in a Book Value of @ Rs 362…giving a Price/BV of just 0.47…in other words JIL is available at half it’s book value 
  • JIL has recorded a net of Rs 27.59 crs for the nine months at December 31,2010….It should close the year at a net of over Rs 35 crs…that’s an EPS of @ Rs 45…and that’s a PE of below 4 !
JIL forms part of the Bhartia Group of Jubilant Companies….Jubilant Life Sciences (earlier Jubilant Organosys and even earlier Vam Organics) and Jubilant Foodworks are the prominent companies from  68 Companies in the Group…Shyam and Hari Bhartia are the Promoters…..Last year they created huge wealth for shareholders of Jubilant Foodworks..the Domino’s Pizza Franchise in India…in January 2010 Jubilant Foodworks came out with an IPO in the Rs 135-Rs 145 book building range and issue was oversubscribed over 31 times (51 times by QIBs and under 4 times by Retail Investors)…On February 8,2011 it listed at Rs 200… nearly 40% over IPO issued price of Rs 145….thirteen months later it is Rs 545 !….275% over issue price !
Agricultural Products Division

There are four products segments here

  • Crop Nutrition……Fertilizers that increase crop yeild and quality…Primary Product is ‘Ramban’ Single Super Phosphate
  • Plant Growth Regulators…help in plant growth and balance maturity by curtailing unwanted vegetative growth…Primary Product is Vam-C
  • Crop Protection…these are Pesticides,Insecticides,hebicides and Fungicides…right from Seed Sowing Stage to Harvesting…JIL currently does not manufacture these but only trades in them
  • Industrial Chemicals…these are Sulphuric Acid (Captive use in the SSP manufacturing process and also commercially sold to other Soap,Detergent,Fertilizer,Sugar Refiners,Colours,Dyes,Paper and Aluminium Units)  and Sodium Silico Fluoride sold to Glass Units
          Plant Locations
  • Gajraula in Uttar Pradesh…..SSP Production (Powder & Granulated Forms) 165000 MTPA…Sulphuric Acid 68640 MTPA
  • Kapasan in Rajasthan….SSP Production (Powder & Granulated Forms) 264000 MTPA….Sodium Silico Fluoride 1440 MTPA
Performance Polymer Division 
Here too there are four product segments
  • Consumer Products….these are marketed under the brand of ‘Jivanjor’ and  cosntitute wood adhesives(premium,middle,economy),wood finishes,footwear adhesives and epoxy sealants (for sealing leakages in sanitaryware and water pipes)…Epoxy Sealants are not manufactured by JIL but only traded
  • Food Products…Solid Poly Vinyl Acetate (SPVA) is a synthetic food polymer made for use in the manufacturing of the gum base used for making chewing gum and bubble gum…Synthetic Polymers ,of which SPVA is only one type,form the main gum base constituent  in  90% of all gum base manufacturing activity worldwide…JIL markets it’s SPVA under the brand name ‘Vamipol’ to chewing gum base manufacturers globally
  • Latex…Three kinds of Latex are manufactured…Vinyl Pyridine,Styrene Butadiene Rubber or SBR and Nitrile Butadiene Rubber or NBR…the first two are used for dipping of tyre cord and conveyor belt fabric by tire manufacturers who have in house dipping facilities and also by tyre cord fabric dippers…in addition they are also used to manufacture SBR Tyre Carcasses,V-Belts and Conveyor Belts…NBRs are used in automotive gasket binding operations…JIL even exports Latex to countries in Asia,Europe and Latin America 
  • Application Polymer Products…These are high quality polymer products developed for application in lamination,flexible and general packaging and pressure sensitive adhesives….Poly Vinyl Acetate (PVA) Emulsions and Poly Utrethane (PU) adhesives are the two product categories…PVA finds application in pressure sensitive adhesives(tapes and labels),laminated adhesives(bonding film to paper/paper boards such as  books,calendars,posters and greeting cards) and packaging adhesives(side pasting in cartons and corrugation)…PU adhesives Re used to produce flexible packaging laminates used to making pouches to package products like edible oils,coffee,shampoo and detergents…these products are sold through channel partners and to original equipment manufacturers in India and even in Germany and Dubai
          Plant Locations

  • Gajraula in Uttar Pradesh…..Wood Adhesives 16000 MTPA…Food Polymer Products 10000 MTPA….Application Polymer Products 3600 MTPA
  • Sahibabad….Footwear Adhesives 2800 Kilo litres per annum
  • Samlaya near Vadodra in Gujarat…All three kinds of Latex 14000 MTPA + research and developement laboratory for testing all kinds of latex and recognised by the Department of Science and technology,Government of India
IMFL Division

JIL has been bottling IMFL products on a contractual basis for various established brands engaged in liquor business in India. Capacity is 100,000 cases per month for IMFL. with technological capacity to handle all sizes of bottles, with a configuration of five automatic/semi-automatic lines. All lines are equipped with the required Vats (used for blending alcohol) for storage of extra neutral alcohol and labeling machines which provides flexibility for bottling various sizes of IMFL. JIL also has a fully equipped, state of the art laboratory to support the bottling plant. The bottling plant is located at Nira, which is about 70 kms from Pune in Maharashtra


A Synopsis of JIL’s Projected results as at March 31,2011 and for the actuals for the nine months at December 31,2010 actuals  are presented below…Agri Products and Performance Polymer Divisions comprise nearly all of the sales in near equal proportion….However Agri Products enjoy a 13% operating margin against 9% reported by Performance Polymers Division…and of the Total Capital Employed of Rs 290 crs at December end 2010,46 % has been applied in the Agri Products Division while 39% has been applied in the Performance Polymers Division 



Jubilant Industries @ Rs 171


Financials & Basic Valuations


(In Rs crs unless otherwise stated)





March 31,2011

Full Year Projected


December 31,2010

Nine Months 

Net Sales


Profit After Tax






Equity ( FV Rs 10)


Reserves (exc Deferred Tax)





Net Worth





Market Cap






EPS in Rs



Book Value in Rs





P/E Multiple



P/B Multiple






Promoters Stake in Equity

47.51 %


FII/DII/Public Holding (on listing on Feb 14,2011)

18.54/13.59/20.36 %



  • Promoters, Directors and Group Companies are involved in a number of legal
    proceedings that, if determined against them  could adversely impact JIL’s business and financial condition
  • JIL derives a significant portion of revenue from a few customers, and a loss of one or more customers or a reduction in their demand for JIL products would adversely affect JIL business,financial condition and results of operations
  • Low entry barriers may result in new smaller players entering the market and putting pressure on margins in the application polymer business which may have an adverse effect on JIL business
  • JIL is governed by the Fertilizer Control Order, 1985 which requires it to obtain a certificate of registration, which is valid for a period of three years from the date of issue, for it to be able to sell,offer for sale or carry on the business of selling of fertilizer at any place as a wholesale dealer or retail dealer. Further, certain of their products are required to conform to the standards as notified by the Central Government/State Government in the Official Gazette
  • Increased usage of radial tyres in India, which use significantly lower amounts of vinyl-pyridine latex when compared to bias ply tyres, will lead to a reduction in demand of vinyl-pyridine latex thereby adversely affecting JIL business, financial condition and results of operations 

  • The demand for vinyl-pyridine latex used in the manufacture of tyres is directly linked to the performance of the automobile industry. Any reduction in demand for automobiles may lead to a consequent reduction in demand for tyres and vinyl-pyridine latex thereby adversely affecting JIL business, financial condition and results of operations.

  • Emergence of new technologies like „Hot Melts‟ and their increased use, if any, in the future will reduce usage of poly vinyl acetate based PSA‟s which may have an adverse effect on JIL business

  • The availability of vinyl-pyridine monomer, a key raw material in vinyl-pyridine latex manufacturing,is linked to the availability of beta-picoline. Any interruption in the continued supply of beta-picoline would affect the availability of vinyl-pyridine monomer and thus adversely affect JIL business,financial condition and results of operations. 

  • The Portable Liquor License (PLL) to manufacture IMFL is in the process of getting transferred in the name of the Company. Any change in the policy of the government on change in name/transfer of PLL license may adversely affect the interests of JIL

  • Single super phosphate business is affected by government regulatory controls on subsidies, pricing,disbursements and distribution. Any changes in public policy such as removal of price controls or other pressures on pricing or reduction/removal of subsidies, delay in disbursement of subsidies in single super phosphate, which is a key product in JIL’s agri products business segment, may reduce the profitability of  new or current products which may have an adverse effect on JIL business

  • Vinyl-pyridine latex is used in the manufacture of tire cord fabric. Any decrease in the usage of tire cord fabric in radial tyres would have an adverse effect on JIL business, financial condition and results of operations

  • In the event governments or civic bodies of other countries place restrictions on the consumption of chewing gum, the demand for solid poly vinyl acetate, a key ingredient in the manufacture of the gum base would be adversely affected

  • Conclusion

    At Rs 171,JIL appears to have little downside as both Earnings and Assets Valuation Basis support for a much higher price,despite some risk factors and that it can acquire some debt too.

    A Low ROE of just over 12% is a cause of concern…but comparison with Peer Group of United Phosphorous (Big Daddy),Excel Crop (Similar scale of Revenues though lower Equity Base and Price of Rs 225) and Nagarjuna Agrichem (Similar Scale of Revenues but a higher Equity base and price of Rs 140) confirm low margins in the Agro Products sector

    JIL can be a selection in the Growth/Value Segment of your Equity Portfolio….The Last time we recommended an Agro product Company was in August 2008 when we committed clients to Sabero Organics at Rs 26….Last year we exited this stock fully in the Rs 60 to Rs 80 range as unfavourable reports on the company’s operating ethics surfaced….JIL is the second Agro company being committed now to clients inside three years…we think it deserves a better PE rating closer to 7 and a higher PBV Rating closer to 1…this has influenced our target pricing for this recommendation    

    Cheers ! 



8 thoughts on “Jubilant Industries @ Rs 290 reaches target set in March 2011 last year…up 70% + from Rs 171 when recommended strongly last year in March…while Sensex drops 5%…Bottom Up for Alphas…Pointless to concentrate Mind and Money Resources on Indices”

  1. voila what was that 13% fall to 142 and then immediately back to 160 … almost 15% return in 20 minutes much higher than one year Bank FD 🙂

  2. Glad i was one of the ones who did mail you about this stock ,more than a year back when it was demerged from Jubilant Organosys.
    I also had to win the GAP gift hamper by answering the query correctly:
    Ofcourse, its another matter that i sold the stock way before it attained its ‘fair value’ as i had to invest it in my new venture.
    No regrets as i’ve had an even better ROI & have finally found by true calling!
    Thanks for all the help/guidance on the stock. Take care & God bless

  3. Glad Swaroop,your Aqua venture is keeping you happy…that’s all that matters really…findind your true calling !…ofcourse you’ve been a regular passionate reader and better yet,responder to my Blog…and even Idea Initiator…Appreciate it…All the best

  4. Yes,Sameer,IGL drop was scary and really quite unbelievable…and all because the Pipeline Regulator issued a drastic and numbing and retrospective effect April 2008 sharply down Pricing dictat….But this matter must have been simmering for years…IGL must have been aware of it….Why were shareholders not enlightened on this as a significant contingency,in the Annual Report…how did the Auditors too miss this Damocles Sword that just fell !?…Shows you the hopelessly inadequate level of Corporate Governance and Information Disclosure Norms in Corporates…Shareholders who lost Monies should demand an explanation from the Company and the Auditors on this act of Omission of this highly sensitive Contingency Information in quantitative terms

  5. Kishor…look for Companies that should enjoy scale and Earnings growth of atleast 20%,have low or zero debt and enjoy relative earnings multiple of below 5 and book below 1…another interesting Investing Theme that has revived great interest is the Potential Delisting MNC and even Domestic Candidates in view of the dictat that by June 2013 the minimum shares float should be 25%…Many Companies where parents and promoters hold over 80 % of Equity may decide to exit bourses by buying back outstanding float…Alfa Laval just did that…Honeywell,3M,Oracle….many more

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