Jyothy’s laundry business gets PE funding

IL&FS is said to have agreed to Rs100 crore infusion in Jyothy Fabricare Services Limited, the laundry business subsidiary of Jyothy Labs, maker of whitener Ujala and mosquito repellant Maxo

Jyothy Fabricare Services Limited (JFSL), a 75% subsidiary of Jyothy Laboratories Ltd (JLL), which is trying to pioneer laundry services in the organised sector, is getting a Rs100 crore infusion of funds from private equity players in two tranches. Moneylife learns that the private equity fund of Infrastructure Leasing and Financial Services (IL&FS) is taking a stake in Jyothy Fabricare.

At the end of the accounting year, 31 March 2010, Jyothy Labs had invested Rs3.75 crore as equity shares and Rs7.5 crore as convertible preference shares in JFSL, besides giving loans and guarantees to its subsidiary. JFSL also has personal investments by the promoters of JLL. According to those familiar with the deal, the deputy managing director of JFSL, Ullas Kamath, also has a significant stake in JFSL-probably about 25%. Mr Kamath, a chartered accountant by qualification, has been associated with Jyothy since its inception and has been on the board since 1997. He spearheads the laundry services business.

JFSL aims to offer "world-class laundry at an affordable price at your doorstep" and other related services. JFSL's bouquet of services include JFSL Corporate, JFSL rentals, Fabric Spa, Fabric Spa Busy-Easy and Snoways. It claims to have set up a "world-class facility equipped with world-class machinery and equipment, most-updated technology, supported by robust IT structure and housed in an area of 70,000 square feet, built on two acres of land at Doddaballapur, near Bangalore." This facility became operational in November 2009.

This is a much bigger and more determined attempt by Jyothy to enter the laundry segment. Jyothy had earlier launched Snoways chain of dry cleaners with the acquisition of eight retail outlets, which has now grown to 30, according to the company's 2010 annual report. In 2009-10, Snoways Launderers & Drycleaners Private Limited became a subsidiary of Jyothy Fabricare Services Limited.

It will take a while for the laundry business to start making money. For the year ended 31 March 2010, JFSL had a loss of Rs6 crore and Jyothy Labs advanced Rs12.16 crore as loan and Rs18 crore as guarantees to the bank on behalf of JFSL. These amounts would now possibly come back to JLL, increasing the stock's attractiveness.

The Jyothy Laboratories stock was down nearly 2% at Rs259 in morning trade today on the Bombay Stock Exchange.

Jyothy Fabricare is promoted by Jyothy Laboratories, which took the consumer market by storm over a decade ago with Ujala fabric whitener that taught multinational companies a lesson or two in branding, promotion and product innovation. Compared to other consumer products companies, Jyothy's range of products is limited, though it has gone on to launch brand extensions of Ujala for washing powder and a unique product stiff and shine. It has also launched a household insecticide brand Maxo, and utensil cleaners under the brand Exo. Set up in 1983 by MP Ramachandran, Jyothy Laboratories got private equity funding from Actis in 2002 and got listed in December 2007, at the height of the bull market. The stock listed at Rs179 and went down all the way to Rs42 in December 2008. From that level, the stock shot up all the way to a peak of Rs322 in October this year.
(Inputs by Alekh Angre)

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