S.H Kelkar Q1FY18 Concall Summary

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 Financial Highlights

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  • Total Revenues for Q1FY18 has declined to Rs.239 Cr as against Rs.249 Cr for Q1FY17
  • Q1FY18 EBITDA stood at Rs. 47 crores as against Rs. 51 crores in Q1 FY17
  • PAT stood at Rs 27 Cr as against Rs. 28 Cr in Q1FY18 and PAT margins have improved to 11.2%
  • The fragrance division reported revenues of Rs. 204 Cr, 8% y-o-y decline during the quarter. The domestic consumption was lower by 12% and overseas business was stable at a growth of 3%. This business registered a profit of Rs. 37 Cr.
  • In the Flavors division, the revenues stood at Rs. 31 Cr, lower by 9% year-onyear while the domestic business grew by 8%. The overseas segment saw a decline of 28% year-on-year. This business segment had an operating Profit of Rs. 6 Cr
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Impact of GST

  • Domestic business was particularly hit by GST. Larger companies have almost resumed their operations post GST. Smaller clientle is expected to resume normalcy after 1-2 months
  • Product launches have delayed by 2-3 months due GST Transition
  • Almost 60% of the business have resumed already of which maximum are large orders
  • Though clientele faced an upward GST rate of 18% from 14.5%, company expects GST passon to net the effect
  • Company expects larger consolidation of manufacturing industry which will help the company’s market share to grow

Frangrance Business

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  • Fragrances should grow at around 15% CAGR or 13% CAGR


  • Since GST helps the company to bill all different productlines in the same invoice, they have included JASH into their retail Pack.
  • This business is expected to shell out Rs. 50-60 Crores in future to control costs by about 1 Mn -2 Mn Euros
  • On the domestic frint, the larger products which are at a lower margin so larger customer are getting favorable pricing. So, these customers have deferred sales earlier than the smaller customers. Hence the top-line decline is much steeper than the gross margin decline
  • Overall demand in terms of consumption, in terms of new product launches, interms of new product adoptions are quite robust and strong. Company is also hoping for a revival in the market demand after the demonetization and GST effects have normalized
  • As large clients have reacted to GST earlier, the company 60% of the business to revive quickly in this segment post GST transition
  • Company expects to be market share for this segment o be at 22.5% approximately


  • The company have taken a conscious call to eliminatesome of the low value or low margin products and have taken a hit on the top-line
  • The company is committed to a 15% to 20% CAGR growth on the profit line

 Service Income

  • GST has led Agarbatti business into inclusion which has led our service income down by Rs. 8 Crore from the last quarter
  • Company is expecting GST to consolidated the manufacturing business in India which is ultimately lead to cost reduction for suppliers.

Flavours Business

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  • Additional amortization and one time of cost of Rs. 70 Lacs for integration of Gujarat Flavors has kept the operating profit at low levels
  • Revenue Contribution from Gujarat Flavors was Rs. 3 Crore and form HTT was Rs. 3 Crore
  • Seasonality of Flavors business particularly in the clientele containing beverages and Ice Cream products faced a lower demand
  •  The flavors will grow 17% to 20% CAGR. The split between fragrance and flavours business is about 80:20.
  • Market Share is currently 2% in the domestic side in 2014 and will be around 4% currently

 Capex Plan

  • There is a capex of Rs. 9 crores in the first quarter which relates to the acquisition of HTT and the acquisition of Tanishka products
  • The company  had also acquired a property at our development center, which is total of Rs. 27 Cr , of which Rs. 17 Cr have been paid out in the first quarter
  • The Company should be doing about Rs. 15 crore of maintenance capex, around Rs. 6 crores to Rs. 7 crore of infrastructure improvement and Rs. 30 crore investments in the twoprojects on the fragrance innovation.
  • Probably another Rs. 25 crores to Rs. 50 crores on improvement in operations led by the cost reduction in the Netherlands operation