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Jocil


Jocil is in the business of manufacturing fatty acids for toilet soap, toilet soap products (outsourced projects for branded soap manufacturers) and byproducts such as glycerine and industrial oxygen.  It also generates biomass and wind power for sale.

Jocil has reported good growth in revenues in the last five years but operating profits don’t seem to have kept up.  It reported about 38cr of operating profits on revenues of about 380cr in the last financial year while employing only moderate leverage.

The company appears to require heavy working capital investments and capital expenditure resulting in negative operating and free cash flows – thereby requiring additional debt financing for operations, which increases financial risk in case of a business slowdown.

The business is subject to stiff competition, which is reflected in compressing margins despite sales growth in the last decade.  It is dependent on imported palm oil from Indonesia and Malaysia exposing it to supply shortages and a weakening INR.  Moreover, the company appears to have low bargaining power with customers since it deals with branded soap manufacturers and retail customers who are resistant to soap price increases despite input cost increases.  Furthermore, the company is subject to 10% excise duty, which puts it a disadvantage to operators in tax exempt areas.

The power segment is dependent on government regulated prices, which result in loss making operations.  
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