Mumbai: Promoters of Jyothy Laboratories sold a 4% stake in the company on Friday that would help them reduce the pledge of shares, even as the maker of Ujala fabric whitener is seeking to become debt-free by March 2021.
However, with weak results for the September quarter, low return on equities compared with peers and weak presence in high-growth north Indian market make the companys stock unattractive at the current price, said analysts.Shares of Jyothy Lab ended 1.03% lower at Rs 173.35 on Friday, and is down 18% so far this year.
Analysts see limited upside for the stock from the current levels.The pace of estimated earnings growth at a compounded annual rate of 18% between FY2019 and 2021 is moderate for a company which is much smaller in terms of size compared with its midcap peers, said Krishnan Sambamoorthy of Motilal Oswal Financial Services.
ROE is also at a discount to peers at 16.7%/ 19.2% in FY20/FY21, he said.
Valuation of 17.3 times FY 2021 EV/EBITDA and 22 times FY 2021 EPS does not offer scope for any significant upside.Promoters held a 67.11% stake as on September 30, of which 24.96% was pledged.
They sold 4% of the company worth Rs 260 crore to pay off the debt which was there against the shares, said company officials.
With that, now only 6% of the promoters stake will be pledged and the rest will be paid off with this transaction.
Post this transaction, promoters stake declined from 67.1% to 63%, joint managing director Ullas Kamath told ET Now.
The company and promoters will be debt-free by March 2021.The company has reduced its debt in FY2019 from Rs 544 crore to Rs 281 crore.