Jain Irrigation Q3FY17 Concall Summary

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Financial Highlights

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  • EBITDA grew significantly to Rs 200 Crore registering 18% growth against last year same quarter figure of Rs 170 Crores
  • Nine months EBITDA reaches Rs 642 Crores showing 12% growth against last year same period figure of Rs 572 Crores
  • EBITDA margins on a consolidated basis stands at 13-14% for 9MFY17

Segmental Revenue 9MFY17

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Segmental Revenue Q3FY17

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  • More steps will be taken to improve solvency ratio, debt ratio so that balance sheet looks stronger
  • 4th quarter usually sees a lot of free cash flows as 40% sales are done in this period which likely to increase this year
  • Debt is expected to reduce this quarter and other ratios will also improve
  • Company saw Rs 300 Cr of cash profit, debt is almost at same level and working capital has increased to support growth
  • CAPEX is around Rs 160 Cr and operating profit is Rs 378 Cr for first nine months
  • CCD is considered as equity which will not add as debt
  • CAPEX for next year would be Rs 200 to Rs 300 Cr on a consolidated basis

Consolidated Revenue Q3FY17

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Consolidated Revenue 9MFY17

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 Effect of Demonetization

  • Farmers affected badly as there was less cash or currency available which is necessary for most of their transactions
  • Rural co-operative credit banks could not give loans due to liquidity issue as directed by RBI
  • Despite this, revenue grew by 3%, piping business grew by 6% and food business also showed positive growth
  • Receivables came down by 12 days in terms of outstanding against sales or Rs 130 Crore
  • Inventory goes up as sales opportunity shifts to next quarter

 Present Scenario of businesses

  • Its effect would impact farm sector negatively in 4th quarter, hence the demand as well and like to get normal by February
  • Based on orders in hand and dealers anticipation, 4th quarters seems to be positive
  • Three major business-micro irrigation, piping system, and food processing
  • Micro-irrigation had positive growth in retail market, project growth was not significant but exports grew
  • Irrigation business could grow by 16%  in upcoming quarter
  • Piping business (PVC Pipes) faced 15% negative growth which mostly present in rural areas

Piping Business

  • Pipes sell to industrial application like for Smart cities saw 37 % growth so overall positive growth
  • For food processing, onions showed double-digit growth while fruit was negative partially
  • PE Piping business has 75% capacity utilization which will increase further in next quarter
  • PE pipes is around 40000-45000 tonnes in terms of production capacity which is around 20-25% of capacity
  • Company makes corrugated pipes whose capacity is 1500 tonnes which would increase to 4000 in FY2018

Impact on Demand 

  • Reasons for lower demand in food processing were - less domestic offt ake, fewer exports due to disturbance in Middle East and some orders getting postponed
  • In food business postponement of demand can lead to customer off take increasing to 6 quarters from 4; It is not an issue of demand disruption
  • In case of micro irrigation business, impact on demand can be seen in case of onion or tomato where in farmers have lost demand in a particular quarter. This leads to lost business and demand comes back only next year . Thus, in case of MIS or pipes in the farming sector , if demand is not met during that period of time,it is lost 
  • Demand for food likely to increase in next quarter


  • Indian Government provided budget of Rs 5000 Cr with NABARD to boost micro-irrigation for the first time
  • The company hopes that it will appreciate just like irrigation fund with NABARD introduced last year which grew from Rs 20000 Cr to Rs 40000 Cr
  • Once funds are established, it likely to grow if state Government also use existing first-year fund
  • PMKSY- Pradhan Mantri Krishi Sinchai Yojana Budget increases from Rs 2300 Cr to Rs 3400 Cr , most of which can be used for micro-irrigation
  • Although exact allowance is not known, but budget for FY 2018 is quite positive

Overseas Business

  • Grew by 8.5% in Q3 and by 11% revenue growth for nine months period
  • Despite few difficulties like currency depreciation due to US elections in Mexico, Brazil & turkey, business remain profitable in these countries


  • Raised funds through US dollar bonds closed on February 1st. Part of it used to repay US dollar loans
  • It is an unsecured bond guaranteed by parent company in India and fundraised in subsidiary based in Holland
  • It is a 5-year bond which would provide liquidity, interest arbitrage and takes pressure off from upcoming maturities which would help in aligning company's cash flow
  • Food company was pushed down and equity raised for it


  • Overseas subsidiary of a company acquired small Ag-tech company in seven-figure US dollar amount
  • Investment would recover in few years  but it will provide platform to give smart solutions to farmers based on Internet of things
  • This is second company acquired after US firm PureSenseand now the company is able to bring technology from US, India, Israel, and Australia
  • It would provide global solutions through IoT to farmers to undergo efficient farming operations using big data analytics
  • It would also help in managing sustainability goals in terms of managing water, air, fertilizers, fewer chemicals in food etc.

Indian States Scenario

  • The company is getting good business from Maharashtra, Karnataka, Gujarat and A.P, Telangana, Rajasthan
  • Since Tamil Nadu receive fewer rains, demand will rise which will be leveraged by company
  • Sugarcane Project In Maharashtra
    • Sugarcane Project in Maharashtra has not taken off because of demonetization and improper functioning of cooperative bank
    • Also because of ZilaParishad elections in Maharashtra, project likely to starts from March
    • 35-40 sugar factories of Maharashtra are not working because of unavailability of the cane as farmers did not plant it due to drought
    • Now since water is available, larger amount of plantation is expected

Drip Irrigation business

  • The comany enjoys 40% market share in micro irrigation in India and around 15-20% globally
  • Opportunity size of Rs 3000 Cr in Maharashtra as Government bring over 300,000 hectares of roughly Rs 1 lakh/hectare under mandatory drip irrigation
  • The Government is engaged with cooperative banks to provide financial assistance which got delayed due to demonetization and now election
  • Drip irrigation involves taking water to the fields and not irrigation
  • State government get funds from NABARD, they can provide interest subvention support
  • Maharashtra is ahead of Karnataka and Uttar Pradesh in drip irrigation
  • Business is growing but due to delay on state government part on fund management, budget can go down
  • Overall industry size is around Rs 3500 Cr to Rs 4000 Cr and growing at 15-20%

Debt management

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  • Debt repayment will be around Rs 350-400 Cr in FY17 but reduce to Rs 170-180 Cr as Indian loans to be paid
  • FCCB also require repaying $40 million by September for which company probably go for refinance
  • Interest saved would be Rs 40 Cr plus as $200 million is raised to pay Indian loans and USD loans
  • Cost of Borrowing
    • In India, it is close to 11.9%
    • For overseas, it is 5.5% and overall in a weighted average is around 9.3%

Food processing business

  • Company got 600 acres of land as an integrated agri and a food park
  • Company need extra capacity, to create additional region for onions which earlier comes only from western India
  • Company will also get bananas from southern region for tissue culture business
  • It would help company to build better relationships with farming community in south
  • This region has water, good infrastructure and benefit from state government
  • EBITDA from food business is around 20% out of Indian assets

Fruit Processing

  • Onions are small part of the business but has done well in nine months
  • Fruits, on the other hand, serve for the beverages which will cater customer in summers from February to June-July
  • Fruit and onion expected to grow in double-digit figure at about 15-16% in revenue

Government Subsidy

  • Good business in Andhra Pradesh and Gujarat reduced company receivables
  • Here, Government place the work orders for the company which led company to grow
  • Company's growth in A.P is 35% in first three quarters and 39% in first nine months and same for Telangana
  • Most of these receivables are present year growth while legacy receivable come down to Rs 66 Cr from Rs 97 Cr


  • Since present quarter does not bring a big change, picture will be clear by next quarter
  • Company does cash-and-carry in Maharashtra and if it sustains with sugarcane, it would be around 60-65%


  • Orders of around Rs 1800 Cr for various business
  • Rs 500 Cr order for food business and remaining for others

Growth drivers

  • More investment in infrastructure will help in piping business to grow
  • Larger customer base and new products will help grow food business
  • Lower interest rate and support from government will be the added advantage

    Solar pumps

    •  Less than 100 Cr planned as a fixed investment for this business
    •  EBITDA is around 15-20% since every state follow different rules for project structuring
    • Investment will lie more in working capital

    Smart city project

    • The company has two projects- Bijapur and Bagalkot
    • They are present at Jaipur and Karnataka which worth Rs. 285 Cr

    Export market

    • Company has done Rs 500 Cr exports in first nine months
    • Fourth quarter seems strong so company anticipates Rs. 800-1000 Cr exports
    • They have a market share of around 15-20% globally which is 40 % in India