Micro irrigation biz to pick up in Q3, Q4: Jain Irrigation

World’s leading micro-irrigation system solutions provider, Jain Irrigation Systems posted a net loss of Rs 16.88 crore for the first quarter ended June 30. Its net profit stood at Rs 82.35 crore in the year-ago period.

Total income declined to Rs 870.24 crore in the reported quarter as against Rs 953.75 in the same quarter of 2011-12 fiscal. Anil Jain, managing director, Jain Irrigation told CNBC-TV18, its micro irrigation business will start seeing a positive growth momentum from third and fourth quarter onwards. "Except micro irrigation business where it was planned to reduce sales and receivables, in other businesses we have been doing fairly well. The current quarter will still remain weak, but from third and fourth quarter we should pick up," he elaborated. He further pointed out that the company is traditionally growing at the rate of 20-30%. “While we have 10% lower growth in this quarter in India, our overseas businesses have done well,” he added. Below is the edited transcript of Jain’s interview with CNBC-TV18. Q: Can you take us through the pressures? There have clearly been manufacturing pressures and pressures of outstanding dues mounting. Do you expect that you are going to see things getting relieved at all in the coming quarters? A: We had anticipated and we had planned that we don’t want to increase the subsidy related receivable especially, exposure to various governments. We had decided to slowdown our sales in certain states, that has happened in the first quarter and it will continue in the current quarter as well. But in third and fourth quarter you will definitely start seeing again a positive growth momentum for our micro irrigation business. In terms of manufacturing, our other businesses, pipe business grew 33% which is quite phenomenal. Even for food business, agro processing our quantity shipments grew by 37%, but you don’t see that reflected into the pricing because Totapuri mango prices as a raw material were much lower this season than the last season. Except micro irrigation business where it was planned to reduce sales and receivables, in other businesses we have been doing fairly well. The current quarter will still remain somewhat weak, but third and fourth quarter we should pick up. As far as subsidy receivable and pressure of the same is concerned, this is part of the same strategy. In the current quarter, our overall subsidy receivables have come down almost by Rs 130 crore. We have planned that in the current year we should bring them down by about Rs 500 crore. In that context reduction of Rs 130 crore already in the first quarter is quite good. Q: If you can just tell me how much have your receivable days bloated up by because of the slowdown from government disbursements and how much are you planning to curtail your receivable days by? A: The receivable days are around 360 and they have been around that for last few quarters. It is not that they have ballooned now compared to before. There is not much of a change. Even though in absolute amount the amount is coming down, but the sales also came down. Arithmetically you don’t see that impact as of now, but over next couple of quarters you will start seeing them down. By March 13 we expect receivables to be around 270-280 days from about 360 days currently. Q: You have taken broadly permission to raise about USD 210 million the mix of debt and equity. Mentally what kind of an equity dilution are you prepared with? A: We are in advance talks and negotiations, so I can’t talk much of details. This fund raising has three different aspects to it. Part of the fund raising is in dollar so that we can repay or prepay next two years of dollar loans falling due. So, we will not have to take a rupee hit because some of the new loans will be for ETF and that takes care of our notional forex losses and they don’t get converted into rupee. _PAGEBREAK_ Second part is because of our high receivables we used to borrow lot of working capital also short-term etc. With some of this long-term funding coming in will balance the balance sheet in optimum way in terms of long-term as well as short-term and maturities to the liability. The third part is we are looking at this long-term fund raising between convertible loans as well as equity put together, so that our interest cost comes down. In our balance sheet and P&L interest is a big item. Through this we should have an annualized benefit, once it is done about almost more than Rs 100 crore. So that would add significantly to the bottom-line again. Q: It should be done in a month, in a quarter? A: We expect to get things finalized in the next couple of weeks and then funding should be available in about 4-6 weeks thereafter. So it’s not too far. Sometimes in October it should all get done. Q: You spoke about slowdown in the MIS growth. What kind of growth do you see in FY13? Do you think it could be in low single digits? A: Yes, I think that’s right. We have been traditionally growing 20-30%. We have had lower growth and loss in this quarter, so at the board meeting we looked at history. Almost for last nine years, about 35 quarters company has had positive growth, except one quarter and we never had loss. After nine years this is one quarter and maybe one more quarter, because we are changing our business model, we are reducing the focus on government subsidy receivable we are bound to have some of this negative growth. But overall for the entire year we should be positive. The fact to be noted is that while we have 10% lower growth as a company in this quarter in India, but our overseas businesses have done well. All in all for the entire quarter we are hardly minus 1%. We have maintained revenue despite significant reduction in micro irrigation. This shows that other businesses have picked up where micro irrigation did not. It was not only our strategy to say lower sales, but also we had little bit lower cotton season etc. Q: IFC is picking up a stake in Jain Irrigation or the NBFC? A: IFC is existing shareholder in Jain Irrigation. This package which we are discussing, IFC will also be part of the new package. IFC has also agreed to take the stake in NBFC. The NBFC should become functional in October.