Jain Irrigation aims to reduce debt by Rs 500cr in FY14

Jain Irrigation is looking to bring down debt by Rs 500 crore during FY14 and increase revenue by more than 20 percent says MD, Anil Jain. Going forward, he feels the company would be back to a very good level of profitability and will sustain growth rate.

"We are also looking at good growth in the project business where we provide complete solution for improving water efficiency and agriculture productivity," he says in an interview to CNBC-TV18. Also Read: Escorts plans to launch products in premium segment Meanwhile, the company plans to further bring down its receivables in FY14, after reducing almost Rs 400 crore in FY13. The company's net profit in Q4 was down 76 percent at Rs 42 crore against Rs 173 crore, a year ago. Below is the verbatim transcript of Anil Jain's interview on CNBC-TV18 Q: There has been some growth in revenues but the margins are disappointing because of your inventory issue. Now, what can you point to in terms of a trajectory that you think both revenues and margins will take through the course of FY14? A: In terms of revenue, in this quarter we could manage almost same revenue as last year which was much better compared to the first three quarters where we had negative revenue growth so that was good. In terms of margin, if you look at our EBITDA level earnings they are almost same as last year this quarter. We had almost Rs 247 crore of EBITDA, last year was Rs 252. Reduction in margin is some issues related to tax and other things that are below the line issues, interest cost was also the same. Going forward to FY14, we have addressed the issues about the balance sheet. We already reduced our receivable by almost Rs 400 crore during last year. We have also been able to restore the debt equity down to 1.15 on net basis. FY14 now augers very well for us in terms of growth and margins as well because some of the issues have already been addressed in terms of higher level of receivables, higher level of debt. As we bring down debt by another Rs 500 crore during this year and increase revenues by more than 20 percent, the company would be back to very good level of profitability for the whole year as well as sustained growth rate going forward. Q: Can you get back growth in the micro irrigation systems (MIS) business to the 20 percent kind of levels in 2014? Do you think growth has bottomed out in Q4 and you can deliver that 20 percent numbers? A: Yes, even Q4 was about minus 20 percent, for the whole year on MIS business we were minus 25 percent. However, in the current year in Q1 we are seeing very good signs and the growth is coming from three different levels. If you look at our micro irrigation business, in terms of exports we have some good orders from Africa. We are also looking at good growth in the project business where we provide complete solution for improving water efficiency and agriculture productivity. Retail sales would grow in places like Maharashtra, Gujarat and others. For example, recently government of Maharashtra said that they want all sugarcane mills in Maharashtra to buy sugarcane made with drip irrigation. Now, that business opportunity is of about Rs 10,000 crore and will pan out over next three-four years. Our annual sugarcane business in Maharashtra is hardly Rs 150-200 crore now, due to shortage of water that many states have realised this year because of the drought. The funding will now come into place and with some of these mandatory requirement coming through, things like banana and sugarcane must be done with drip with additional focus on projects and also some success in export market. So, we will go back to this year, already a growth rate of more than 20 percent. Depending on how monsoon goes, may be in the later part of the year we might be able to ramp up closer to 25 percent. As of now, FY14 20 percent growth in MIS looks certain however at the same time piping for PVC pipes which again goes into water related markets, we grew more than 25 percent in Q4 already. In the current quarter also we are growing more than 25 percent. Overall, for the type of product lines that we have, there is good growth and last year we were constrained with balance sheet and other issues which are now behind us. Oil seems to stay where it is or will go down. If rupee maintains around 55 then we should have good growth and good margins. However, rupee and oil price can always create some changes in the margin situation. Q: Is your improvement in the receivables situation more or less done? Do you see any incremental improvement there in FY14 from what you have achieved in FY13 already? A: There would be additional improvement, so while we have improved by Rs 400 crore, but this year business came down by Rs 300 crore. Now in the current year, our plan is that business goes up by 20-30 percent which is about Rs 700-1000 crore growth in sales. Receivables would remain even lower than the balance sheet level. On a net basis, the ratios of receivable to our sales would considerably improve during this year. Q: There is some focus on your agro processing business and whether you can choose to unlock some value from there, perhaps even help that to alleviate your debt situation. Would you look at that aside from improving the operating matrix of business, any value unlocking plans for this year? A: Our agro processing business is doing well. Infact in terms of growth, we have two parts to that business today. One is the onion-garlic, which is close to Rs 200 crore in India and almost Rs 250 crore outside India. We have a fruit pulp business where we do mango, pomegranate and other fruits. Globally for us the food division is already more than Rs 1000 crore and we are adding spices this year because onion also is a spice and our customer base is same. We are starting probably in last quarter of this year spice processing. We see a lot of growth opportunity in that particular product line as well. So overall we expect food to grow in 20-30 percent. In terms of value unlocking while there are no concrete plans at this stage in terms of when and how to do it, there have always been this question whether we are an irrigation company and agriculture input company and whether food processing fits in there or not. We always believed that this is part of a complete package of relation with farmers that we are able to operate both sides and create value on both sides for our customers and us.  As of now it will not be right to comment on value unlocking but I can definitely tell you that in terms of food business we are expecting about 25 percent growth in that business in the current year with additional this new product line of spices.