Growth to continue in Q4; have strong order book in hand: Jain Irrigation

“December has been our best ever quarter. For the last five years, we never had this level of growth which is there, the level of profitability we have at EBITDA level margins like micro irrigation business, is more than 23 percent. So margins have held quite well in terms of what we expect,” he said.

On the debt front, he said our debt is almost same as at the level of September.

Talking about the agro business listing, he said we plan to do an initial public offering (IPO) for the next fiscal.

Below is the verbatim transcript of the interview:

Q: Where did 30 percent revenue growth come from? Was it mostly the hi-tech pipes or are you seeing other pocket pickup as well and what could be a sustainable growth for the company by the end of the fiscal?

A: I think growth has come from various places. Our micro irrigation business grew 37 percent in India. We had higher growth in our overseas market. Therefore, micro irrigation business has grown more than 48 percent globally in this quarter. We had strong growth in piping and sheet business that is plastic product which was close to 33 percent.

The food business was somewhat subdued which was at about 7 percent and that is why you see global consolidated average at 30 percent, but two businesses have done really very well at high level of growth and we expect similar level of growth to continue even in the current quarter because we have strong order book in hand.

If we see the results, the first half was somewhat weak due to GST etc., but we are catching up now and we are expecting, for the whole year, we would maintain 20 percent because first half was weak but third quarter was 30 percent, fourth quarter also should be similar level of growth going forward.

Q: While your revenues look good, this is one of your strongest quarter seasonally and your profits looks good but profitability has taken a dip and as far as margins are concerned they have taken a dip and it is lower than the market estimate and also you have other income component which has wrapped up the profits. Could you take us through the details of that other income, how recurring is it in nature and what happened operationally there?

A: In terms of margins our EBITDA is up by almost 26 percent. If you look at the EBITDA margins in India, they are up 1.2 percent that is JSL standalone. If you look at global consolidated margin, they are down by 0.2 percent. It is a small amount and it was due to, when you look at consolidated results, in our food processing business there was a fire during the quarter so we lost some material and profit on that material. Otherwise if you see, even consolidated global margins at EBITDA level are positive. In India they are up 1.2 percent. Overall EBITDA margins are 26 percent. If you look at net; net last year this quarter was Rs 6 crore. This year it is Rs 67 crore. So it has gone up 10 times.

Q: Going back to the micro irrigation systems (MIS) business and the strong 48 percent growth you have seen overall. You held on to your 20 percent full year guidance for MIS but do you think given how strong the performance was in this quarter, you could even better that growth by the end of the year?

A: That is always a possibility. We are saying that we will definitely maintain what we said at the start of the year despite weak first half. Our order book is good. We have almost Rs 4,000 crore worth of order in hand across different businesses put together which is similar level; little bit higher level than what it was at the end of September and by the time we finish, go closer to March including the orders which are in pipeline, this order book position should be higher by end of March. Therefore, next fiscal FY19 also would mean strong growth. So we are not just talking of this quarter or the fourth quarter but we are talking that the undercurrent we have in terms of orders, the negotiations in pipeline, overall business opportunity is that this is a multiyear growth opportunity and not only that this year we will do more than 20 percent but even next year and year after we see very strong momentum going forward.

Q: As far as food processing business and the fire there is concerned. Is that all sorted and for this quarter is it up and running normally?

A: December has been our best ever quarter. For the last five years we never had this level of growth which is there, the level of profitability we have at EBITDA level margins like micro irrigation business, is more than 23 percent. So margins have held quite well in terms of what we expect.

Our debt is almost same as at the level of September. Our networking capital on global basis despite 30 percent growth, in fact has come down by eight days. However, I do not know in terms of market but if you look at all the matrix whether the revenue growth, net margins, if you look at networking capital cycle, earnings growth, all are considerably positive, in line with our budget and expectation and we think same thing should happen in the current quarter as well.

Q: When can we expect the listing of the agro business? Can we expect it within FY19, any kind of timeline?

A: We spoke about the food business that we will start exploring the opportunity and we said that we would like to do it in next fiscal. So while we are still not firmed up the detailed plans but we will stay within that period. We plan to do an IPO of the food in the next fiscal.