Jain Irrigation Systems, is expecting an uptick in business in the coming financial year owing to increased plantation by sugarcane farmers says Managing Director Anil Jain.
Speaking to CNBC-TV18, Jain said the note ban enforced by the government had “frozen everything” in rural areas for two months, reducing the demand for PVC pipes delaying a policy on mandatory microirrigation systemsin Maharashtra. But he said disruptive forces were expected to vanish by the end of this month.
He said the government’s proposal to increase plantation would benefit the company as it has 60 percent market share, adding, he expects Rs 300 crore business from sugarcane next year based on current levels.The company posted an operationally strong performance in the third quarter aided by forex gains. Announcing its results on Tuesday, the company said it had achieved a consolidated net profit of Rs 9.21 crore for the third quarter, against a loss of Rs 39.68 crore in the year ago period.Below is the verbatim transcript of Anil Jain's interview to Sonia Shenoy & Reema Tendulkar.
Sonia: I want to ask you about the trigger that the market was awaiting for the last few months which is the announcement of the mandatory micro irrigation systems especially on sugarcane in Maharashtra, any update on that. Has it been announced and what could the impact be when it does come through?
A: It has been already announced. They were still working out the details in terms of how the Apex Co-operative Bank will provide loans to various sugar factories through district level co-operative banks. However, that got delayed due to the whole demonetisation and everything was frozen in rural areas for two months, but we expect that to be done this quarter. So the planting season for sugarcane, next season, starts post July, so Q2 and Q3 onwards you will see full implementation and that time it would be a bigger number.
You might have been reading that almost 30-35 percent of sugarcane capacity in Maharashtra is not operating today because there is not just enough sugarcane. So we expect a much larger business next year because the farmers would be planting sugarcane, which they couldn't do because of last two years of drought and these additional financing and sugar factories would be investing into mandatory drip irrigation.Sonia: When you say that you expect much larger business from this, can you quantify that for us?
A: For us Maharashtra is about Rs 600 crore a year business for drip irrigation division and sugarcane typically is about Rs 150-200 crore. This year we are less than Rs 100. However, next year it could be Rs 300 crore. So that kind of a minimum additional growth we see out of sugarcane because the government has said and assuming they deliver on what they have said that they want to bring at least 100,000 hectors every year under mandatory sugarcane and 100,000 hectors would mean a business size of more than Rs 1,000 crore. We have about close to 60 percent market share. So if everything goes as per plan, it should be Rs 500-600 crore. So even if I take 50 percent of that to Rs 300 - that is still 100 percent more than what we have done this year.
Sonia: Coming back to the impact of demonetisation. You said that there was some impact of demonetisation which you saw. What was the MIS growth seen in the quarter and do you hold on to your full year guidance of 16-18 percent for MIS growth in FY17?
A: In MIS we grew about 3 percent in December quarter because of what happened. However, if you look at the overall nine months, our MIS business in India is almost at same level to what it was a year before. So if we have to now hold on to 16 percent growth that would mean we will have to grow almost 40 percent in the current Q4, of which some of the business is postponed to the next year, but I feel fairly confident to say that even in the current quarter that is Q4, overall MSI growth would be more than 20 percent and that would mean for the whole year we would maintain 12 percent rather than 16 percent. So minimum is 12.
How much more we are able to achieve for the whole year - one has to wait and see, but considering nine months, we have not grown to reach 12 percent on annualised basis that would mean Q4 has to be very strong and we feel fairly confident that things have been coming back, some of our orders for solar water pumps are in place, we have good orders for the exports. So with combination, we should have a strong Q4 and double digit growth for the whole year.
Sonia: You had told us the last time that you are looking to reduce your debt further by about Rs 300 crore or so. Have you been able to achieve that and what is the net debt at the moment?
A: The net debt compared to September to December on standalone basis went down by Rs 50 crore or so. Majority of our positive cash flow comes during Q4. Last year we reduced to almost by Rs 300 crore in Q4. So we expect around Rs 300 crore of debt to come down in Q4. Therefore, we are on path to reduce our debt. We have been also able to reduce the interest cost because we have raised the funds through dollar bonds. So as a combination we are very well set going forward with lower interest rates, actual lower outgo of interest rates, higher growth and even lower debt in FY18 than what we would reduce by Rs 300 crore in '17.
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