Plastic business growing due to new order wins: Jain Irrigation

In an interview to CNBC-TV18, Anil Jain, MD of Jain Irrigation spoke about the results and his outlook for the company.

"We have consistent level of profitability and sales growth in June and September quarter. That would mean that second half of the year should be much more robust", he said.He further mentioned, "Plastic business is growing because of the infrastructure growth. We have got Rs 300 crore order under AMRUT (Atal Mission for Rejuvenation and Urban Transformation) cities water programme".Below is the verbatim transcript of Anil Jain’s interview to Anuj Singhal, Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Anuj: Good numbers for you for this quarter. You have made a profit versus a loss. Earnings before interest, taxes, depreciation and amortisation (EBITDA) margins look good, income has gone up, do you think the worst is over for Jain Irrigation and when do you go back to the kind of heydays that you had 3-4 years back?A: Definitely worst is over and we are now having consistent level of profitability and sales growth. June quarter also we had good profit and sales growth and September quarter usually is the weakest quarter because of the rains and so on but even that has gone reasonably well and that would mean that second half would be much more robust and if you talk about overall larger amount of growth from FY18 onwards you should see significant amount of overall growth but even current year we are growing double digit and earnings would be far more. So, if you just look at the first six months numbers last year our entire year profits were about Rs 76 crore. We have already got more than that profit in the first six months. So, that shows that earnings level overall for the FY17 companies should do very well.Latha: You have your finger on the pulse of a large part of the real economy and that is why this question. How has demonetisation affected? Do you think business is coming to a standstill in several parts, the way cement companies and paint companies are falling what is the situation on the ground?A: For at least our business we still had inflows coming in from dealers yesterday into bank account and of course there would be some panic for the next 2-4 days or so but overall farmers with whom we deal they are not like the ones who are bringing cash in gunny bags and giving to our dealers. Most of them already have bank accounts and if they had cash at home they can always deposit because that is not taxable and they always keep that money in their homes. So, overall I do not see a situation. We as a society are quite adoptive and aspirational and in a sense we are also ingenious. So, people will find ways to make things happen. But especially in rural India with our farming community, our dealer base, we feel we are comfortable.Sonia: For the first half of the year if you look at what you have done or even if we go by this quarter the growth on your topline has been pretty good, so it is almost a 9 percent growth that you have seen on your topline and for the half year ended you are sitting at Rs 3,177 crore. What kind of growth do you see on this base of Rs 3,000 crore in the second half?A: Usually our second half is stronger than the first half. So, having done already about close to Rs 3,200 crore now, in second half we should cross at least about Rs 4,000 crore or so. So, all in all overall at consolidated level including our global companies, our growth should be somewhere 12-14 percent at revenue level and as I said earnings level would be higher.Within that if you look at the various segments, which we have micro-irrigation started doing well, our retail business especially grew more than 22 percent this quarter, which was a very good news after so many quarters. Also if you see our food businesses grew well, it grew 13 percent or so. Piping was a little bit muted this quarter but it was extraordinarily well in earlier quarter. So, when you look at combinations and baskets of different businesses, double digit growth on revenue and significantly higher growth on earnings is definitely higher on the cards.Latha: 20 percent of promoter holding is pledged, could it be de-pledged soon since the company is in the money?A: These are the loans we had taken to put money into the company. In March, we had put about Rs 115 crore into the company for the warranted sector. So, for over next few quarters, you will find that we will be able to de-pledge most of it and reach to a situation where that should not be a concern at any point of time.Sonia: Your plastic division is still very smaller but growth is looking very good over there as well, more than 11 percent growth in the first half of the year. Is this a segment that can grow and what would the overall contribution be of plastics to your overall business over the next 1-2 years?A: The plastic business is growing because of the infrastructure growth. We recently announced that we got a Rs 300 crore order on this under AMRUT cities water program. Like that we are getting a lot of infrastructure projects. We are getting desalinisation, power projects and so on. So, these projects, which are intra-city and inter-city and also these larger irrigation projects -- you might have been hearing about this that instead of doing canals government wants to do piped conveyance now and you heard yesterday big news today is about how Punjab and Haryana are having water issues. So, people have to use on one hand drip irrigation, on the other hand they have to do piped conveyance because of canal because in open canals again you lose lot of water to percolation and evaporation. So, structurally government has decided that they should go for piped conveyance.So, this irrigation infrastructure as well as smart city infrastructure would require lot of pipe for gas, cable, water. We will score. Therefore we believe our overall pipe division also should do very well based on infrastructure play. We are giving very unique solutions in overall basis rather than merely supplying pipes.