See 13-14% consolidated growth for FY15: Jain Irrigation

Anil Jain, MD, Jain Irrigation in an interview to CNBC-TV18 spoke about the company's thrid quarter performance and the outlook going forward.Jain is confident of the fourth quarter performance being better than third quarter and hopes to clock 13-14 percent consolidated growth in FY15. The softness seen in third quarter was mainly due to untimely rains, reduction in polymer prices and sluggish rural demand, he adds.Jain Irrigation   reported a consolidated net loss of Rs 39.68 crore for the third quarter of this fiscal due to poor sales. The company had clocked a net profit of Rs 25.88 crore in the same quarter last year, it said in the BSE filing.The performance took a beating as net sales declined to Rs 1,258.12 crore during the quarter ended December 2014, as against Rs 2,352.37 crore in the year-ago.Below is the transcript of Anil Jain's interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Latha: Tough quarter, so let us go segment by segment, especially your micro-irrigation systems, you are pretty bullish on it, it has simply not lived up to early promise, now when do you think that it can spike up?A: If you look at micro-irrigation business, which we talked about, for the first nine months the domestic business has grown 24 percent and the negative growth we have is on exports of micro-irrigation where this year there was no project compared to last year. Even Q4 is going to be quite good for micro-irrigation. Particularly Q3 was not a great quarter because there were untimely rains in one of our important markets like Maharashtra and others on one hand and also, during the quarter due to the oil reduction the polymer prices came down and there was value erosion because everything else was selling at a lesser price. That impacted revenue but as far as domestic market is concerned for the whole year, we are expecting north of 20 percent growth and with the new projects being done, next year looks even better for micro-irrigation.Latha: You have the finger on the pulse of the rural economy more than most other companies since you approached that market in many ways. Are you seeing a general decline in demand, how will you assess rural demand in general and secondly you referred to this commodity prices, I thought that would work to your advantage and your margins would improve, how would you look at commodity prices and margins for the current quarter and maybe even for the next?A: If we are looking at overall general rural demand, it is definitely sluggish there are two-three reasons for that. One is that since last two quarters, the food prices have come down but the farm gate prices for farmers whether it is cotton, sugarcane, be it so many others like soya bean have come down and that has reduced the consumption demand at the farmer level, as well as investment demand at farmer level. However, this is a larger discussion at national level that you have a narrative where you want inflation to be at very low level but you should not do it at the cost of taking income away at the farmer or the rural constituency. So how do you improve the supply side productivity without hurting farmers’ income because what has happened in last six months is we have great inflation number but farmer income has definitely been hurt. So there is definitely sluggish demand on farmer side and I hope government in the Budget does certain amount of productivity related investment into rural area especially for agriculture because without which next year looks grim.Coming back to the commodity prices, it did come down radically during the Q3 period but that is now improving but in that particular quarter of Q3 we had to take some inventory value write-down because suddenly prices came down by 20-30 percent.However, from Q4 onwards it would be a positive for us because our product becomes more affordable in the hands of farmers and our ability to improve margin also increases. So that is definitely great for the current quarter going forward but for particular Q3 that was not the great news. Reema: Do you maintain your FY15 growth guidance of 15-20 percent in  micro-irrigation systems then or would you scale it down because in nine months on a consolidated basis MIS has only grown 9 percent and even for standalone, the growth has been in single digits?A: Overall it has grown 9 percent but standalone as I said domestic grew 20 percent but export was less. Current quarter, again domestic and the projects will come through so overall we would expect definitely double digit growth but it may not be 20 percent, it will be closer to about 13-14 percent for MIS.Reema: For domestic or consolidated?A: Consolidated because Q4 is typically a much stronger quarter for us compared to Q3 and that might repeat also partly into piping and other divisions just to give an example we have division for polyethylene pipes, what we sold in the first nine months, we are looking to sell similar level of amount during Q4. So you will see a much stronger Q4 and resultantly annual numbers would be positive for the whole company in terms of revenue, standalone as well consolidated.