Jain Irrigation

India’s largest Micro Irrigation Company in the country and the second largest globally, remained in the red during Q2, like it did in Q1FY14 and the loss has only doubled. In Q2FY14, its consolidated net loss came in at Rs.81 crore compared to net loss of Rs.46 crore in Q1. Like in Q1, and has been the way for some time now, it was forex loss which pushed the company deeper into the red. During current Q2, forex loss came in at Rs.86 crore. The depreciating rupee also added to the price rise of polymer, which during Q2 hit a life time high thus impacting margins seriously. But for this forex loss, the company’s performance was better. Its total income came in at Rs.1224 crore, up 23%.

In terms of segment growth, the best growth came in from PE Pipes which showed a growth of 198% (YoY) and PVC sheets, which grew 65%. Micro Irrigation business grew at 20% as export of MIS has grown substantially by 200% in Q2FY14 resulting in revenue of Rs 300 crore. The company is hoping to push exports further and mitigate the forex loss. Its standalone order book is at at Rs.1,028 crore. The company is increasing capacity of its PVC and PE piepes by 10% over existing capacity in current fiscal. The management expects H2 to be better given the robust monsoon and high demand from rural areas though the rains have played spoilt sport by continuing into October too.

The big issue with the company remains it debt which currently stands at Rs.1500 crore. Its interest outgo for H1FY14 stood at Rs.552 crore, up 47% (YoY). The company is indeed looking at ways and means to bring down its debt and in early July this year, it had said that it was looking at selling its non-core wind power business, which as such is not contributing much to the company. By selling this wind power business, the company hopes to bring down foreign currency debt of around Rs.70 crore from the books of the company. Its aim is to reduce over debt by Rs.500 crore this fiscal. Receivables, which has been the other big issue for the company is getting tamed. It was down over Rs.400  crore in FY13 and this fiscal, it hopes to bring it down further. The aim of the company is to increase revenue by 20% this fiscal. And MIS, its mainfray, which saw a 25% degrowth in FY13 is estimated to see a growth of 20% in FY14 with an upside potential of 25%. The company stated that it is seeing good business in Maharashtra where the state Govt has made it mandatory for banana and sugarcane cultivators to use drip irrigation. And the company feels that this could mean a business worth Rs.10,000 crore spread over the next few years. But for now, concerns over this loss remain and unless we see these things happening – reduction of debt and sale of wind business, the stock could remain under a cloud.