Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jain Irrigation Systems Ltd (BOM:500219, Financial) achieved a profitable overall performance despite a 13% decline in revenue compared to last year.
- The company reported an EBITDA of approximately INR180 crore, with significant contributions from Hi-Tech, plastics, and agro processing segments.
- The company successfully reduced overall receivables by about INR150 crore during the quarter.
- The order book position is strong, with INR1,000 crore at the India level and INR1,800 crore at the consolidated level.
- The company generated INR128 crore of net cash from operating activities, indicating strong cash flow management.
Negative Points
- Revenues were lower by 13% compared to the previous year, impacting overall financial performance.
- The plastic business saw a significant reduction in revenue by almost 30%, and Hi-Tech by 17%, leading to a 25% overall reduction.
- Lower utilization of capacities resulted in lesser fixed cost absorption and lower EBITDA.
- Inventory levels increased during the period, partly due to seasonal factors and weak quarter performance.
- The company continues to face challenges with the timely release of government subsidies and receivables, impacting cash flow.
Q & A Highlights
Q: Can you provide details on the sale of shares from Jain Farm Fresh Food Limited to Mandala Capital?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: This transaction involved selling 0.86% of Jain Farm Fresh Food Limited shares to Mandala Capital for INR9.9 crore, resulting in a profit of approximately INR5 crore. Mandala has been a long-term shareholder, and this sale is part of ongoing discussions regarding their future involvement.
Q: Can you break down the sales in the Hi-Tech Agri segment, particularly the export component?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: For the standalone level, out of INR850 crore in sales, retail accounted for INR566 crore, micro irrigation projects for INR70 crore, institutional sales for INR75 crore, and exports for INR86 crore.
Q: What are the major constraints in the micro irrigation industry, and how do you see it growing in the next few years?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: Delays in subsidy releases by the government have been a significant issue. However, administrative solutions are expected soon. We anticipate better fund flows and improved mechanisms, leading to potential double-digit growth in the micro irrigation sector.
Q: How do you plan to address the administrative issues affecting subsidy releases?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: The central and state governments need to streamline the process. We are advocating for a central portal for better monitoring and disbursement. States like Andhra Pradesh and Gujarat are already showing positive movement.
Q: What is the current status of your receivables from government projects?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: Approximately INR900 crore is outstanding. We expect most of these receivables to be realized as we complete the projects. Some minor disputes may arise, but overall, these are good receivables.
Q: How do you plan to improve margins over the next two years?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: Margins should improve as we shift more towards retail business, which is typically more profitable. Better fixed cost absorption and increased presence in new geographies will also contribute to margin improvement.
Q: What steps are you taking to expand your dealer network in North and East India?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: We have added 50-100 new dealers in the last 9-12 months. Our focus is on quality and long-term commitment. We aim to double our business size over the next three to five years through this expanded network.
Q: How do you plan to communicate the benefits of your products to farmers?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: We engage with farmers through demonstration farms, village campaigns, dealer networks, and agricultural exhibitions. These efforts help us reach a few hundred thousand farmers annually.
Q: What is your outlook for the Jain Farm Fresh business?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: Jain Farm Fresh primarily operates as a B2B business, supplying ingredients to major brands like Coca-Cola and Nestle. While we have a small B2C segment, our focus remains on growing the B2B business in global and Indian markets.
Q: Are you confident about achieving the revenue guidance for FY25?
A: Anil Jain, Executive Vice Chairman of the Board, Managing Director: Despite a weak first quarter, we expect a strong H2 and aim to achieve the INR7,000 crore revenue target for FY25. We will provide more clarity on this in our October update.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
