Release Date: February 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Retail business showed resilience with only a 2% decline in standalone India and 1% globally, despite overall challenges.
- Nine-month revenue growth for the retail segment in India was 36%, and globally, excluding EPC projects, it was 19%.
- EBITDA for the first nine months grew by more than 20% compared to the same period last year.
- Piping business is trending positively, and the irrigation business is expected to pick up soon.
- Focus on retail business is yielding better profitability and cash flow, with receivables in the retail segment down to 60-65 days.
Negative Points
- Overall business was down 18% for India standalone and 9.7% on a consolidated basis for Q3 FY24.
- Delayed season due to untimely rains impacted the expected growth in Q3.
- Working capital challenges persisted, with gross working capital remaining the same as in September.
- Election-related uncertainties could impact business in the upcoming quarters.
- Receivables from government projects remain high, affecting overall cash flow and working capital.
Q & A Highlights
Q: Sir, I want to know the kind of numbers you're showing -- showing the improvement, but the kind of [Foreign Language] the kind of faith in the company, how an investor will get about these numbers and the developments? Like, again, I have seen the statement. The pledging is being done somehow. So how that faith will come? I know that company will cover and will make good number because you are number two in micro irrigation. I'll come on that point again. But can you answer my first question, sir.
A: Yes. Yes. You see, in terms of faith or trust or (spoken in foreign language), only our performance can create that right? And structurally, if you look at it not one quarter but over a two-year period, we have said that we are moving away from government business, which you can see. We have significantly added to the dealer business, that one can see. Continuously, EBITDA has been improving that is positive. Our working capital cycle, again, if you compare over two years, it has substantially improved. So -- but one quarter, as we are -- this is a structural change which is taking place right post the debacle we had in '19, '22, '22, '23. Our company is going through metamorphosis. It's going -- we are trying to create a new Jain Irrigation now. And in that process, while we earlier sorted out the main core company, here we are now addressing also the issues with the food company or other businesses within the group. And I think we are coming very close to all of that so that we can have more consistent forecasting going forward. Having said that, partly, all our businesses are part of the agri value chain. And with the climate change here or there, somewhere or else, there is an impact which one cannot foresee. But structurally, strategically, directionally, and if you really see over the last 2, 2.5 years, where we have started actively again, engaging with the investors, almost out of 100 things I would have said on conference calls or otherwise, about 80, 85 have come, and rest 10 or 15, we could not have foreseen or there is a climate change issues which have impacted. In terms of the pledge, that was part of -- coming out of the master restructuring agreement we signed with the banks that whatever new equity we had issued as a part of the restructuring that came through as warrant. So whenever that will get converted into equity, it was a requirement by the bank that, that should be pledged. So we have not got any new financing or we are not raised -- promoters have not raised any new funds. This was a requirement under the master restructuring agreement, that is why pledge has increased. There is no other reason for pledge to go up.
Q: Sir, like micro irrigation, you are such a brilliant player, sir, nobody can touch you. But no progress. Just little, little progress like 10%, 5%. Not big performance like outperformance like we can see the name of Jain Irrigation everywhere in micro irrigation. You are the number-one player, sir. How can you not able to capture the market share in that? I'm not able to understand that. Like government is also supporting micro irrigation as I'm living in New Delhi sir, I have seen a lot of projects, Nal Jal Yojana, micro irrigation, a lot of projects, a lot of farmers are doing greenhouse effect. Sir, why I'm not seeing Jain Irrigation, being the largest player of India, can you please explain, sir?
A: Yes. So I think Jal Jeevan Mission is different. That's part of our piping business. And micro irrigation is drip irrigation where you provide straight to the root zone. In that particular business, I can share with you over the last 2, 2.5 years, we have actually been gaining market share in the retail market where you sell to the dealers. And company has taken this policy or philosophy of moving away from the projects, which was very risky and long cash flows. And that is where we are going down. That's why overall, you do not see a big increase. But retail business, we are actually taking significant market share as far as micro irrigation is concerned. And for some of the other shareholders who have been tracking company more frequently, I can also explain, in the December quarter, some of our revenue could have been higher. There is part of micro irrigation wherein Andhra, Gujarat, Telangana and Tamil Nadu, these four states, the government places the order on behalf of the farmer. So we don't have a choice but to deal via government but supply to the farmers. This is different than the EPC project. Now there, we had opportunity to do more business. But knowing of the upcoming elections and knowing that it could mean one year of receivables, we did not take that business. So we are very focused on selling through the dealers, collecting money faster. And in that business, as I said, pure retail business selling to the dealers. Our receivables are hardly 10, 12 days. It's not even that level. So our focus is on creating business and going for the market share, where I will also generate significant amount of the free cash flow because idea is to continue to deleverage the company going forward, right? This year, standalone India business, we almost repaid about INR250 crores plus in the first nine months. So that has been -- we have not done -- there's a lot of good part of the business, which is helping us to continue to delever, and that's what we want to focus on. So we are not really focused on purely revenue, revenue number, but we are focused on increasing earnings and deleveraging. And I think another year and so on, we continue on that path and where company's net debt to EBITDA goes less than 3, between 2 and 3. And that's where the company becomes, I think, more stable, you get credit rating of A-. And then whatever earnings you have, you reinvest into the business for the future growth. I think that's what we would like to really focus on.
Q: Sir, in the previous con calls, you were talking about the EBITDA run rate of nearly INR1,000 crores. So when can we see these kind of EBITDA run rate in our business?
A: No, I think what I said is that we are close to INR600 crores for the first nine months, and we had indicated that we'll be close to INR900 crores at the start of the year. And we are still anticipating that we'll be very close to that original number despite the low 3Q we had and the growth did not come in Q3. So the next year, FY25, of course, would be a four-figure and a higher number because as we do more retail business, automatically, profitability goes up because net back is better in that business compared to the EPC projects. And also as the business grows, we have better fixed cost absorption because we will be using more capacity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
