Jain Irrigation Systems posted a strong Q1 with profits jumping four times to ₹58.5 crore and robust margins. The company has an order book size of ₹1,650 crore. Speaking to BTVI, Jain Irrigation MD Anil Jain says higher crop prices, a good monsoon and projects at hand will improve margins in the second half of FY17.
Q1 seems to be an operationally strong quarter. Can you take us through the highlights?
It has been a really very good quarter for us;the margins have especially grown a lot. Our revenue grew almost 4 per cent to ₹1,713.2 crore in Q1 compared with ₹1,643.3 crore in the same quarter a year ago. But that was expected due to muted response. EBITDA grew to almost ₹250 crore in Q1 from ₹230.5 crore. Two strong quarters are yet to come for FY17. Our profit after tax came at ₹58.5 crore as against ₹14 crore last year, substantially because of savings on interest on the back of the equity we raised at end of March 2016. So, all-in-all, revenue was less, but at an expected level. As revenue grows in the second half and with already an operational margin in Q1 with low polymer prices, we expect a very good year.
The plastic division has done very well in the first quarter. What’s the reason for the marked improvement?
Yes, the piping division has done well. We have been seeing this for the past few quarters. The overall infrastructure spending has started taking shape, at least from what we see in the piping business. We are seeing consistent orders in polyethylene pipes, which mostly go into infrastructure. We are L1-qualified in few tenders for 24×7 drinking water supply projects.
What’s the update on your agro-processing unit?
Our business in India grew 29 per cent because it was a hot summer and during a hot summer you get to sell more pulp, and it gets used in beverages. We had a slowdown in exports to markets such as West Asia, where we had some continuous disturbances and changing economic scenario. But we recently finished the processing season for mango — the largest product we have.
We have now built a processed inventory worth a sale value of ₹575 crore, within 70 days. We already have received orders for 80-85 per cent of that product, and it will get shipped within this quarter.
So even though the first quarter was muted for food business in terms of revenue, our overall internal target for full of FY17 is 20 per cent. But margins have been good during Q1 because prices of some of the raw materials such as onions have been low.
With an above-normal monsoon, how do expect the irrigation sector to perform in the next 2-3 quarters?
We expect a very strong performance on the irrigation front in the second half of FY17 primarily because of 2-3 factors. One, monsoon has been good. That means farmers will have access to water. Everybody has been sensitised by the government about micro irrigation after two years of drought. So, we see a secular growth opportunity in that segment.
Second, we have good orders in solar water pump and solar irrigation projects, which the Prime Minister talked about in the Independence Day speech. We expect more orders in that segment. And not to forget the higher incentives for farmers to buy micro-irrigation equipment when they get higher prices of crops such as cotton and sugarcane. Based on higher agri prices, a good monsoon and good project orders in hand, we expect the micro-irrigation business to grow more in the second half of FY17.