JISLJALEQS - Jain Irrigation Systems Ltd. Share Price

In the Q1 FY26 earnings conference call, management provided a positive outlook for Jain Irrigation Systems Limited, anticipating continued growth despite a challenging deflationary environment. CEO Anil Jain noted that while the company experienced only a 5% revenue growth in the first quarter, the overall guidance for the year remains optimistic with expectations of surpassing 15% growth. Significant growth in the Hi-Tech Agriculture segment was highlighted, achieving close to 30%, while the plastic segment saw a decline of about 10%.

The company recorded EBITDA growth, increasing from 15.2% to 16.6% in the Hi-Tech Agri segment, while agro-processing EBITDA improved by 1.6%. Management expects improvements in working capital over the next nine months, primarily as overdue government receivables are settled, targeting recovery of INR500-700 crores by mid-2026. The Jun quarter concluded with a revenue of approximately INR1,550 crores and gross debt of INR3,590 crores.

Key forward-looking comments included the expectation of significant growth from the drip irrigation business, buoyed by a good monsoon, and a strong demand for solar pumps, which saw sales rise from under INR2 crores last year to INR50 crores in the current quarter. Export growth surged by 40%, from INR88 crores to INR130 crores.

Management emphasized a commitment to maintaining a strong EBITDA margin and indicated that the long-term financial structure aims for debt levels to decrease below 2x EBITDA in the next 18 months while continuously focusing on increasing EPS in the medium term. The anticipated capex for the year is aligned with previous years, suggesting financial prudence in future expansions to harness growth in multiple business segments.

Question 1: What sort of revenue and EBITDA number can we expect to reach at the overall level in the next 3 years?

Answer: We did approximately INR 5,800 crores last year and are targeting over 15% growth. In 3-4 years, we could potentially double the business size, aiming for 2.5 - 3 times growth in 5 years. Each segment will grow at different rates; piping at 15%-17%, irrigation at 12%-14%, and solar pumps could see substantial growth. Overall, maintaining an average of 15% growth is our goal, with a chance to exceed 20% based on upcoming changes and opportunities.

Question 2: Can you throw some color on the EBITDA as well as the overall and segmental numbers?

Answer: This year, EBITDA was about 13%. Forecasted margins include Hi-Tech at 15%-17%, Plastics between 8%-10% (targeting 12%-14%), and Agro Processing at 11.8%. We aim to maintain consolidated EBITDA around 13%-15%. Achieving 15% would be positive, with expectations to gradually inch toward 14% in coming years.

Question 3: Can you elaborate on value monetization?

Answer: We're actively working on monetizing our food processing subsidiary. With the groundwork laid, we anticipate a strong possibility of value realization in FY '26. This aligns with our goal of improving our financials and eventually enhancing shareholder value.

Question 4: What portion of the recent equity infusion was from promoter versus institutions?

Answer: Out of the recent INR 150 crores infusion, about one-third came from promoters while the remainder was from institutions, aligning with the previously issued warrants. We do not have plans for immediate further infusion but may consider it based on future growth needs.

Question 5: What is the status of government receivables?

Answer: Currently, there's around INR 750 crores in pending government receivables. We anticipate clearing about INR 350 crores before March '26. This will depend on project milestones and state government funding availability, which is affected by their broader financial commitments.

Question 6: What are the limitations that might hinder growth in the tissue culture segment?

Answer: While demand, especially for bananas, remains strong, challenges include climate risks and potential diseases affecting crops. We're actively mitigating these by focusing on production capacity and adapting planting practices to ensure consistent supply. Overall, we aim to expand nationwide beyond Maharashtra.

Question 7: How is the food processing side affected by food inflation?

Answer: We have been impacted by deflationary pricing, especially for onions and mangoes. Though lower prices affect immediate sales revenue, they may encourage higher demand downstream, improving margins in future seasons. We're positioning ourselves for growth even in this volatile pricing landscape.

Question 8: What are your thoughts on equity dilution and its impact on existing shareholders?

Answer: I empathize with shareholder concerns regarding dilution. Future equity raises will be carefully considered to ensure they're value-accretive, aimed at fostering overall growth rather than merely servicing debt. We are striving to bring down debt levels and improve shareholder returns without compromising their interests.