JISLJALEQS - Jain Irrigation Systems Ltd. Share Price

Management provided an optimistic outlook for Jain Irrigation Systems Limited, highlighting a revenue growth of 17.4% in Q3 FY26, amounting to approximately Rs. 1,600 crore. Key segments contributing to this growth include Hi-Tech business, which grew 16% to Rs. 625 crore, plastic business rising 18% to Rs. 462 crore, and agro-processing increasing 18.5% to Rs. 509 crore. Retail sales showed significant strength, growing 24%, signaling a positive trend toward consumer demand.

For the entire fiscal year, management anticipates averaging a revenue growth rate of over 15%, with an expectation of continued strong growth in subsequent quarters. Q4 FY26 is projected to achieve around 20% growth, buoyed by favorable conditions for the drip irrigation business and a recovery in volumes due to improved demand as adverse weather conditions recede.

EBITDA margins are targeted to be above 13% for the year, with a focus on enhancing profitability through a better product mix and fixed cost absorption. While the EBITDA for this quarter was slightly reduced to 10.5% from 12.9% due to seasonality and inventory losses linked to resin price declines, management expressed confidence in recovering this in upcoming quarters.

Future initiatives include investments in food processing, particularly a beverage line expected to contribute significantly next fiscal year, alongside efforts to enhance penetration in existing markets and expand into untapped regions. The company is also poised to benefit from recent Free Trade Agreements that could facilitate exports.

Overall, the management remains confident, indicating a goal for FY27 to target revenue growth between 18% to 20%. They aim for improved operational efficiency and robust financial health, suggesting a positive trajectory moving forward despite challenges faced.

Question 1: "Could you give us some update on what is happening with filing the RHP and the structures of the JVs for the Bottling division and the Tomato Puree division?"

Answer: We are working with investment bankers on the IPO for our food business. We expect to provide clarity on its progress post-March results. The bottling beverage unit operates within Jain Farm Fresh, utilizing a collaborative approach without a specific joint venture. Our tomato processing JV with a Japanese firm has been formed, operating at a 51%-49% ratio, and should generate revenue beginning January 2027.

Question 2: "Could you tell me how much of the EBITDA degrowth was a result of inventory loss versus a lack of capacity utilization?"

Answer: In absolute terms, our EBITDA dropped from Rs. 42 crores to Rs. 33 crores, reflecting a 20% decline. Half of this decrease is attributable to inventory losses, while the other half resulted from reduced volume due to delayed seasonal demand. However, for the nine-month period, the EBITDA decline was limited, suggesting we expect recovery and overall growth by year-end.

Question 3: "What is happening with the receivable side of it in terms of the projects state-wise?"

Answer: Our government receivables have remained stable. While we anticipate recovering significant amounts in Karnataka, Maharashtra, Madhya Pradesh, and Rajasthan, the pace is slower than desired. We expect to reduce outstanding receivables by about Rs. 125 crores in the current quarter and around Rs. 350 to Rs. 400 crores in the following fiscal year.

Question 4: "Can you clarify the reasons for the net profit loss and how it might impact your financial performance?"

Answer: The net profit loss stems from a Rs. 23 crore book entry related to the new Labor Code and a goodwill write-off from a liquidated subsidiary, totaling Rs. 38 crores in non-cash items. Adjusting for these, the real adjusted PAT shows a profit of Rs. 16 crores for this quarter, suggesting strong underlying performance despite the reported loss.

Question 5: "What would be your EBITDA margins going ahead, especially for FY '27?"

Answer: Currently, our EBITDA margins average around 12.4%. For the whole year, we target over 13%. For FY '27, we aim to improve this to 14% or 14.5% as we project revenue growth of 18% or more. This improvement is driven by better product mix and absorption of fixed costs.

Question 6: "What is the current status of the Jal Jeevan Mission and expected disbursements from the government?"

Answer: In the current quarter, we anticipate receiving over Rs. 150 crore from government projects. We expect a significant increase next year, with disbursements projected at around Rs. 350 to Rs. 400 crores. The current figures reflect steady progress, and we expect further improvements.

Question 7: "What are your thoughts on the fundraising plan, particularly regarding the Rs. 500 crores QIP?"

Answer: While we received shareholder approval for the QIP, we have not yet acted on it. Given our positive business momentum, we prefer to wait for an opportune moment when the need arises for additional capital. Currently, we are managing well with our growth and internal accruals.

Question 8: "How do you plan to manage your debt repayment strategy going forward?"

Answer: We're comfortable with our ability to generate sufficient internal accruals for debt repayment, especially since Rs. 688 crores is due in the latter half of FY '27. We have repaid over Rs. 1,300 crores in the past three years, and expect to maintain this repayment pace while balancing investments in new projects.