Jain Irrigation Systems Limited (JISLDVREQS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Jain Irrigation Systems Ltd. Q2 and H1 FY27 earnings conference call. Today, we have on call Mr. Anil Jain, CEO and MD, and Mr. Bipin Valame, CFO. As a reminder, all participant lines will be in the listen-only board, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anil Jain to take us through the company's business outlook and financial highlights, after which we will open the floor for questions. Thank you and over to you, sir.

I would like to welcome. Thank you very much. Marginous comment. As a company, we have incurred revenue of approximately 3,100 crores, higher about 4% in the last year, covering for the deficit which was in the first quarter. Overall, EBITDA is at 370 crores. I look at various businesses. What worked, what did not work. I mean, our overall trip irrigation business continues to be good. Thank you.

I'm going to press star, and... Again, to register for a question, you may press star and then 1.

So, I think what we have seen during first quarter and this quarter, piping, per se, domestically has been weak for us because, as you know, we sell almost entire quantities in two rural areas for agriculture applications. And that's where we have seen a lot of our competition sell significant parts into urban areas, into commercial building markets, so the plumbing. And I think that is the difference. What we have seen, commentary from other people, that rural area demand remains subdued for everybody. Because, you know, when the price goes beyond a point, when the resin costs are very high... Well, this quarter has been revenue neutral. Earlier quarter was negative growth. But for the overall year, I think piping would show positive growth. I think we should, I think all goes well. We should end up for the whole year at 8 to 10% positive growth in pipe also.

Got it, because we basically are expecting the... Market outside agriculture to grow, and that's supposed to mostly drive the growth of the year. And with regards to our receivables, I think in our standalone business, we have around 1850-ish crores remaining by the September quarter. I'm just trying to understand by March, how much of this are we expecting to receive? First, like, how much is it applicable to government receivables? And how much of it, of the government receivables are we expecting to get?

We have a breakup of 1860 and odd receivables which we have. About 800 crores is linked to the projects and the MIP, which is where the government plays a role in the government subsidy, is about 400 crores. This is the normal retail or institutional or solar and export, etc. So, out of this 800 crore project and MIP of 400 crore, which is about 1200 crore directly linked to the government, we expect Thank you very much. Not much on the project side, but the MIP is an ongoing business. We would expect these Basically, on a net basis, at least by 300 crore plus.

I'm just trying to clarify, because at NIP, anyway, we continue to revolve the credit around, right, anyway, we continue to make a more product as we have fulfilled. I'm just trying to understand the receivable side only related to government. And for the remaining payment we need to complete by March, are we looking for any other sources or this should be enough with other things combined?

This should be enough, right? Also other actual generation of EBITDA will happen, etc. So we are okay for March.

Understood, sir. And there's any projects left over in terms of projects? How many have we closed during the year? And will there any move on to next year also?

The projects which are going on now are about seven to eight. I think in the last six months, we have closed about 15 to 20 projects. But after we physically close the project, to get everything sorted with the government, it takes a little bit some more time. But what I would say is that, as I said, March 27, this 800 goes down to, let's say, by 300 crore net basis. So, 500 crore. Some additional revenue, you know, those 7 or 8 ongoing projects which are there, some additional revenue, especially one in Puna would be higher revenue because still good amount of work is still to be done there. But next fiscal year, we expect all this project business to come to zero and recovery also to be become zero. September, anything hardly should be.

How much worth of projects did we enter and revenue did we do this year?

The project revenue, I think first half, I think this quarter was small amount. I think we did about 14. We have about 60-70 crores. Most of other projects we have no revenue. When you close the project, there is some additional billing related to...

Sorry to interrupt, Ramish, sir.

We would request you to return to the question queue. Ladies and gentlemen, we request all the participants to limit themselves to two questions each and rejoin the queue for any further follow-up questions. Our next question comes from the line of Ankit with AB Investment.

Thank you, sir. Like, your high-tech ME microagulation has grown very well.

Basically, the next generation farmers who are coming in now are looking to do more valued agriculture and for them micro-irrigation or drip irrigation becomes essential part of the agriculture and not optional anymore. Flood irrigation versus drip irrigation. So that is helping that momentum and growth. And right now also water is short, right? So more farmers need to then use drip to conserve. With limited water, they still need to do agriculture. So, both are playing a role, but structurally speaking, we are seeing. Next generation farmers are looking and more and more farmers are looking for more valued agriculture. And as soon as that decision is made, that we are not doing merely agriculture for livelihood or for the government MSP, but we are doing this as a business to make money or grow, then they buy more drip irrigation. So structurally, we see Indian agriculture moving towards valued agriculture. So we think, you know, overall next decade or two as we as. More valued agriculture takes place in India because exports are also growing and domestic consumption of processed food is growing, which requires standard, more uniform agriculture commodity supply and with better logistic chain, right, to equate the product out of villages or small farms into the nearest market. When you look at all of this, what is happening, we expect that this would remain very positive going forward. On the other hand, you know, at a government level… Government, I think, is investing massive sums in doing these river linkages. And if you do the river linkages, then also it creates more water available. Because half the country today farmers don't irrigate beyond monsoon period. And then that becomes an issue. So structurally, I think this should remain possible.

My next mission will be on.

How far that has reached? What's the new development in that revenue or new project or new orders from that? The coffee is still very small. The largest, you know, crop, followed by, I think, pomegranate, and then would be things like we do mango or orange or coffee, those type of products. So as of now, coffee is positive. It's a good momentum.

Sorry to interrupt, Ankit sir, we request you to return to the queue for the follow-up questions please, as there are several other participants waiting for their talk. Thank you. Your next question comes from the line of Ravi Kumar with Vadaga Investment.

Yeah, hello. Congratulations, sir, on a good quarter, especially in a difficult environment. My question is relating to the growth capex that is expected for the remaining part of the year, specifically for the food division, given that we will be investing something for the tomato, JV and also additional beverage line. Or maybe the BioCar, additional BioCar projects, if you can give us just the growth capex, not the maintenance capex.

One was the tomato JV, I think. Some of the... One is proof of concept. We are already producing one of the best quality biochar in the world, but some quantities now need to go to the market, into the field, and all of that, which is taking place. Some carbon floods need to come through. All of that is going to happen this year. So growth capex should be... For that particular.

My second question is relating to the first half of the year. How much business do you think we let go because of the tight liquidity situation? Cycle Connection. How much business we would have let go.

Approximately, I would tell you that about 100 crore rupees of the micro-irrigation business in states like Andhra, Telangana, Tamil Nadu, etc., where money is slow to come, we have let go. And that's one part. I think in terms of, of course, we let a lot of projects go. We let some of the solar pump business go because the cash was not coming fast. And that would be also about 150. So, total somewhere around 200, 250 crore rupees of business we have let go, let's say in the first half. Because of one, we needed cash in hand to be able to, you know, repay the obligations in cities which are falling due. Plus, you know, just to bring a more working capital discipline in timeline, you know, let's, you know, I would just say Thank you. Directionally, we are moving to businesses which are more cash generation, right, and as you can see from last few quarters, there's so much of focus that whatever EBITDA we generate, how much we are able to convert into cash, and I think that would remain focused for next few quarters, right, which I think is good for overall health of the company going forward.

To a linked question, sir, the land monetization and others would add to liquidity. Do we have any view, Maharashtra Incentive, do we have any view when that money will come?

It's a combination, right?

Infantic, can you give a number for just like you gave 300-odd crores for the receivable?

March, about 100.

From the line of Amit Mehendale with Robo Capital, please go. is on second half.

How do you see the H2 second half shaping up compared to last year? Do you think we will be able to do some year-on-year growth or it will be flattish? How do you see it?

I think looking at this drought scenario, I am a little bit hesitant to commit. I think we will, with whatever I know and I can see, I think at least we will remain flattish. Whether we are able to do better the last year in terms of H2, that I would know, comment more on January, because what happens related to this climate change and also polymer practice, the climate change part, you know, you know water is not there or limited there. In some areas it increases the business opportunity, right? Because if there is less water, then farmer have to use lubrication. So it's a two-way street in that sense. But this high polymer prices which have been there due to uncertainty, Asian war and so on, if that changes due to geopolitical situations, meaningfully, I think between December to March, then I think we would look at... Thank you. Otherwise, as of now, Receivables.

Can you just elaborate what will be the project revenue for full year FY27 and 28 government projects, and is there any write-off that you expect from the receivables?

So, to answer second question, first, we don't expect write-off from receivables. Wherever we had expected write-off, those provisions we have already made in the past. So, as of now, whatever receivables you see on the books, all good. They will come. In terms of the overall project revenue, I think the first half revenue has been about 30 and odd crores and 33 crores as of now, total for the first half. And as I said, the second half could be 60 or 70. If we do 40 or 50 into the Puna project, remainder would be hardly about 20 crores. Kona is a water supply program.

Okay, sir. And how do we, like, if we were to model, you know, interest costs for next year, or FI28, you know, once our repayments are done, what will that number, any, you know, any estimates on that annual interest first?

Right now is 0% debt, the NCDs which we are paying. So that is not going to create major impact on the interest reduction per se. But what will go from the interest and finance line in terms of is the unwinding charges which get debited every time.

So that will be how much? I mean, I'm looking to quantify the interest savings for FY28. For the full year, 28 versus 27. Any ballpark getting an estimated number on that?

It might be about 20 and out crore per year because 800 crore which we are repaying this year is the 0% NCD which we are repaying.

And if I can squeeze in one last thing, I just wanted to check, you know, whenever, you know, polymer prices go down or the wall stores either way, how do you see that impacting our margins or, you know, like, how do you see, do you think that... Higher margin for the... To the end customer, how do you see that?

See, in terms of margin, even if you look at the current quarter, right, if you look at high-tech, our margins are around 18%, right? So, despite difficult time, I think we have managed to maintain those. We think in plastic business, we will have a better opportunity to take the margins, you know, our medium-term, you know, idea is that plastic business should We will go to 12% or so. In terms of margin, and in high-tech, maintaining 18 to 19 percent. So when the prices come down, I think the benefit would be the demand growth comes, capacity utilization improves, and that fixed cost absorption gives you that extra leverage in terms of improving margin by 1 to 2 percent.

Okay, sir. But do you expect, like, you know, once the prices go down, do you expect, like, you know, at least for a quarter or so, there will be some hit on the margins? Because our procurement costs would have been also higher, you know, in the, like, for this quarter or so. And if there's any...

They are not based on the latest price. That is, they are based on the average price of inventory we have. So, let's say we have existing finished goods, right, coming out of the old room, right. We do the new cost, average it out, and based on that we do the pricing. So we don't anticipate anything, any negative impact.

Okay, so perfect. Thank you very much.

Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference back to the management for closing comments.

So again, I thank everybody, thank all listeners. I think this has been a very good quarter for us, overall company, you know, for short term, medium term. And I think some issues related to Bichar, which I can talk about, are really good for long term as well. And the next six months remain challenging due to drought and higher prices of raw materials. And we remain watchful. We are taking a lot of steps to ensure that the business will remain at a certain level, will remain profitable, and the major focus will continue to remain on how to generate more positive free cash flows, to take care of the debt and reduction of the debt on one hand, and provide the necessary funding for the growth. for the next fiscal. Thank you again. Happy divine to everyone.

Thank you, members of the management. Ladies and gentlemen, on behalf of JAN Irrigation Systems Limited, that concludes this conference. Thank you, everyone, for joining us, and even now, disconnect your lines. Thank you.