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Jalgaon blues

Will a change in business model help Jain Irrigation regain investor confidence?

Photographs by Soumik Kar and Raman Pruthi

I still remember driving from Aurangabad to Jalgaon and the entire stretch would be barren land and farmers could barely get a crop a year,” says Ghanshyam Dass, recalling his first visit to Jain Irrigation’s headquarters, in 1987-88. “But now all you can see is green fields with very prosperous farmers growing three or four crops a year,” says the independent director on the company’s board.

Selling avalanche
Institutional investors fleeing the stock has led to a 63% fall against a 8% rise in the Nifty over the past year

 

As India’s largest micro-irrigation company, Jain Irrigation has certainly played a key role in bringing prosperity to rural India. With the central theme of agriculture running across its all businesses, the company supplies drip and sprinkler systems to farmers, is into food processing, PVC pipes and solar and renewable energy among other things. 

But right now, some of its stakeholders aren’t feeling very prosperous. Amid a huge sell-off by institutional investors, its stock is down 63% in the past year (against an 8% rise in the Nifty). Mounting debtor dues led to a yawning working capital gap which the company funded through debt, and that’s eroded profitability. While revenues grew by 22% on average since FY10, earnings fell by about 5% during the same period.

With its receivables position worsening by the day, Jain Irrigation was staring at possible losses as some of its foreign currency loans are due for repayment in the next 18 months. To regain investor confidence, the management is not only restructuring the core business, it is also infusing fresh capital. Question is will this be enough? 

Welcome change 

Not long ago, Jain Irrigation was a thoroughbred on steroids, with revenues growing 46% on an average and earnings growing by an equally impressive 70% between FY05 and FY10; the stock saw a ten-fold increase during that period. The market couldn’t get enough of the stock, it seemed. That changed two years ago, when political changes in Ma

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