Bhavarilal Jain, the promoter of Jain Irrigation Systems Ltd is from farming community with modest means. Initially the trading in daily needs of agro community like kerosene was engaged in by the promoter later the product range was augmented to include items like tractors, sprinklers, PVC pipes and other farm equipments. The capital accumulated from these trading efforts was finally channeled into manufacturing when the promoter took over a sick industrial unit making refined papain in 1978. Soon the operations of this company were stabilized and export market in North America was found with attendant benefits in the long term growth of promoter’s plans.
The success gave rise branching into PVC pipe making in 1980 with a modest capacity of 300 MT which today is standing at 206, 000 MT per year with emphasis on research and development to segment the market with new products. In 1989 Micro Irrigation division was added as a service facility to help farmers manage scarce water resources. The company leveraged its pipe manufacturing to offer to the farmers a one stop solution to their water management, a crying need in their back yard, a Gujarat where the manufacturing is located is known for the draughts and perennial water shortages forcing the farmer’s ways and methods to optimize water use. The initial foray in pappain making was strengthened in 1994 when the company set up food processing unit with facilities for dehydration of onion, vegetable and production of fruit purees, concentrates and pulp. These plants are ISO 9001 & HACCP certified and Meet International FDA statute requirements. Combining the modern technologies of the west with the vast, mostly untapped agriculture resources of India, using the local human resources and inculcating the culture of excellence in quality and total customer service.
With over 3000 employees the marginal farmer Bhavarilal Jain is today championing the cause of farmers supporting them, enabling to manage water and help them to market their produce to a wider market, preserving their efforts to reach the final consumer. The installed food processing capacity is 131, 200 MT per year. It has added capacities through strategic acquisitions to cover mango pulp processing,
No doubt the present tie up with Mekroot of Israel is another well calculated venture to tap the fresh water supply market in India, anticipating the potential in this segment for private players.
Please read http://www.fingad.com/review/fresh_water_crisis_%E2%80%93_knocking_at_india
http://www.fingad.com/review/jain_irrigation___irrigating_the_world__
to understand the potential markets in fresh water and agriculture from fingad reviews by me and Prakash (Jain Irrigation)
Financials
The financials of the company are given below
| Rs Millions | Dec ' 07 | Sep ' 07 | Jun ' 07 | Mar ' 07 | Dec ' 06 |
| Sales | 4117.2 | 3292.6 | 3274 | 4493.9 | 3023.1 |
| Operating profit | 819.8 | 613.4 | 550.9 | 714.9 | 559.9 |
| Interest | 295.9 | 264.5 | 242.8 | 221.3 | 167.6 |
| Gross profit | 554.6 | 429.2 | 410.7 | 651.5 | 408.8 |
| Depreciation | 102 | 95.2 | 91.9 | 83.9 | 77.8 |
| Net profit / loss | 448.5 | 300 | 282.2 | 258.5 | 313 |
| Equity capital | 676.5 | 662.4 | 651.2 | 614.8 | 584.1 |
| EPS (Rs) | 6.63 | 4.53 | 4.33 | 4.2 | 5.36 |
| OPM (%) | 19.91% | 18.63% | 16.83% | 15.91% | 18.52% |
| GPM (%) | 13.47% | 13.04% | 12.54% | 14.50% | 13.52% |
| NPM (%) | 10.89% | 9.11% | 8.62% | 5.75% | 10.35% |
The December 07 quarter is marked by good growth. The sales has increased by 36.19 (YoY) and 25.04% over previous quarter. The earning per share went up by 46.36% over previous quarter and 23.69% over past year. There has been matching growth in gross profit and net profit. It is an impressive performance with good gains made at operating margin and net margin over the past year and previous quarter.
Summary
Jain Irrigation Systems is India’s biggest and World’s second largest manufacturer of micro-irrigation systems. The increasing outlay and focus on agriculture by the government and the privatization moves on fresh water distribution has opened a larger market for the company. The company business is made up of micro irrigation 33%, piping 32%, agro processing 11% and plastics 20%. The company is potential market lies in 67% (140 million hectares) of rain fed cultivated land in India. The government has proposed to introduce micro irrigation in 14 million hectares between Fy 07 -12 at an estimated cost of US $ 15 Billion. The piping market is growing at a CAGR of over 30% and this is expected to continue in the current year as well. India agro processing industry is at its infancy. Although India is second largest producer of vegetables and fruits in World, the processing of these farm produce is limited to 2% of the output. This is expected to grow and show also the fortunes of the company.
The promoter has built around the farming community needs his industrial venture and with business is poised to tap the opportunity in fresh water market that is unfolding in India. Privatization of water supply currently monopolized by the local governments needs to be addressed before their plans in this sector can get results. But the tie up with Mekroot will give muscle to compete for such projects in near future. With strong manufacturing base in PVC pipes, Water Sprinklers, and other related water supply and distribution solutions and above all a performing management the company is poised to grow further and stronger.
The risks in investing this company arise from any changes in the Government policy as well the inability of the company to integrate the new acquisitions with their main operations.
The stock is a long term buy especially when the prices reach Rs. 570-610 region in the current downfall.