Ladies and gentlemen, good day and welcome to the Jain Irrigation Systems Limited Q2 FY 2025 Earnings Conference Call hosted by DR Choksey Finserv Private Limited. As a reminder, all participant lines will be in the listen only mode 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 the star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Ashwini Trivedi from DR Choksey Finserv Private Limited. Thank you, and over to you, ma'am.
Thank you. Hello, everyone, and welcome to Jain Irrigation Systems Limited earnings call to discuss Q2 FY 2025 results. Today we have on call Mr. Anil Jain, CEO and Managing Director, and Mr. Bipeen Valame , Chief Financial Officer. We must remind you that the discussion on today's call may include certain forward-looking statements that may involve known and unknown risks, uncertainties, and other factors, and must therefore be viewed in conjunction with the risks that the company faces. Future results, performance, or achievements may differ significantly from what is expressed and implied by such forward-looking statements. Please note the results and the presentation are available on the exchange and on our company's website. I now request Mr. Anil Jain to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you. Welcome to all for second quarter results discussion and to also see what is the way forward. This has not been a great quarter in terms of revenue or the earning numbers, and it has come less than our own expectations. If you think in terms of YOY, because officially our business is not sequential, it does get impact with seasonality. While India business did not do that well in terms of revenue as well as overall growth, but other businesses, our subsidiary business for food or our overseas plastic sheets business did very well. So it kind of resulted into approximately 12%-12.5% negative growth, compared to the same period earlier time. But still company was able to clock close to INR 1,200 crore of revenue during this quarter and earned close to INR 140 crore, little bit less, EBITDA.
And for the first six months when you think about it beyond the quarter, it's overall on a PAT basis, our company has almost no earnings, even though EBITDA is for the six months, close to INR 318 crore. So when we look at what went right and what went wrong during the quarter, that both the businesses in India, where we sell drip irrigation to the farmers who are dealers, and we sell the pipes and other materials, similar materials also. Both of these did not do as well as anticipated. Primarily it was like a lot of rains across the area where we sell. On an average, rains have been about 20%-30% more than last year or similar periods, which augurs well for subsequent next 4-6 quarters.
But in this particular quarter, because of consistent incessant rains, it became an issue where fields remain wet and demand for pipe and drip, both could not pick up at the farmer level. In addition to that, there was a fact that there are some states where we could have done a little bit more business, but we could not, or we did not because the earlier recoveries were still not good enough and therefore we decided not to take that additional exposure. Some reductions linked to the project business where we have decided to kind of wind down the project business. That was naturally expected. All in all, company has done overall INR 2,674 revenue for the first six months. Typically, compared to our normal revenue, we get about 35%-40% first half and 66%, 68% second half.
It seems this time, for us to be able to meet our annual targets and numbers, we might have to do 67%, 68% kind of in the second half apart from what we could achieve in the first half. So when we think about that, what's going to happen in second half, I think with the kind of good rains which have been there and they're just stopping as we speak. Up to last week it has been raining across the country. A normal monsoon withdrawal starts end September, early October, but it has been delayed by about three weeks or so. So we are anticipating and that's the feedback from our dealers, marketplace, that things should pick up considerably post Diwali holidays and through November, December, and January to March, the entire five months should remain positive.
Some of the business we lost in this quarter, the first half, has been linked to some of the business such as JJM business, where we have a contract and those orders are going to come through. But I think they will come through in the second half. So that can be recovered. What has been lost would be recovered. We have recently got some additional orders related to solar water pumps, and that would also partially help us to reduce the deficit in the first half so that overall our annual target, we remain close to when we had started in April. Despite these reductions in the revenue and consequent reduction in the earnings, we have been able to maintain a better cash flow.
In fact, if I look at overall consolidated profile, we have reduced the debt by almost close to INR 57 crore during the quarter, despite this being a weak quarter in terms of overall revenue and earnings. If I look at the cash flow statement our overall investment into maintenance CapEx, et cetera, is almost same as last year at this time for the first half, close to about INR 94 crore. We anticipate that our overall spend on maintenance CapEx and small amount of growth CapEx will remain actually a little bit better than the last year. Having said this, if I look at overall as a company console level, including all the businesses put together, we have generated net cash from operating activities for the first half to the tune of almost INR 340 crore which last year for the same first half was INR 303 crore.
There is improvement in net cash being generated from operations, and that's a good number to have when we consider the fact that last entire year we had generated only INR 534 crores. To generate INR 340 crores in the first half I think is definitely positive. If I just speak about the current quarter, the overall for the standalone cash flow generated from operating activity is INR 198 crores. When you think about that it shows that the company has been able to manage its operations efficiently to generate a better cash flow, reduce the debt, and continue to focus on overall improving the balance sheet in totality. When you look at individual businesses our food processing business has managed to grow globally at about 6%. Our plastic sheet business for the first half again overseas has managed to grow almost close to 15%.
We have seen that while in India the businesses have been slow, our export business from India has also grown substantially. Too much of rain or these issues were a cause of concern, but where we could management focused in terms of exports or overseas business or the food business and that helped us to reduce the impact of negative business sentiment in the domestic market, domestic agriculture market. All in all, I think as where we are overall, we think the second half looks good. As I said, one, because partly rains have been quite good. That should generate demand itself. We have also seen the cash flow in the ecosystem. A lot of cash which was not released due to election and whatnot has been released as a direct benefit transfer to the farmer, which creates a better ecosystem.
That has also happened over the past few weeks. That's positive compared to where we were in July or August. Generally speaking, polymer prices which is our main raw material for the recent pipe business have remained benign. Even though recently oil had gone up all the way to close to $80. But it has come down again. If you think globally, whether China, Europe or U.S., those economies are not really growing that large. So we expect over next few quarters polymer prices, unless there's some kind of a global shock either way, polymer prices should remain benign and that should help to grow the business. Our planning in terms of the retail business and our overall strategy, generally speaking, between 2021- 2024 has done well.
In 2021, our total retail business was hardly, I think, around INR 1,200 crores, and March 2024, our overall business was very close to INR 2,400 crores. So over four years, between 2021- 2024, we kind of doubled the retail business. The idea over the next 3-4 years would be, again, double the retail business. Because as we deepen the network of the dealers and as we cover the additional geographical area, and also add a more urban thing to our piping sales, and try and sell pipes also beyond agriculture. While our primary focus has been agriculture. But we evolved and developed new product ranges which will cover all types of pipe requirement. Whether that's for drainage, or that's for rainwater, whether that's for fire sprinklers, whether for subsoil drainage, for flood control or desalination projects, or in power plants, piping systems are required everywhere.
So we have spent the last few quarters to evolve and develop all types of new piping systems where we can go and address markets beyond agriculture, which kind of partly help us de-risk and also de-seasonalize the business we have. I think that is what the quarter has been. While revenue and earnings, it has been not up to the mark, but I think in terms of cash flow and balance sheet, on that it has done quite well. We think in the second half as the revenues and earnings come back, and the discipline on the cash flow as well as earnings from the operating activities would allow us to create far more favorable, I think, financial health of the company. Not only financial health, but it would help us to actually set the stone or set the foundation for significant growth going forward.
As I had talked about the cash flow even in the current quarter at the console level, net cash generated from operating activities is about INR 212 crores. As I've said, overall, the basic company is well-poised. We have good production capacities. We have better network than we had a couple of years ago. Raw material prices are quite reasonable in Chennai. I think we're raring to go as the market starts to go and capture higher market share where we can. Apart from also consolidating on the higher growth we have in food business or our plastic sheet business where we have done well. With that note, considering these are the start of Diwali holidays, we would not like to take a lot of time from all the investors.
With that, I would like to close my opening statement, and we will be very happy to answer any or all queries which you will have. Thank you again.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjay Kohli. Please go ahead.
Yeah. Good afternoon, Mr. Jain. How are you doing?
I am doing fine.
Great. Mr. Jain, this clarification which you have made on the second half, that now we have to work harder and get to about 66%-67% for the overall to maintain the overall guidance. We are still maintaining the overall revenue guidance of close to INR 7,000 crore?
Yeah.
Or we have to because this quarter there has been a bit of a setback, do we sort of revise it little lower?
I think any of our guidance, it is a bit qualified with the seasonality. I think while this quarter was bad, if I look at the first half in total, if you look at it, Jain Irrigation Systems has done, compared to last year, almost INR 500 crores. Then let's say we were planning to grow at least double-digit growth, 10%-12%. We have lost INR 200 crores there. So total shortfall in the first half compared to our estimation is in total INR 700 crores. Out of INR 700 crores, based on specific orders we have in hand, which were not there this time and so on, I think about INR 400 crores-INR 500 crores will be covered. The remaining INR 200 crores, whether will be covered or not, depends on how strong the season is in the month of February and March.
That is a little bit difficult to say. I think, if our original expectation was this 10%- 12% growth, I would say at least 7%-8%. We are still calculating for sure. Anything above, despite this INR 700 crore reduction with the compared to estimation as a YOY comparison, we are still feeling okay.
Okay. Thank you. I'll rejoin the queue, sir.
Thank you.
Thank you. The next question is from the line of Praneet, an individual investor. Please go ahead.
Hello. Thank you so much for your time, [inaudible] . I have questions about basically the trade receivables. Right now, in the last 4- 5 years, we have taken a loss allowance of about INR 200 crores. I am curious about how much was it a factor of the government link projects and something else. You also mentioned in previous con calls that there are a few states like Andhra, Gujarat, Telangana, and Tamil Nadu that government procures on behalf of farmers. Andhra has a higher level of trade receivables. To what tune is the trade receivables in overall this particular channel of government procuring for the farmers, and how is it with Andhra's trade receivable situation at this point of time?
Andhra trade receivable is better than right now compared to, let us say, what it was in June quarter. They have been able to release some of the old receivables over last 4- 8 weeks. Indication from the government is that by end of November, early December, let us say before end of December quarter, they would be able to clear all the old outstanding. That is quite positive news. We saw over last 4- 8 weeks again, that from Gujarat itself, considerable amount of old outstandings were released. In at least two states, we have seen a definite positive indication of old receivables getting down to the lower levels. Overall, if we have the state view on orders on behalf of the farmer, there is no delinquency.
There is a delay, but as I said, two of these major states, we see significant improvement. We anticipate by December, everything old would go away and only the new receivables which we create now should stay. That is a positive development, and that is what you see that overall cash flow generation has been generally speaking better for us despite weak sales. Overall, the second part of the government which we have these EPC projects, against those projects, against those accumulated receivables over long period of time. We have taken some provisions over last few years. As we complete this project, over a period of time we have been trying to complete them and bring them to closure. Now I think over next maybe somewhere between 2- 4 quarters, we expect to more or less 90%, 95% projects would get fully done and completed.
The remainder of the cash flow should already come through between FY 2025 and the remainder of six months in FY 2026. We do not anticipate on our books any receivables left post FY 2026 linked to the project business, which is currently around INR 850 crores outstanding. We anticipate between FY 2025 and 2026 that entire portfolio should come through from where it is now.
We do not expect to take a further impairment loss of provisions going forward in the next 1-2 years. We expect to receive the rest of the amount, right?
I do not think it could be any significant sum. As we close the project, there could be small amounts here and there because you will not know unless you close the project and government does measurement, et cetera. It is a little bit of unknown. Based on all what we know and what we are doing, we do not anticipate. In 2023, I think 2022 and 2023, we took significant provisioning. We will not anticipate that type of provisioning related to receivables from the project.
Understood. One more thing about the tissue culture. Tissue culture division has been providing immense amounts of growth to the company, and you mentioned that it has also a significant EBITDA contribution going forward. I am curious about basically the inventory holding cycle of this particular business. As we are growing, because it is an organic product, it tends to be perishable, right? How long can it stay in our inventory before it has to be sold? What kind of inventory losses or inventory write-downs we need to take if the inventory stays with us for longer? What is the duration between the finished product and the sale of work? How many amount of days we can keep it as inventory after it is finished? On top of it, curious about the scaling process.
In FY 2023, we did about INR 50 crores investment in the business, and we managed to increase our production by around 20% from FY 2023 to FY 2024. Is this the maximum amount of increased production we can take out of the INR 50 crores we invested in FY 2023, or is there more to go? One more thing regarding the inventory. Right now, this year, I think we have around 206 days worth of inventory for the tissue culture business itself. How do we see this trend going forward? Is it going to remain in similar way or as it matures, it might go down a little?
I think there are a lot of questions in one question. But by and large, I would say that in the tissue culture business, which we have, we are growing plants. The plants are delivered to the farmers so that they can plant in the field. Just to take example of our main product, which is banana. Some of the farmers across the country, let's say, would be planting banana in January or even in March, over a longer period of time, depending on season in each geographical area. The amount of the inventory we carry is at a different stage. Let's say, a plant, once we start from a tissue, we generate a plant. A plant will be one week, then it will grow to two weeks, like that.
It will be with us at least, I would say, let's say for about six months, give and take, at different stages when it is growing. So let's say 24 weeks. I will have some inventory of two week old plants and some inventory of 24 week plants. The selling model for us is all our plants are kind of booked by customers saying that, "Look, I want" So now only I know that up to February or March, all my plants are sold. All customers have already booked the plants. As they get made, or as they reach the maturity of six months, so that they're ready to be planted in the field, they will get delivered to the farmers, and then we start new again in the cycle. It's an ongoing cycle.
Inventory is dynamic to the production and the market demand, both. I think as the overall tissue culture business for us has been generally improving over a period of time. We expect even in the current year business to grow, I think, overall to about INR 300- INR 350 crore type of scenario. That's because it's higher level profitability. Even if you carry a little bit of inventory, that part of the inventory gets paid because you receive advance from those farmers. When they book, they provide 30%, and on the day of delivery, you get fully paid. It has its own working capital cycle. All in all, I think, I would say for the total capital employed in the tissue culture business, we get, I think more than 20% return on that.
Understood. But you had a two-phase plan for this particular business, right? In the phase I, you wanted to reach INR 500 crores, and in next 5- 7 years, you want to reach INR 1,000 crores. So at each phase, what EBITDA margin could we expect and EBITDA contribution could I expect for the entire business, from this business to the overall business? What could the EBITDA margin profile be with individual level, and what is likely to be contribution level to overall business?
I think, the margin for last few quarters has been hovering around 30% at the EBITDA level. But some of the, what you call, the cost of the ingredients or the soilless media, et cetera, have gone up with overall inflation. So we are in process of actually improving our prices to customers so that we can capture that and maintain our overall profitability. So I think medium to long term, this level of profitability would be maintained, even though there could be particular quarter or two where it may go down till the time it gets adjusted in marketplace. But all in all, despite the new growth or higher growth in the revenue, we anticipate the profitability be maintained at this level. As we go along, you talked about INR 300 crores- INR 500 crores.
Now INR 300 crores- INR 500 crores would mostly happen with similar product lines which we have today. So more of bananas, more of pomegranate, more of potato, these four or five major product lines, more sweet orange, et cetera. But when you want to move from INR 500 crores- INR 1,000 crores, we will be adding other product lines, and they may not have the same level of EBITDA profitability. They might have 25% or so, for example. So it's very difficult to predict as of now what would be the EBITDA profit after five or seven years. But I think for next two, three years, we feel comfortable to say that whatever growth we are hitting to go beyond that INR 500 crore number, we should maintain this level of profitability.
Understood. Going along the lines with pricing itself, you mentioned that you could raise the price or what it might be dynamic. So in most of the products we operate in, we are the market leaders, whether it be tissue culture for banana or irrigation, everything. So does this market leadership position avail us a price premium on overall basis? Or how is it on off-- Because you mentioned in previous conference calls, despite the polymer price fluctuations, you're able to maintain your margins. With regards to piping, you told that you changed the price depending on the time, like dynamically, it was always varying. What about the irrigation business and tissue culture business? Do we charge a premium or how is it compared to competitors?
I think if you look at irrigation business, typically, in India, large amount of ecosystem of people who produce drip, etc. I think more than few hundred people. 300-400 people. Maybe there are more, let's say, 20 organized players and 380 non-organized players. Non-organized players will be typically 30%-35% cheaper to us. They will sell non-ISI products, et cetera. Among the organized players, where the states are providing orders themselves on behalf of farmer, pricing is similar for everybody. But there are markets like Maharashtra where everybody's free to do their own pricing. There, our product carry premium because of the quality, the brand, the knowledge transfer which we provide to farmer, etc. In case of tissue culture also, there are lots of labs in the country who provide tissue culture plants at, I think, 30% cheaper than us.
But again, because of quality and the higher output farmer gets for every plant he buys from us, they continue to pay us those higher prices. We always try and optimize, that whatever pricing we have should give us the necessary margins to continue to grow the business and reinvest in the business. But at the same time, it is cost competitive for the customer. That's the right balance we follow. But we have price leadership in both of these businesses.
Understood. With exports, your previous communication-
Mr. Praneet, could you please fall back in the queue for further questions?
Yeah, sure. It is one last question, if you don't mind.
Sir, actually, there are participants waiting for their turn.
Got it. Okay. Thank you.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Sumanthan Paul from Relay Investments. Please go ahead.
Yeah. Hi, Jain. I just want to ask, could you just mention the number of, I mean, could you just give the receivables which we have now completed in this quarter, vis-à-vis end of FY 2024? By when do you think you can practically assume, because we had earlier guided for closer to Q4 of FY 2025. That is the first question. I'll follow up next.
I think, if I look at March 2024, and if I understood your question correctly, overall, gross outstanding retail, where about INR 1,988 crore was the receivable at March 2024, which is now at INR 1,930 crore. When I look at the India business, which is more, let's say, receivable-focused due to the government subsidies and the long projects, it has improved overall compared to March. When you look at individual breakup within that, in terms of retail versus institutional, government project, etc. When I really see the government and non-government projects, government, I think, project outstanding September end is almost same as it was March end. The reduction which we have achieved is also on some of our export receivables. We have achieved receivables reduction in where government places order on behalf of farmers.
We talked about earlier a little bit about Andhra and Gujarat, where we have recovery of old receivable. There it has gone down. As we have said earlier, I think by March of this year, FY 2025, you will see significant improvement in this number of INR 1,930 crore because of one-time reduction as project receivables come through as we close the project. Then our overall days outstanding, DSO, would also be substantially improved. If I really look at right now, non-government receivables, they are maybe close to already 98 days or so. The government receivables are much higher. As I said, now sales are going down and receivables still remain high. As you go into March, you will see a substantial change.
Sir, I think was more pertaining to the ones, not the regular state of business, but just on the government side, because I think I've been hearing this, that we are on course of reducing the receivables. But like you said, there has been no significant number on the government part. Given the fact that I think Maharashtra election dates are around, and then there will be code of conduct. How do you think that thing will end up managing significant? Because this is something which has been a bit of a bother other than the factors which are beyond your control, like crop measurements. Can you just throw some light on this particular part, please?
Yeah. I think, specifically Maharashtra, we expect post-23rd November, things should get back to normal once the results are announced. But out of the project business, Maharashtra is not that big. Out of the receivables, Maharashtra has maybe 15% of the project receivables. Just to quickly cover what you are saying. If I really see, and I will just look at last four years. Quickly. So 2021, on the government projects, we recovered INR 500 crores. In 2022, we received INR 667. In 2023, we received INR 857 crores. In 2024, INR 436 crores. So when you look at just our last four years, on government projects specifically, close to about INR 2,500 crores have been recovered. But at the same time as we are completing the various projects, we have done also the new billing, which is maybe close to INR 2,100 crores.
If I see in last four years, new billing on government projects has been, as I said, close to INR 2,100. We have recovered INR 2,500. So overall, reduction of INR 400 crores has happened during that period of time. But today, we are not now doing our billing this year, maybe down to INR 250, INR 300 crores as we complete the last stages of the project. Next year, it may be down just to maybe INR 100, INR 150 crores. That is the remainder part. But what we need to recover around INR 850 plus whatever is the remainder billing I spoke about. So over the next two years, close to maybe INR 1,150, INR 1,200 crores would come. That way, overall receivable, currently, as I said, INR 1,930 is the overall receivable.
We expect this out of that, about INR 800 and odd crores will simply go away for all the time, and company's receivable size will be down to INR 1,100 crores of all other businesses which are there.
I really hope so because I think the reason why you said a lot of people are doing good business with government as of now, but I think that is the reason why we are having the current market cap, because there are too many past activities for which we are overdue. One more thing I just wanted to ask. Do you kind of foresee that the EBITDA from our tissue business itself outgrowing or outpacing all the other segments combined together? Because that, I think, is the jewel in your crown currently. Is that less receivable, higher EBITDA kind of margin where you have a leadership and Jalgaon specifically being that banana hub for not only India, I mean, mostly going for export.
So on a longest view, do you kind of foresee that the EBITDA from tissue itself should outgrow or be more than combined other businesses together?
See, so let's say even tissue culture grows to INR 1,000 crores, and at 30% EBITDA, if you maintain, it will be INR 300 crores. But drip today, let's say INR 2,000 crores with 15%, 16% EBITDA is already more than INR 300 crores. And drip will continue to grow going forward as well. So when we look at businesses, we are looking at the idea is that the drip, as we move forward, once the projects are out of our life cycle, my normal receivable cycle on drip is also quite long. Retail cycle of drip would be less than 30 days in terms of receivables. And on that business, to move as we improve production capacity utilization, move from current 15%, 16%- 18% EBITDA, that could provide great ROC as well as less than tissue culture is providing.
Our focus is not just on absolute EBITDA, but overall improving the ROC cycle. And there, the idea of going forward, as we use this government receivable, as they come back, we use to deleverage ourselves to pay off all the sum debt and NCDs, et cetera. The idea going forward that individually, as per the new business cycle, the retail business cycle, whether for drip or whether for pipe or tissue culture, should all generating north of 20% ROC is for sure. So that's where our focus is on. That's where we want to bring our working capital cycle to. And while drip might be 16%- 18% EBITDA, pipe maybe 12%, 13% EBITDA, tissue culture maybe 30% plus EBITDA. But overall, then when you look at capital involvement, then each of business should be focusing on more than 20%.
I think definitely we see 2026 onwards achieving these numbers.
Just one small last personal thought, sir. I think we've been trying to be aggressive, but fortunately or unfortunately, we've been falling below our guidance. I would really hope, sir, we have a time where we are at least able to at least meet the guidance which we are giving, and perhaps exceeding that would be beneficial because we are really far off from where we should be. So that's a personal comment. Thank you.
Thank you.
Thank you. The next question is from the line of Praneet, an individual investor. Please go ahead.
Yes, thank you for the chance again. I was curious about the exports. The company was expecting to achieve around INR 30 million from the Q1 of the partnership between Rivulis and us. So how are we on track with the particular plans of that? And in Q1 of this year, we did INR 86 crores of revenue from exports. Do we expect to follow the similar run rate going forward in the year? And out of this INR 86 and overall contribution over the year, what is expected to be contribution of Rivulis and other direct exports from Jain to neighboring countries?
I think generally speaking, exports are improving. Apart from the good exports which we had in the first quarter, this quarter also, we have registered very good number on export growth. It is combination with Rivulis of other customers which we have in totality. In fact, if I look at in this second quarter, overall exports we have registered close to about 14.5%, so almost INR 100 crore, I think we had in the second quarter. For the overall first half, our exports are at INR 188 crores as against last year's INR 146 crores, so registering 29% growth. It is combination of Rivulis plus others. There are some other, I think, projects related to exports which are in pipeline as we speak. Order flow is also good from Rivulis as well as other customers.
We feel quite okay on the export side in terms of what is in pipeline or what we see already, kind of, we have view on it and the rest. That export, what we have maintained this year, first half, 28% growth, I think would be something that is our target for the whole year to maintain similar level of the growth.
But in next 2- 3 years, how do we see this trend going forward? Because you mentioned, highlighted Bhutan in one of the earnings calls, saying that we have been giving a significant amount of product to Bhutan, and we are also expecting it to go to other neighboring countries. Because as part of the partnership, we are not supposed to go further than that, right? It is only mostly neighboring countries for the irrigation business. So how do we see the direct sales from Jain to neighboring countries going forward? To what quantum can we expect sales from neighboring countries in the next 2- 3 years, that is direct INR 200 or INR 300 crores? From Rivulis itself, how do we expect these revenues to grow in the next three years?
Because, right, we expected $30 million in the first year, and I don't think we are close to that yet as of such. But going forward, can we expect $100 million run rate for this particular partnership, or how is it going to be?
I think the idea over long term is there that we should grow to that level. As of now, the first stop was to go and hit that 30 million number. Company, let's look at overall exports, right? This year, our target is cross INR 500 crore total exports. That's not just irrigation export, but also piping. I think we have some good traction on piping. We export plastic sheet and drip irrigation. Our internal target is, while this year we close cross INR 500 crores. But the strategy which we are setting up is that over next 3-4 years from that INR 500 crores, how do we double the exports of the company and take it to INR 1,000 crores.
Good part of that, apart from Rivulis which I mentioned, has to come from the piping exports, has to come from nearby countries where we can sell irrigation. If you think about Bhutan and Nepal and Bangladesh and Sri Lanka, etc., these countries do not have very large budgets of their own. So they will depend typically on multilateral funded projects to improve their agricultural irrigation system. We are working on some of these. If they come through, then that would give a big leg up to this growth potential in the region. Meanwhile, currently, we are supplying to Bhutan, and I think as I said. So what you see this year, first half growth of 29%, means we are selling more to Rivulis, we are selling more to nearby countries, as well as our pipe exports are also growing.
As I said, this particular quarter, in fact, exports have grown close to overall 15%. Within irrigation growth was 48%. Again, quarter-to-quarter variations can come, but generally speaking, if we are thinking that domestic market in India will grow to 10%-15%, our thought process internally is that exports must grow 20%-30%.
Understood. I think plastics has lifted the boat for the last two, three years very much after, especially with the drop in revenues after our sale of international business. Plastic has taken it up, and we've been growing significantly in the plastic division. You mentioned that plastic sheet division especially has been giving you north of 20% ROCE in the overseas business. How do we see that panning out going forward? What is the volume expectation, let's say amount expectation we might see in the next 3-5 years for only the overseas division? How big is it in the plastic division on overall basis? One more thing about piping is that you also mentioned you wanted to go to the urban markets and actually grow apart from the agricultural use at this point of time.
What are the efforts we are putting into this, and how can we make inroads? In the next 2- 3 years, can we see that we actually meaningfully get market share in this particular urban or residential market? Or how do we see it?
I think I will just break your question into two. One is about the overseas plastic business and one is piping. If you look at overseas plastic business, that has done well. I think if I look at just the first half, this business has grown 15%. Most of economies in Europe or U.S. are growing 2% or 3%. So overall, our business has been doing well. But because overall economic growth is not very high, as long as we maintain this 10%, 15% growth I think through mostly organic, but maybe some inorganic aligned opportunities, that would be good. And it has a good ROC, good level of profitability, because I think that business also has maintained close to now 13%, 14% EBITDA. So our long-term plan is to be about 12% EBITDA. And it is somewhat a commoditized business, right?
But within that, we have some value-added products for the U.S. building market, et cetera. So it is not plastic more, you could look at as a building materials product as part of our portfolio, and as I said, doing well. We expect to continue to do well, despite headwinds in some of the markets around the world because of high interest cost, et cetera. Now they have started bringing down the interest cost, so hopefully their economies spur more. And we have strong balance sheet overseas, so that looks good. In terms of domestic piping business, overall plastic, as you rightly said, has done quite well for us to take the company out of difficult times. And it really supported us. And again, this quarter was overall weak for all product lines, including piping.
But generally speaking, I think we are very, I think, not just ambitious, but we feel very confident about piping business because whatever business we have, close to INR 2,000 crores or whatever that size is as a plastic business, we are still in only limited part of the country selling our product. So larger rural area, we still cover other geographical parts of India. And within the areas we are already operating, selling to urban applications such as plumbing, residential buildings, et cetera, that whole portfolio has kind of built. We are still slow on uptake on building distribution into urban areas. But I think you will start seeing maybe from January quarter, a lot more revenue coming from this particular aspect.
Again, if we are talking a little bit of medium-term, three-year plus scenarios, we are very gung-ho on the plastic business especially, because that particular business is not linked to any subsidies, it is not linked to specific government policy. There is still lot of demand in that sector. As we increase our availability and our dealer base into areas where we are not operating, and despite the fact there is a lot of competition, but there is always a market for good quality brand, which we have. We might be operating just in 30% of the market, which is focused on quality, but we would still be able to get certain market share there. All in all, very positive on the plastic pipe business in India. Overall, quite happy with the overseas plastic sheet business. But I will not say overseas plastic sheet business can do miracles, right?
Because those economics grow small and the numbers we already have, whether ROC, whether growth, profitability are already good. To maintain that would be nice, but stupendous growth one would anticipate would come only from India plastic piping business.
Understood. But I think we primarily grew in Plastic division because of our innovation, right, during projects or whatnot. What was the project size in the overall plastic business? Because you mentioned that there is a small that you are doing EPC or projects with. What was the size of that? Going forward, you also advocated for the point that you wanted the entire piping industry, especially PVC, to get together to join a coalition just to enter the market similar to cement or other pipings. How is that going so far, and how do we expect us to enter this market? Because you mentioned that you have been slow in entering the residential and these markets, right? How are we expanding our distributor network right there?
As I said, we continue to grow the piping business into new areas as well, where we are developing new dealer networks. I answered your specific question related to plumbing, et cetera. There we have been slow, but the normal retail business, we are already growing across the country. In terms of the EPC part in piping, we have not taken any new EPC projects in piping for last three years. We have only completing, and most of the existing projects we have completed. One last project, which is for drinking water supply in a large city we need to complete, I think over next 12 months, maybe that gets completed in FY 2026. It would be done and over with. That would still bring about INR 200 crore of still additional revenue to us as we complete that project.
But thereafter, our focus is on retail because again, retail brings best ROC and huge amount of volume growth with excellent working capital.
Got it. So, going forward, we want to reduce the debt by a combination of infusion, receivables and all of that, right? How confident are you going forward? You mentioned that you will be probably repaying about INR 200 crore a year in overall principal payments and whatnot just by keeping up with the payments. How do we see that we expect to prepay, how much do we expect to prepay as soon as we get the money? And how are we planning on repaying it? Because right now the EBITDA has been under pressure due to headwinds and whatnot. In the case this is going to continue for the next few quarters, what is the plan for the company going forward to make sure they keep up with the debt payments? And how are we planning on prepaying the debt and deleveraging the overall business?
Yes. I think we did not have any pressure on repayments even though business was down this particular quarter. As you saw, we have overall reduced the debt. Between now and March 2026, we have close to INR 300 crore of debt, which is falling due for repayment. That will get repaid on the due dates based on the internal accruals plus the receivable collections which we have from the government projects combination. There is enough room or cushion there where we do not have to worry about repaying the debt. The other part is the 0% NCDs we have in India. A part of them needs to be, again, paid between, overall, that needs to get repaid between now and 2028. So we have about three years to pay off that about INR 800 and odd crore of those NCDs.
So between, again, our accruals, even at the current level of accruals, let us say just March 2024 level of accruals, without even growth, and some receivables coming from the project should suffice to provide for full repayment of those NCDs. So after the payment of these NCDs, as well as normal debt, which is falling off between now and 2026, what would be left would be only INR 1,500 crore cash credit, working capital debt into the main company. That by then, hopefully, EBITDA is INR 700 crore, INR 800 crore. So then you can sustain INR 150 crore of interest or lower interest on INR 750 crore of EBITDA. So we do not foresee that as an issue thereafter. Generally speaking, we had a big debt issue three years ago. We are quite balanced now on the debt issue. It is no more a concern.
Of course, it needs to get repaid in I think over two, three years. Majority of debt will get repaid through internal accruals and better working capital management. Overall, our equity is INR 5,000 crore, debt is INR 3,500 crore. As we go along, debt will continue to go down as profits come in. So debt-to-equity ratio would be, I think, going forward less than half. All in all, I don't foresee debt as an issue.
In the Agro division, I think we were not able to concentrate on the division because we were going through a little bit of trouble in the main company. How do we see it going forward? Many companies in the space get onto the PLI scheme to grow their businesses in a very effective manner, because government support was there. How are we going forward on the CapEx of this and capacity utilization on the overall basis? Scaling up production in this business also is very capital intensive. How do we plan to sustain this growth we are expecting of 10%-15%, despite it being a mature business? How do we see that going forward? In terms of the spices also, are we also planning on catering to the international markets, such as exports?
First quickly, we do export. Actually out of agro processing business, almost 40%, 45% is already being exported to 50 countries around the world. Second, we already have good level of production capacities. I don't think we need to put lot of CapEx to take the revenues to the next level. As things are stabilizing overall into the business, I think next three years we can grow, especially India business. Food again has two components, India and overseas. Let's say this year, if we do INR 1,800 crore, let's say India will be INR 700, INR 800, and overseas is INR 1,000, INR 1,100. That's the breakup. Overseas is doing quite stable, and as, again, those economies are growing 2%, 3%, we should maintain growth of 8%-10% overseas business on annual basis.
The India business, as we use more production capacities, we will have ability to take this INR 1,600 crores to maybe over three years to INR 1,200, INR 1,300 crores, depending on the market and the demand. There is a competition, and people get PLI and all of that. That is true, and we were not there at that point of time. Because you said that business is working capital intensive, because that is the nature of the business, that you process inventory in short period of time and sell over a longer period of time. We are also conscious of that fact, and as a group, as a combined, consolidated entity, we want to take our working capital cycle, free cash flow, we have a focus. So we won't be investing that much more unless the business terms change to improve working capital cycle.
But I think next two, three years, we have a clarity there. Without putting too much of new capital into the business, we will still manage this level of growth which I am talking about, as well as better earnings.
So we do not expect to see substantial any debt reduction from the main company side to infuse into the business right now?
I did not get your question.
Sir, I was wondering if the main company wanted to invest further into the subsidiary to improve, let us say, most of its working capital debt, to reduce some of the working capital and further increase equity. That is not in the books right at this point of time.
No, no. We would not be investing new money out of the parent into the subsidiary. I think we would expect subsidiary on its own to improve its balance sheet.
Understood. Sorry for bothering with so many questions, but one last one.
Sure.
Sir, the time has exceeded. We will move on to the next question. Okay? It is from the line of Sanjay Kohli from Gold Stone Capital Group. Please go ahead.
Sir, I wanted to know the relationship with Rivulis in the domestic market, basically. They are selling to them, they are doing their own brands, they are our competitors. What is the trade relationship with Rivulis?
They are-
For drip irrigation. They are competitors.
They are our competitors. They have their own business, we have our own business. We compete with each other as per the Indian market.
Where do they source? How do their products? They have got manufacturing sites here in India as well?
Yeah. They have manufacturing sites. They have been existing here. I think they are manufacturing here for more than a decade. It is quite old. They operate on their own. We do not have any view into their business. It is an arm's length market competition.
But we are exporting to them also. We export to them. We have our investment in their parent company. They are competitors here. They owe us money on a trade basis. They are our customers as well.
Yes, sir. This is part of a complex international deal. We did a deal. We got a $500 million valuation for our business from Temasek. That helps us to reduce our debt by $350 million. We continue to hold a stake into the company. They continue to buy product from us. We continue to compete with them in India. Those are the facts. They are all transparent. They are all arm's length. They are all market-based.
Do they have any tech which they provide to us for our products?
No. We have adequate tech. We run a global company. So we have every technology which we need to sell in India or any other place.
Okay. Great. Thanks.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to the management for their further closing comments.
Thank you. Thank you all for a lot of questions and a lot of insightful questions. Overall, as I said, this quarter was a weak quarter for us. Because again, this is typically weakest quarter, but it was even more. We were surprised, despite so much of rain, overall rural demand was slow. All the feedback we have from customers is that it would pick up post-Diwali. With some additional specific projects or work or orders we have, which we have negotiated, we feel second quarter would be much more robust compared to this particular quarter or the first half. Within organization, we are trying to keep up the momentum and tempo to try and meet the original target. We might fall a little bit short of the original target.
Especially, I would say maybe on the revenue side, but with whatever efforts we are doing on the cost and with the product mix, that at least on the earning side, we will try and stay what we had guided at the start of the year. Having said this, generally speaking each business in medium term, whether irrigation or piping, our focus is to continue to improve working capital efficiencies, because that would generate that free cash flow, which would allow us to continue to deleverage ourself while growing at the same time and unlock the value for the business. Overall, company maintains its leadership in technology, in marketplace, in brand, in pricing power. Some of the legacy issues like this project receivables is still holding us back.
I think as that gets sorted over the next few quarters, we as a company will be more nimble, and will be able to move faster during that period of time. This quarter, again, not great, but overall, I think with the positive free cash flow we have generated, a lot of cash we have generated from operations. The fact that we have been able to reduce the debt during this quarter. Ship volume of generally overall team working towards a particular goal. As demand starts coming back, I think second half should be much better. Overall, I think when we speak in April or May, hopefully we see a positive outcome for FY 2025. We thank you for all your interest, and I wish you, again, everybody, a happy, prosperous Diwali and good time with your family. Thank you.
On behalf of DRChoksey Finserv Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.