Ladies and gentlemen, good day and welcome to Jain Irrigation Systems Limited Q3 FY 2024 Earnings Conference Call. 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 star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ashwini Trivedi. Thank you, and over to you, ma'am.
Thank you, Sagar. Good afternoon, everyone. Welcome to the Jain Irrigation Systems Limited earnings call to discuss the quarter three FY 2024 results. Today we have on call Anil Jain, Chief Executive Officer and Managing Director, 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 be therefore 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 presentations are available on the exchange and are on our company's website. I now request 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. I would like to welcome all the participants, investors, and others on the call. This particular quarter, third quarter, was not, I would say, great in terms of overall trading. But when you slice the overall business, how it has evolved during this quarter. Well, the headline number is that business was about 18% lower for India standalone, and on console it was about 9.76% lower. But when you look at the breakup of that, when I look at the business we are really focusing on, the retail business, standalone it was down hardly by about 2%, while globally it was just about 1%. Major reduction, in fact, is due to the project business which we are unwinding. That is a known fact.
If I quickly look at the nine-month numbers as well. Standalone India, in fact, the retail side has grown almost 36% in the first nine months. Even globally, if I exclude the EPC government-related projects, overall revenue for the first nine months is up 19%. While this particular quarter was challenging, overall for the first nine months, we have good revenue growth in the business we are really focused on. Of course, Q3, the December quarter, was lower than our own budgets and our own expectations.
While we had spoken earlier about the fact that monsoon may not have big impact on H2, what has happened in November, December, that there were a lot of new untimely rains into areas which we operate in, et cetera, has caused a delay in the start of the season and the demand. It is expected as we speak around this time, things have started picking up. Our piping business is already now trending to what we would expect, and the irrigation business is also expected to maybe start within a week or so in terms of season.
This delayed season has caused partial reduction in the growth which we were expecting. As I said, overall, the retail part of the business, retail, the institutions, that whole thing, that is down by 2%. We could manage despite this adverse situation, climatic situation. We could manage it to almost bring it to the same level of the last year. But of course, the growth which we were planning didn't come. Our year two quarters were very strong. That's why on a standalone basis, revenue growth for the first nine months in the retail business is still about 37%, which is quite substantial.
That is in terms of the revenue growth. In terms of the earnings or the EBITDA as we compute and we have shared that in investor presentation. While standalone EBITDA came down by almost 18%, matching the revenue reduction.
Mr. Jain, we are not able to hear you. Ladies and gentlemen, the line for the management seems to have disconnected. Please stay connected while we reconnect the management line. Thank you for patiently holding. The line to the management has been reconnected. Sir Anil, sir, you can please continue with the remarks.
Yeah. Can you hear me quite okay?
Yes, sir. Loud and clear.
Okay. I am sorry for that issue in terms of communication. But I was talking about that overall-
Sir, we have lost your audio once again, sir.
Hello?
Ladies and gentlemen, please stay connected while we reconnect the management. Ladies and gentlemen, we have the management line connected back. Mr. Anil Jain, you can please continue with your remarks.
Yeah. I think I was talking about the EBITDA, that for the first nine months, EBITDA has grown more than 20% overall compared to the same period last year, in line with our expectations. In terms of working capital during this particular quarter, what is important to note, that if we look at gross level of working capital, that means inventory and receivables, both have remained almost at the same level they were end of September. That has not changed. At console level, it's about INR 4,000 crore, which is the same amount as of end of September.
But what has happened during this period, we have substantially paid off stress payables across different businesses, and that has resulted on a net working capital, that DSO, days outstanding against sales, has gone up. It's a combination of payables being reduced quite a lot, and also the other part is that the revenue has gone down. That's why DSO looks much higher than September. But when you look at absolute numbers in terms of gross working capital, whether for the standalone or at a global console level, inventory and receivables both are almost at the same level as of September. I think that's on the working capital.
Now, anyway, this quarter is now done and over with. In terms of going forward, what's a good thing? What is something which we need to watch out for? Good thing is that our overall focus on growing retail business is giving good dividends. As that happens, profitability will continue to improve as well, because retail business does generate a better level of profitability. When we really look at the receivable days, right now because of the whole old legacy receivables of the project, overall receivables look quite high. But when I look at India receivables, which is close to about INR 2,000 crore, almost about INR 900 and odd crore is linked to this project business.
The remainder of the receivables which are there, which are between domestic, other business and export, and others. Actual operating business, the retail-oriented institutions, what we do is close to about 60, 65 days of receivables. As we had planned, this has come down to, as I said, the business we want to continue and focus on. That is coming down to almost closer to two months of the receivables. As we go along and sell even more retail, as we do less project business, and as we recover older government receivable, overall the receivable numbers will keep coming down in absolute terms as well as the BSO basis. So that's on the, I think working capital.
In terms of underlying demand, overall we are seeing that piping business, as I said, the plastics overall has done. In fact, if I look at nine months, the retail part of the plastic business India was almost up 61%. Actually quantity growth was even a little bit higher than that 61%. So there our focus is actually dealing good dividends, and this is what we would expect to continue. Even high-tech retail business, that is micro irrigation plus tissue culture, for first nine months is up almost close to 21%, and we hope to maintain similar level of similar type of growth going forward.
One issue we need to watch out for as we move forward in the fourth quarter and thereafter next fiscal year, is what impact the government's Model Code of Conduct around election will have. While we are reducing the government related business, generally within the entire agri ecosystem, once the Model Code of Conduct comes, there is a general slowdown because of the whole campaigning, or farmers do not get Direct Benefit Transfers, so their ability to invest also becomes a question mark. That we do not know when, whether the dates of election are in April or May, and whether Model Code of Conduct comes mid-March or mid-April. That is uncertain as of now. That might have an impact or a slowdown which we cannot really quantify as of now.
But in terms of the rural factors, some of the negative factors which were there has been the fact that for example crops like cotton, which is important for us post November. A lot of farmers had not sold the cotton expecting higher price increases, so they did not have that much of cash in their hand to reinvest and start planting again, and they have delayed their planting. So some of these rural issues are continued to be there in terms of farmers cash flow and other things. As I said, despite that, we have managed to do the same level of business. The growth which we had in April to September, we hope there will be a positive growth again in the current quarter, and next year should be even more better year for us.
Generally speaking, as we are hitting this EBITDA close to INR 600 crore, as we had given in our investor presentation. Our target for the whole year was about closer to INR 900. The breakup of INR 300 crore in current quarter would be about INR 200 crore to come from standalone business in India, and about INR 100 crore to come from food and other businesses we have. So that's the kind of a breakup. As long as through March we don't have any election related delays or whatever we should be closer to that figure which we talked about of INR 900 crore, which was what we had planned when we started the year. Last year was about INR 720, and we were planning to have about INR 900 this year. So about trying to get more than 20% growth at the EBITDA level.
We have achieved that for first nine months and similarly as of now also we're hoping to maintain that for the whole year despite the fact that Q3 was slow. I think in terms of discussions these have been the issues, these have been the factors. Despite the slowdown in that third quarter and things have not really gone full scale yet in the fourth quarter. But overall we see our dealer base especially is now quite enthusiastic, is investing more, and I think as we go along directionally, strategically that will keep throwing more positive free cash flow.
The fact that during this quarter we also paid a lot of stress payable across all businesses should help us going forward because while stress payables they were creating certain issues in the underlying business. Most of these issues for the main JISL standalone business of India, we have sorted already in March 2023. During last nine months we have been working on also solving the issues within the food business, the plastic business we have, the NBFC which we have, et cetera. That is all getting worked out so that as we move into the next fiscal, all businesses will be fully stable, would be churning out overall good cash flow.
If I look at cash flow statement for the first nine months, I think at standalone basis, post working capital, net cash flow from operating activities post working capital has been about INR 338 crore and at a console level, that is about INR 190 crore. So good cash flow generation from the operating, even post working capital. As I said, on a net basis, because we have reduced payables almost close by INR 300 crore, that has an impact on our net working capital and also on some of the debt which we have to raise to pay off the net working capital. Hello. Hello.
Yes, sir.
You can hear me, right?
Yes, sir, we can hear you.
Message is going to everybody, right?
Yes, sir.
we can now open up for Q&A, right?
All right. 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 phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets only 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 Ankit Bhasin from AB India. Please go ahead.
Hello.
Hi Ankit.
Hello, sir.
Yes.
Sir, I want to know, the kind of numbers you are showing improvement, but the kind of the kind of faith in the company, how an investor will get about these numbers and the developments. Again, I have seen the statement, the pledging is being done somehow. How that faith will come? I know that company will cover and will make good number because you are number two in micro irrigation. I will come on that point again, but can you answer my first question, sir?
Yeah. See, in terms of faith or trust or [Non-English content], only our performance can create that, right? Structurally, if you look at it not one quarter but over a two-year period, we have said that we are moving away from government business, which you can see. We have significantly added to the dealer business. That one can see. Continuously, EBITDA has been improving. That is positive. Working capital cycle, again, if you compare over two years, it has substantially improved. But one quarter, this is structural change which is taking place, right? Post the debacle we had in 2019, 2020, 2022, 2023. Our company is going through metamorphosis. We are trying to create a new Jain Irrigation now. In that process, while we earlier sorted out the main core company here, we are now addressing also the issues with the food company or other businesses within the group.
I think we are coming very close to all of that so that we can have more consistent forecasting going forward. Having said that, partly all our businesses are part of the agri-value chain. With the climate change here or there, somewhere or else, there is an impact which one cannot foresee. But structurally, strategically, directionally, and if you really see over last two, 2.5 years, where we have started actively again engaging with the investors. Almost out of 100 things I would have said on conference calls or otherwise, about 80, 85 have come, and 10 or 15, we could not have foreseen, or there is climate change issues which have impacted.
In terms of the pledge, that was part of coming out of the master restructuring agreement we signed, that whatever new equity we had issued as a part of the restructuring, that came through as warrant. So whenever that will get converted into equity, it was a requirement by the bank that that should be pledged. So we have not got any new financing or promoters have not raised any new funds. This was a requirement under the master restructuring agreement. That is why pledge has increased. There is no other reason for pledge to go up.
Okay. Sir, I got that point. Now coming on to the business, sir. Sir, like micro irrigation, you are such a brilliant player, sir. Nobody can touch you. But no progress, just little progress like 10%, 5%. Not big performance like out performance, like we can see the name of Jain Irrigation everywhere in micro irrigation. You are the number one player, sir. How can you not able to capture the market share in that? I am not able to understand that. Government is also supporting, sir, micro irrigation. As I am living in New Delhi, sir, I have seen lot of projects, Nal Jal Yojana, micro irrigation, a lot of project. A lot of farmers are doing greenhouse effect. Sir, why I am not seeing Jain Irrigation, sir, being the largest player of India? Can you please explain, sir?
Yeah. So, I think Jal Jeevan Mission is different. That is part of our piping business. Micro irrigation is drip irrigation, where you provide straight to the root zone. In that particular business, I can share with you over last two, 2.5 years, we have actually been gaining market share in the retail market, where you sell to the dealers. Company has taken this policy or philosophy of moving away from the projects, which was very risky and long cash flows. That is where we are going down. That is why overall you do not see big increase. But retail business, we are actually taking significant market share as far as micro irrigation is concerned.
For some of the other shareholders in company more frequently, I can also explain, in the December quarter, some of our revenue could have been higher. There is part of micro irrigation where in Andhra, Gujarat, Telangana, and Tamil Nadu, these four states, the government places the order on behalf of the farmer. We do not have a choice but to deal via government, but supply to the farmers. This is different than the EPC project. There, we had opportunity to do more business, but knowing of the upcoming elections, and knowing that it could mean one year of receivables, we did not take that business.
We are very focused on selling through the dealers, collecting money faster. In that business, as I said, pure retail business, selling to the dealers, our receivables are hardly 10, 12 days. It is not even that level. Our focus is on creating business and get going for the market share, where I will also generate significant amount of the free cash flow, because idea is to continue to deleverage the company going forward, right? This year, standalone India business, we almost repaired about INR 250 crore plus in the first nine months. There is a lot of good part of the business which is helping us to continue to deleverage, and that is what we want to focus on.
We are not really focused on purely revenue number, but we are focused on increasing earnings and deleveraging. I think another year and so on, we continue on that path and where company's net debt to EBITDA goes less than 3x, between 2x and 3x. That is where company becomes, I think, more stable. You get credit rating of A- , and then whatever earnings you have, you reinvest into the business for the future growth. I think that is what we would like to really focus on.
Okay, sir. Now, last question, sir. On the food business part, sir, like your Jain Farm Fresh Foods, you have a brand this. Sir, I have not seen that brand in North India, sir, like in Delhi, in Rajasthan, in U.P. It has been popular in Maharashtra, that side. Why so that, sir? Can you please explain, sir?
Yeah, that's a good question. See, the food business which we have, it's close to almost this year will be roughly about INR 2,000 crore in revenue. Out of it, about INR 700 and odd crore will come out of India and INR 1,300 from overseas. The INR 700 crore revenue which comes out of India is mostly B2B. You must have seen Maaza as a mango juice. It is produced and supported by Coca-Cola. It's their brand. But we are major suppliers to Coca-Cola. Knorr Soup you have heard from Unilever. We supply to them some stuff. If you look at the ketchup by Nestlé, the tomato ketchup. There we supply them tomato paste. Our business in food in India is primarily B2B, business to business. That's why you don't see directly Jain Farm Fresh as a brand, because we supply to other brands. That's the nature of the business.
Sir, any IPO for coming year, Jain Farm Fresh?
I think as a part of possible value monetization opportunity, we'll definitely look at it, and we also have private equity in that business who owns about 20% or so. In consultation with them, we'll look at that opportunity. But as of now, our focus is to grow the business. I think EBITDA is expected higher this year compared to last year, and next year we are planning even more EBITDA in that business. As I said, focus is on earnings and cash flow for the medium term and deleverage.
Okay. Sir, you can make this food business a big business because if you are supplying to such big brands, Jain Farm Fresh in North India can become a big brand if you strategically plan it. That will be my last request to you.
Sure.
Thank you.
Thank you.
Thank you. The next question is from the line of Govind Ranjit from Mott MacDonald. Please go ahead.
Hello, sir. Are you able to hear me?
Yeah.
Sir, you are sounding a bit muffled. If you are using the speaker mode, can we request you use handset mode, please? Hello? Mr. Ranjit?
Yes.
Please go ahead with your question. I am waiting.
I have one question. Only one question. Can you please tell about your solar business? Is there any plans to expand?
As of now, we have kind of decided to freeze that business. We did lot of solar pump business. Again, it was linked to the government and long payment terms, and that is why we are not focusing on that business. But we are still exploring a possibility whether we can. The solar water pump business in a cash and carry mode. But impact, if any of that, would come only next fiscal year. It won't come anything in this quarter.
Okay, sir. But in the website, I am seeing that there are solar rooftop panels. Is that anything connected to the government decision of providing rooftop panels to the household?
We have a rooftop panel capacity. I think we can produce somewhere between 60 MW and 100 MW. The government has recently announced, just I think Prime Minister announced a few weeks ago, a much larger program about this. As that program gets implemented, I think we can use our capacity. But as I said, most of that business will come through next year, not in the current year.
Yeah, okay. My request is please expand the solar business. There is a large, huge scope in future, as we know, in the current market.
Yeah, I think as I said, this is an important article of faith for us in renewable energy. But because of the involvement of the government, we are more focused on retail business to bring back cash flow and deleverage the company before we get involved again. The new model with which we want to work is where we remain focused on, as I said, revenues, but cash flow generation is more important. Wherever we see opportunity that we are going to get paid faster, we will definitely go for that business.
Okay. I am staying in Andhra Pradesh, from East Godavari. How are you planning the dealers across the country or state? In my area, everyone is using Finolex pipes, Finolex drips and all. When I asked the farmers, they are saying that we have Finolex dealers more across this area. We have very less Jain suppliers. How can we overcome this kind of thing?
That is a good observation. Actually, our irrigation business in Andhra is really growing quite a lot. I think this year we are in fact growing 80%-90% in Andhra Pradesh. The piping business, from a smaller base, I think also is growing about 40% or 50% this year. We are in the process. In fact, I think over last three to six months, we have appointed about 25 new dealers across Andhra Pradesh, and we plan to appoint another about 15-20 people before end of March. Next year, you will see far more footprint of Jain pipe. When you go around the cities or the villages or the [Non-English content] , as it is called in Andhra Pradesh, you will see more boards of Jain dealers and so on. We are penetrating, we are improving that structure across India.
Yes sir, that is my request because when I ask people, they are more interested into Jain because previously they used to use Jain pipes and Jain drips. Because of less dealers and increase of dealers from the competitors, they had to quit. Their interest is, they are saying that Jain is number one good quality pipes and drip, but we do not have dealers here. This thing I want to inform you.
No, you are right. This is also our experience that across wherever Jain product is available through the dealers at most touch points all the way up to the farmer. Farmers prefer Jain as a brand because it is most trusted in terms of quality and fit for purpose, and there are no shortcuts, and that we have built that reputation over 40 years. As long as Jain becomes available, people really do not want to buy other brands. That is the motto we have.
That maybe over next 1.5 years, we would be present in every [Non-English content] across India. India has about 600-800 districts, and each district has about 10-15 [Non-English content]. We are trying to be move there over next, as I said, two years or so. In last six months, we have spent time at the highest management level, and we have interacted with almost about 2,500, 3,000 dealers. But we need to hit that number 6,000- 7,000 dealers, and then we would be available every nook and cranny, as they say, across the country.
That's all. Thank you.
Thank you.
The next question is from the line of Ronak Himmatramka from Robo Capital. Please go ahead.
Hello, am I audible?
Yes, sir.
In the previous con calls, you were talking about the EBITDA run rate of nearly INR 1,000 crore. So when can we see these kind of EBITDA run rate in our business?
No, I think what I said is that we are close to INR 600 crore for the first nine months, and we had indicated that we will be close to INR 900 crore at the start of the year. And we are still anticipating that we will be very close to that original number despite the low 3Q we had, and the growth did not come in Q3. So the next year, FY 2025, of course, would be a four figure and higher number because as we do more retail business, automatically profitability goes up because netback is better in that business compared to the EPC projects.
And also, as the business grows, we have better fixed cost absorption because we will be using more capacity. So combination of both, all of that should result into very good numbers. I think we were down to some INR 500 crore-INR 600 crore two years ago in terms of EBITDA. We are now coming back closer to four figures as we speak. Structurally, that's where we'll continue to go, and that's our primary objective.
Got it. Sir, what is the outlook on the debt part like? What are our repayment plan in the next two to three years?
We have a quick look at also investor presentation. Overall, debt which we have. There are two parts to the debt. One is the debt as the India businesses. Most of the term debt, as one would call, that would get paid by 2026, fully repaid on an average about INR 170 crore, INR 180 crore that will get repaid. In addition, we have some 0% NCDs. They are due in 2027 and 2028. These are under the restructuring which we have signed with the banks. Based on certain collections of sale of some unused assets, et cetera, and some old government receivables, we need to repay about INR 350 crore in next few quarters. That will go down.
As I said, about INR 400 crore and odd of the other schedule would also get fully paid. That INR 750 crore will go down, as far as the standalone entity is concerned. That would then leave INR 1,500 crore, which is what is called working capital cash credit, and about INR 500 crore would be left of 0% NCD. They will be falling due in 2027 and 2028. Those we need not prepay because it is not carrying any interest.
Of course.
The INR 1,500 crore would be a cash credit working capital debt. As far as rest of the businesses are concerned, international businesses, the food business which we have, which is our subsidiary. There, I think there won't be any reduction in the current year. Actual reduction will start from the next year.
Got it. Sir, I also had someone had asked about the IPO. Can you just tell me what are your plans related to that?
I think I would not like to speculate, but I think as I explained, we will have in the food business because we have a private equity investors, and they also desire to exit. Probably the best way would be through value monetization method. They can of course, sell their shares to somebody else, and that's also a possibility. But, depending on the performance and the market situation, there is an option that can happen. But, I think let's talk about that when we come closer to it.
Yeah.
Right now, that business is growing profitably, and that is what matters, and that is where our focus is. Next year, the food business alone, how can it hit number closer to INR 300 crore in EBITDA is what our focus is. This value monetization will address when we come closer to market reality.
Okay, sir. Got it, sir. Thanks a lot. That is it from my side.
Thank you.
Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Yeah. Am I audible, sir?
Yes, please.
Yeah. Thank you very much, sir, for the opportunity. First up, I just wanted to understand, INR 300 crore EBITDA you are targeting in fourth quarter. Now, we are already one and a half months into it. Are you seeing any kind of impact in terms of as we are leading up to the election and election related Model Code of Conduct that you spoke about?
See, that has not come through yet, right? We do not know when that will come. As I said, if it comes in mid-March, there could be a question on that number. But if it comes in April and then we are able to run through the full quarter, then we should be closer to that number in the fourth quarter.
Oh, understood. As of now, we are not seeing any impact, right?
As of now, there is no election related impact. As of now, the impact has only delayed start of the season. I think we were expecting mid-November and December should have been normally stronger, which was earlier year was strong YoY. Even January has been slow. Whatever we hear from our dealers across the country, everybody's expecting that orders will start flowing very soon in a consistent manner. As of now, as I said, since about last week of January, pipe business has already picked up, and we are waiting for drip irrigation to also pick. Again, we are already selling. That extra push which happens usually in the fourth quarter, that has not started yet, but is expected to start very soon.
What you're suggesting is that in spite of this delayed season, I mean, the pipe picking up maybe by January end, so would have seen some January impact. We are still expecting INR 300 crore kind of an EBITDA in the fourth quarter, right?
Yeah. Because also other businesses, I think we are expecting them to contribute better with the food or the plastic businesses, which are not directly linked to this whole agriculture part.
Mm-hmm. Okay, fair enough. My second question revolves around your debt and interest cost. Would you be able to tell me by FY 2024 and by FY 2025, what would be our gross debt level that we might be targeting based on our debt reduction plan? What would be the interest cost that we might see in fourth quarter, and absolute interest cost on fourth quarter as well as FY 2025?
I think when you look at finance cost, because that's a line which gets printed, right? It has two parts. One is the actual interest you pay to the banks on the borrowing, and some bank charges and bank guarantee charges, et cetera. That part, as far as India is concerned, that's about close to about INR 210, INR 212 crore. That should be for the current year, FY 2024. That is for standalone Jain Irrigation India business. Then we have food business, which is about, I think, another INR 100 crore or so. Then we have a plastic business overseas that is about INR 20 crore north.
All said, FY 2024 figure is expected to be close to about INR 350 crore. That includes the interest paid, bank charges, finance costs across the world, all businesses put together. That's about INR 350. As next year we repay some of the debt, which we talked about, it should go down accordingly based on the amount of debt we are able to bring down in terms of the overall net interest which is out there.
Interest cost in first nine months is close to about INR 312 crore. For annually, if you're targeting INR 350 crore, fourth quarter, we are expecting it to be as less INR 40 crore?
No, no. The part of the interest cost what you see is about almost more than INR 50 crore, is unwinding of the, we have this 0% NCDs, right?
Correct.
As per the accounting treatment or accounting standard, when those NCDs were issued, because they are 0%, you take the net fair value in your books. Then as you go closer in terms of time value or repay some of those, then that gets unwound and that comes through P&L, and that gets added to the finance cost. We are not paying that out as interest or anything, but that is the way accounting is done. That amount is INR 50 crore or so for the first nine months.
Okay. Including that it would be close to INR 400 crore, right? If I have to, INR 410 crore maybe for the finance cost for FY 2024 as a reported basis number.
Yeah. Yeah.
Okay.
Including that unwinding of the NCD.
Absolutely. FY 2025, do we expect this INR 410 crore, including this NCD impact, would come below INR 350 crore or somewhere in the ballpark that range?
Actually, depending on how many NCDs we pay and prepay, as required under the agreement. Some of these NCD unwinding costs could be actually higher in terms of the books. But as I said, it is not a cash outflow. It is not net interest outflow. Actual underlying interest in the businesses should be lower by about INR 30-INR 35 crore, because of the loans which will be in normal course loans what we will repay. We should save about standalone another INR 20 crore approximately, another INR 15 crore or so into food and other places. So INR 35-INR 40 crore reduction in actual interest cash outflow would take place next fiscal.
Fair enough. I got a fair understanding. I think that's it from my side. All the very best to you. Thank you so much.
Thank you.
Thank you. A request to all the participants, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. If you have any follow-up questions, you can rejoin the queue. The next question is from the line of Sanjay Kohli from Goldstone Capital. Please go ahead.
Good afternoon, and thank you for the opportunity. Mr. Jain, this question on capital employed, currently around INR 9,600 crore. Is there any scope for identifying non-core assets and selling them so that we can have some better measures of profitability?
Yeah, I think we have identified some parcels of land we have. But I think the reduction because of sale of parcel of that land is going to be INR 150 crore-INR 200 crore. There is another, as I talked about earlier in the call, there is about this INR 900 crore, which is linked to the government receivables. As they come back, that will go into the deleveraging, et cetera. So that will further improve the whole capital employed. Beyond that, as we speak, we have, as I said, investment into a subsidiary, this Jain Farm Fresh Foods Ltd. We also have investment into Rivulis, which is overseas entity along with Temasek, which came as a part of the transaction we did last year, and we reduced our debt by INR 3,500 crore as a part of that transaction.
Some of this, what you see on the balance sheet is invested into food company or overseas Rivulis company. As and when those value monetaries happen, that will reduce that capital and it will come back to the parent, which parent can use to deleverage. This government receivable and some of the surplus assets together can reduce overall capital employed by another, as I said, INR 900 crore government receivable and another INR 200, INR 300 crore linked to the surplus assets. That INR 1,200 crore. INR 1,200 crore, that about INR 1,200 and odd crore is these investments. Actual investment, in fact, Rivulis itself is INR 1,200 crore, and food would be also another substantial sum.
As things are evolving over the next couple of years as we go along, you will see a substantial change into the balance sheet. From where we came from 2021, 2022, where it was so difficult going through the restructuring process. The fact that today we have about INR 5,500 crore of net worth. Company is quite strong. We definitely need to improve our ROCE substantially. Also, part of the net worth I would like to just bring to everybody's attention is the company, because of the nature of the business we have, possesses large number of farms in the demonstration areas, thousands of acres. Under the fair value method, while that particular land creates the business opportunity, the farmers come, the technology gets developed. Because it is valued so highly, I think the land is valued about INR 1,600 and odd crore.
You don't immediately see any particular return from the land because that's for really long-term. That asset has been created for next 20, 30 years for company to survive, grow, and convert majority of Indian farmers to drip irrigation as against, it's hardly about 10%, 15% now. When you really analyze the balance sheet and maybe at the March balance sheet number or annual report, we will provide also to shareholders this in a more clear way. That where there's a perception there's a lot of inefficient assets. As I said, partly it's land, partly these are two big investments, and partly it is the government receivables. Government receivables, we're addressing in next 12- 18 months. Most of that will go away.
As I said, part of land we can monetize. That would be to the tune of INR 250, INR 300 crore. The rest, the value monetization for these two investments we have or subsidiaries or whatever we have, that will take some more time.
Just to follow up. The best case scenario for the government receivables will be 12 months from-
12- 18 months.
12 - 18 months is the best case scenario.
That's it.
It could be more than that, but not less.
Yeah, it cannot be less because this project needs to be completed before we receive the money. So 12 to 18, I think is a good estimate. Give and take, maybe there could be another six months, but we do not expect to go beyond that. This has been on the books one way or the other. Earlier amount was much higher. It has come down. But I think this year most of these projects will get completed, and therefore we expect, starting April 2025, during that year, majority of the funds should come back to us.
Okay. Thank you, sir.
Thanks.
Thank you. The next question is from the line of Ankit Baghel from Shubham Ventures. Please go ahead.
Sir, good afternoon. Actually, my phone got disconnected. Sorry if I am asking any repeatable question. Sir, my first question is on the debt part. I just heard that you said something on the repayment side, but just wanted to know, is it possible for us to become completely debt-free maybe in the next two, three years time frame, considering potential realization of our investments in the Rivulis one or some internal accruals reduction in working capital. From all these sorts, is it practically possible?
In terms of assuming, if these monetizations do take place during that period of time, then it is definitely possible because one, as I said, recovery of some of these receivables as well as some of the sale of assets should reduce part of the debt. That's the first part which we are already focused on and working on. The second part is the value creation opportunities, and third is going to be out of the EBITDA which we generate. In FY 2025, FY 2026, and FY 2027, all these three years, we expect good amount of EBITDA of that. About more than 60% should be available to deleverage.
So combination of earnings and free cash flow, realization of these old receivables and some of the surplus asset sale and value monetization. I think in that priority, all three together definitely would entail that possibility that company on a net debt basis can become debt-free. Now whether it happens between two to three y ears or three to four years depends on so many factors which are going on. But structurally, we as a company, we as management have that as an internal target that we should strive. We have been to a point where the [inaudible] was seven right? Currently it is around four. The first target is to bring it down less than three, then less than two, and then eventually go to a point where we are totally de-leveraged.
Okay. Sir, my second question is on the growth of EBITDA going forward. As you mentioned that you will be ending somewhere around INR 900 crore this year. Next two years, can we grow at like INR 1,200 crore or INR 1,500 crore EBITDA? What's the outlook there, sir?
I think, we would like to say, in terms of forward-looking statement where we are trying to go, is that the underlying revenue, right, should go at high double digits. That is north of 10, somewhere between 10 and 20. And whenever, because of the fixed cost absorption and product mix being changed going forward, if we are able to grow revenue, let's say 15%, I think EBITDA will grow at about 20%-23%. There is going to be that much of an additional EBITDA growth possible. Structurally speaking, over three years, the idea is that grow the revenue between 15% and 20%, and grow the EBITDA between 20% and 25%. I think that's the framework within which we are working.
And again, as I said, focus is on better product mix, and revenue into the business, which also gives you a better cash flow. You're trying to achieve both of these things, right. It's not just about growth of EBITDA, but you have a twin objective of that you want to grow EBITDA, but also convert most of that into free cash so that you can de-leverage. And, you need to balance both.
Okay. Yeah. That's it, sir. Thank you so much.
Thank you.
Thank you. The next question is from the line of Ram Babu from RAMTeCH. Please go ahead.
Hello.
Yes, hello.
Actually, these receivables, we are hearing from last so many years. Almost like five or six years, we are hearing the same thing. What are the concrete steps? Still we are there for around again, two years' time.
I think, that's a valid observation you have. Our business, by its nature, over long period, because we are providing irrigation solutions to the farmers, government gets involved, we have long receivables. Then since we started talking about 2019, 2020, that we will start bringing down the receivables, then COVID hit and projects could not get completed, so it got another delay by another two years. There is a concrete improvement in top the receivables. As I said, as we are more focused on the dealer business now, we are selling more. Receivables are really low there or within normal norm business.
Once we get these legacy receivables, as I said, I already said that over the next two years, maybe between 12- 18 months, but maximum within two years, most of those receivables come down. Then our receivables would be like any other company, 60 days receivables or whatever. Then we don't have to discuss receivable. This is part of the legacy. It has taken longer than we anticipated, but it is definitely happening. I think if I look at 2020 and now, we have reduced these government receivables by at least INR 400 crore- INR 500 crore. That much of improvement has been achieved. It is not that nothing has been achieved, but as much one would have liked has not happened. I'm acutely conscious of that. It is on our radar as a prioritized item, and you'll start seeing good results on that definitely in next fiscal.
And sir, is there any interest we will get it along with the receivables?
No. When you deal with the government, they don't pay interest on the delayed part.
Oh, okay. That is all from my side.
Okay. Thank you.
Thank you. The next question is from the line of Nirag Shah from Exemplar Investment. Please go ahead.
Yeah. Thanks for the opportunity. My question was regarding Jain Farm Fresh. In reply to one previous participant question, you said in current year you expect domestic food business to touch INR 700 crore in size, which is majorly housed under Jain Farm Fresh, if I am not wrong.
Yeah.
If I look at it, last fiscal, under JFFL, domestic revenue was INR 356 crore. My question was, if we are expecting such an aggressive growth in domestics business, are we expecting an equal significant slowdown in export business? As for nine months, I do not see any such significant growth in JFFL consolidated revenue.
Yeah. I think, when I talk about 700 crore JFFL, that is JFFL India business. What we sell in India and export from here. JFFL, sir, has two parts. One is we have four overseas subsidiaries, right? When I talked about that this year, we are assuming, we are close to let's say INR 2,000 crore. INR 700 crore will be done by JFFL India, including domestic sales and export, and about INR 1,300 crore will be done by Jain Farm Fresh overseas subsidiaries in U.K., in Turkey, U.S.A., and Belgium.
What was the size of this food business that you are talking about domestic last year?
Last year, the domestic business overall, JFFFL India was about INR 660 crore. From INR 660 crore, we are looking to grow maybe INR 715 crore, INR 720 crore somewhere. It's about, I think eventually you'll see about 9%-10% growth.
Okay, got it. Thanks.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to management for closing comments.
Thank you all. Thank you for the interest and spending time on this call. As I said, some of these external situations like climate change does impact our business. Our constant endeavor and effort is that despite that, as we go along, try and create risk mitigation. We plan to grow more of the piping business into plumbing side and other sides, so that it is less impacted by agriculture cyclicality and seasonality. That's what we want to do. We want to grow more food processing business. Again, the idea is to de-risk the direct focus on the monsoon or untimely rains or change in the climate. That's what we are trying.
Again, larger focus is to deleverage over next few years. Focus is to continue to grow revenue in double digits and EBITDA to be higher than double digits. Improve the quality of earnings through making more of EBITDA come into free cash flow. It's not an easy thing to do from where we have come from. Just in March 2022, we signed the restructuring. March 2023, we solved the ORC piece. These are series of the events which have taken place, and we are definitely moving in the right direction with lot of confidence, lot of clarity in the vision, and also good execution. Some of these pure financial results on what we are trying to do would become more visible over the next one or two years.
As I said, this is Jain Irrigation 2. We started in 1986, and now we're trying to do this in a very different way than what we have done for all the last 30, 40 years. Next 20, 30 years would be very different than these past years, where we want to move with capital light model, better free cash flow model. We are largest drip irrigation company in India. We are among the top few in the piping business. In tissue culture biotechnology, we are really growing leaps and bounds on a smaller base, but it's very profitable business. Our food business is also now growing nicely. A lot of things going for the company, going forward as well. We look forward to your continued support in the process. Thank you.
Thank you. On behalf of Jain Irrigation Systems Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.