Ladies and gentlemen, good day, and welcome to Jain Irrigation Systems Limited Q4 FY 2024 earning conference call hosted by DRChoksey. As a reminder, all participants' 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 Mr. Karan Kamdar from DR Choksey. Thank you, and over to you, sir.
Hi. Thank you. Good afternoon, everyone, and welcome to Jain Irrigation Systems Limited earning call to discuss the Q4 FY 2024 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 presentation are available on the exchange and 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 a Q&A. Thank you, and over to you, sir.
Yeah, I think we missed the beginning. Anyway, good afternoon, all. Welcome to Jain Irrigation Q4 and FY 2024 conference call. Overall, company's revenues are up compared to the last year by approximately 7% for the whole year. Out of which, there has been a reduction in the project business, which was already pre-decided that we are unwinding the project business and slowly that will be stopped. If we exclude the project part of the business, the remaining business, in fact, grew almost close to the retail business, which is where we are focused on, grew close to 25%. Overall, company EBITDA has also grown considerably, at a higher level than the revenue growth. So that shows that the quality of earnings overall have improved.
In terms of what we could achieve during the year and what we could not, compared to what we had spoken earlier, I think, our focus on retail market, building of the dealers' business is paying good dividends, and consistently, the retail business is growing while the government business is coming down. And that would mean going forward, better and better, more free cash flow, because this business would not require too much of investment into working capital as that business grows. But meanwhile, we need to still focus and bring down the receivables, which are locked in the various pending government business. And we believe that FY 2025 shall be the year when the considerable reduction could happen.
Our target, I think, over the next 12 to 18 months approximately, is to bring down the government project receivables almost close to about somewhere between INR 600 crore to INR 800 crore on a net basis. We will still be doing some amount of project business as we complete the remainder of the projects. Just to quickly look at this, FY 2023 project sales were INR 732 crore.
This year, FY 2024, they have been INR 321 crore, and next year, they will be down to maybe close to INR 270 crore. That will go down. The receivables in FY 2023 were INR 900 and odd crore. They came down to INR 894 crore in FY 2024. As we do this recovery, as I said, over 12 to 18 months, the receivables are expected to be down to close to about approximately INR 400 crore to INR 500 crore level during this period.
This reduction in the receivables and the cash flows coming from them would straight go towards bringing down the leverage in terms of repayment of the bank term loans, repayment of the NCDs under the agreement with the banks. That way, deleveraging would become possible from this side. Beyond that, the retail business, which we will do, as I said, while it will not the growth, which we expect, as we did 25%, similar growth, but let's say definitely north of 20%. That level of growth into the retail business can be achieved almost with no further investment into receivable side. We might have to increase some more inventory towards the end of March 2025, because 2026 would be one we expect a better year.
In current year, there is still some kind of elections happening now. In October, there is additional elections in state like Maharashtra, which is a very important state to us. We expect 2025, 2026 to be even better. 2025 will definitely be much better than 2024, in any case. We as a company are moving in a right direction in terms of where we wanted it to be. We are, I think, a little behind on bringing down the debt or deleverage than what we had spoken about, because of the delay in still completing the projects and getting money back. Over last one year, a lot of things have happened.
I think we are coming to a position where we feel fairly confident that FY 2025 would be the year when most of the projects we will close and also recover substantial parts of funds which can be used for deleveraging. When we look at other businesses company has and the breakup of different businesses, when we look at the AgTech business, which is agriculture input business, drip irrigation, biotechnology, tissue culture, all of that grew.
If I exclude project, that still grew 19% on the retail side. That is in a positive growth. If I look at within that, tissue culture business grew even faster than the drip business. Piping businesses have generated all along quite a good number in terms of the significant growth and revenue, and even better growth in terms of the level of profitability, which we have achieved.
That shows that that business has become more stable, more predictable, and more profitable. I think next year should continue in the same mode. We have one overseas business, which is partly India and partly overseas, which is part of the plastic division, the plastic sheet business. That is also doing quite well, if you look at the breakup, which is available under the investor presentation, which we also share.
When I look at whatever EBITDA, which is much better EBITDA than last year, which we have achieved this year, where it has been deployed, some of that has gone into overall CapEx. As a company-wide, the CapEx, global console CapEx has been close to about INR 225 crores, and depreciation is INR 242. So slightly lower than the depreciation has been the CapEx. Most of it is maintenance CapEx, small amount is growth CapEx.
We expect similar trend for the FY 2025 on that account. If I look at overall debt profile of the company, the debt at JFFFL standalone India, in fact, has come down. But there were additional debt for working capital and balancing purposes in other businesses. So overall debt has remained more or less in the same range compared to the last year. Debt is, as of now, approximately INR 36.6 billion on console basis, out of which about INR 10 billion is long-term debt and the remainder mostly is working capital debt. But 0% NCD is another INR 6 billion. So INR 16 billion is long-term and close to INR 21 billion, I would say is working capital debt, which company has across all businesses which it has.
When I look at the working capital cycle, we are seeing that in terms of days outstanding against sales, overall, there was an improvement compared to the earlier period in which we have been operating. So working capital DSO, especially India, which is where usually the working capital cycle has been very long. In March 2023, we were at 250 days net working capital cycle, we are down to 235. So that's an improvement by 15 days.
As we move towards 2025, with significant reduction in the receivable on the project side, this would, we believe, would dramatically go downwards in terms of overall utilization. If I look at console basis, overall net working capital cycle is up by about 12 days. But partially that is because as company has become more financially stable, secure, we have been able to make lot of stress, payables, etc .
Overall inventory on console basis used to be 121 days last year. It has come down to 117 days now. Receivables are almost at same, 119 to 121. So this increase of 12 days at net working capital cycle from 176 to 188 days is linked to more reduction in accounts payable, which was required so that company can start enjoying better purchasing power, et c. That is getting reflected into higher level of EBITDA level profitability for the company. In terms of other overall developments during the year, we got certain amount of equity infused in the company during the year, which time to time, we already informed all the investors in the market.
One of our associate company where we own 49% equity share, called SAFL, was an NBFC, for which over a period of time, company had issued corporate guarantees, etc , to the tune of INR 100 crores. As of last week, SAFL has repaid all its liabilities. Whatever the debt they owe to the banks or other lenders, including some listed entities, has been fully paid off. That's a good thing because it avoids any likelihood or even small chance of any cross default, plus it cleans up our balance sheet to take away this corporate guarantee overhang which was there. That's another positive thing as we move towards company with strong cash flows and overall much less leverage going forward. If you look at general overall other ratios, I think debt-to-equity ratio has further improved.
The standalone business, India business, we were able to reduce, as I said, debt by almost INR 375 crores. Recently, CRISIL has also reaffirmed long-term external credit rating at investment grade at about triple B minus. When I look at the type of the business which we are in terms of retail business, which is where we are focused, we have grown 25%. It's broken into the drip, sprinkler business and piping business. Piping, in fact, had an even higher level of growth than the drip during the current year. We expect the market sentiment for that business line is still quite positive so that we can maintain a high level of growth into that business. As we further utilize our capacities more efficiently, that could also mean more efficient earning potential out of that business.
Drip irrigation business is linked to partly the seasonality and monsoons as all of us are aware. This time, IMD has forecasted that monsoons are going to be good and timely both, adequate monsoon and timely monsoon. That is, one has to wait and see, but that's what has been projected. Typically, if there's a good monsoon, for the next four quarters thereafter, we should get good business because farmers have access to water. They can irrigate their farms. Also, that means overall, there is a less worry in farmers' mind because the adequate rain means good crop outputs. They intend to invest more in such years. All in all, good monsoon would mean good business for us.
It may happen that because if there's a lot of monsoon in a given quarter, which is July over September, we might have a subdued second quarter result. That would mean actually a little bit more business in quarter three and quarter four. All in all, I would like to say that good monsoon would always be good for us. There is, let's say, delayed monsoon for 15 or 20 days. There could be additional demand during those 15, 20 days. Medium to long term, I would always say that good monsoon is good for overall business company faces. In terms of where we stand as a management going forward, we have three priorities in our mind. One, definitely, totally wind down this government business and recover the maximum receivables.
As I said, next 12-18 months, INR 600-800 crores receivables should be received back in our account, and that should go towards debt reduction. Whatever are the remainder receivables linked to some of the old and some of the remainder business we will do in the current year, all of that should be definitely covered the next fiscal year. So that way, before March 2026, all the old government receivables, including new ones which will get created in the current year, will be totally extinguished, and that should help, one, bring down the overall balance sheet size, reduce the debt, improve return on capital employed.
So that is one major focus we have. Second focus we have is traditionally, we have been a comparatively strong presence in retail market, where we sell to the farmers, where dealers, et c, in western and southern parts of India.
We are in the process of further strengthening our distribution and dealer network into this market. We are also, and we have spoken over two years, last two to two and a half years, that we are also expanding into other regions. That is showing some good results, but it is always a two to three-year scenario before you can establish yourself into the new markets, new geographical markets.
I think this year that should provide us good dividends, and we should be doing comparatively much better business in places like U.P., Rajasthan, Punjab, Haryana, these kind of states. Also additional business in existing states, like Karnataka, we expect to do much better. Maharashtra, except the fact that there is another state-level election in Maharashtra later this year. But keeping that part aside, overall, Maharashtra always is a good state for us to grow.
We also expect additional business post stabilization in Andhra, post this election. Our business is also likely to grow in Gujarat. So that is the geographical location where business is, we are focused on. So first is the government receivable and winding down the government project. Second is continuously focus on increasing the retail distribution and improve the new geographical areas where our brand in organized sector should find a good level of customer base, because otherwise, in agriculture, everywhere Jain Irrigation is a very well-known brand.
The third part of our focus in the current year, that one of our subsidiary, which is a food business, also should be taken to the next level in terms of growth and profitability. There, in the current year, we are anticipating the FY 2024, we grew only I think 5% or 6%, single digit. But we'll be expecting to grow next year in the food business double digit. So instead of 5%, I think our internal targets are closer to 15%. But sometimes this revenue is linked to the actual prices of commodity, like mango or banana.
If prices of the commodities are low, then our revenues become low. But quantities will surely grow at 15% + in terms of what we sell. So that is expected to be positive, and our overseas plastic sheet business has been doing well. We hope that post-COVID, that business, the way it has come out strongly, should continue to become more stronger going forward. So this is where we are as a company, and we are looking forward to a good year, FY 2025. Generally speaking, for all product lines, we see the environment is conducive for the growth.
In current year, as you can see, that maybe upfront revenue, it seems only grew 6%, but that was primarily because of a reduction in the government project business, which was kind of there. But the retail business grew 25%, which is where we are really focused on now. This is where we are as a company. Now after this 20 minutes opening statement and information, I would like to request the organizers to open the floor for any questions investor might have. Before that, I would like to just thank everybody that even though it is a Saturday whoever has been able to join, we really appreciate the fact that you're spending some time with us on Saturday. Thank you.
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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets 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 from Goldstone Capital. Please go ahead.
Thank you. Good afternoon, and thank you for giving me the opportunity. Sir, congratulations. This has been a very strong quarter in terms of operations. We did a quick back of the envelope calculation, and since March, please correct me if I'm wrong, the EBITDA margins are quite strong at about 12.9% compared to the previous March quarters being quite strong. Now, sir, the other encouraging thing is that for next financial year, you've clearly set a roadmap of reducing the leverage.
Because right now, when we were just discussing amongst ourselves, basically you're saying that we have been working for the bankers for far too long now. The time is now should come when the owners of this business, and so much of hard work is going into it, must start enjoying the fruits of that hard work. Sir, if you can just sort of expand on this. I think you have already covered it in your presentation, but.
No. Thank you. I agree with you wholeheartedly, that the direction definitely has to go towards deleveraging. It's not just about deleverage and getting the benefits to the shareholder, but it is also definitely focusing on creating substantial long-term value. Because, with the very strong brand, the innovation, quality, R&D, what we have, and product range, I think going into individual districts, individual tehsil, developing that dealer network will keep.
Once that it is there, then we can do this larger amount of agriculture-linked businesses or inputs which we can provide to farmer. So, it would keep on generating positive dividends for the company in that context. So last two, three years, and as we speak, we have been transforming the company in terms of its business model. It may not be visible directly, because still some legacy issues of this project, et c, is still on the books.
But I think post March 2025, it will become crystal clear. There will be a kind of a breakout where you will see a very different company in terms of quality of earnings, because of the free cash flow generation and overall growth, which we are looking forward to. So, management is very clear that deleveraging must happen, and the growth should be funded through internal accrual.
Okay. Just a follow-up. So, the non-core assets which are there in the company, which are significantly and don't yield much, can we, in times to come, get more information, more qualitative analysis on it? So in the way the non-core assets itself are generating a lot of value for the business, a more detailed commentary on that in the financial statements or the annual report. This is just a suggestion so that we will get to sort of track what is going on with the low-yielding assets of the company.
I think at the next possible opportunity, maybe September quarter, we'll give more detailed commentary on that part.
Thank you, sir.
Thank you. Appreciate it.
Thank you. The next question is from the line of Madhur Rathi from Counter Cyclical Investment. Please go ahead.
Hi. Thank you for the opportunity, sir. Sir, I wanted to understand our previous guidance of 15%-20% growth and a four-digit EBITDA margin for FY 2025. Is this on track or due to elections as well as some kind of pricing pressure in the piping segment as one of our competitor has guided? Do we see this to be muted than what we had expected?
I think the revenue growth guidance and the four-figure in terms of EBITDA for FY 2025, as we see things today, unless there is a substantial change due to the election outcome, we do not know that today. But otherwise, in terms of our internal budget, our preparations, what we know and feel from the marketplace, feedback from our dealers as well as customers, we feel we are on track for both of those things in overall totality.
Okay. Sir, our EBITDA margin is around 13% for Q4 FY 2024. Where do we see this increasing? Sir, there is some kind of a difference between the EBITDA margin in our numbers and our presentation. If you could just help me in that as well.
Yeah. The difference between the presentation and actual numbers is that in presentation, we do not take into account some of the provisioning linked to the earlier year legacy receivables, because it is not linked to current year's profitability. That is why our presentation shows a little bit higher level of EBITDA than what one sees on the books, because those expenses, let's say what comes under the presentation under direct expenses, that is linked to the past period and not this period. Maybe, I think, going forward, to make it easy for everybody, I think our presentation, we will align with how market rates it, and we can provide the note related to any past issues if any.
With regard to this 16% kind of EBITDA margin for Q4, can we expect in the next 12 months as our legacy receivables get over to reflect in our numbers?
Yeah. As we increase the sales, as I said, overall company growing at 15%-20%, with better cost absorption, we expect EBITDA to improve. Of course, there are what happens in election, what happens to the monsoon, these one or two issues are out there. But overall, we feel strongly about our ability to drive growth with maintaining margin, and then adding to the margin, the benefits of the cost absorption.
Sir, is this 15% number achievable for the whole year FY 2025?
I cannot say precisely because 15% would mean all businesses put together. That would be a little bit ambitious, but we will be definitely at least a percentage point more than the current year. Our target is to go towards that 15%.
Okay. One question from my side. Sir, we have guided in our tissue culture that we have progressed in the coffee plantation side. Sir, do we see this business could grow faster, like the whole tissue culture business from around INR 230 crores that you did last year to the INR 1,000 crore guidance you have given for the next five, six years?
I think, tissue culture business has grown this year to INR 240, INR 250 from last year's INR 177 or so. From INR 177 to INR 250, we have done this year. From INR 250, we are looking to again grow around maybe INR 325 or so in FY 2025 in that business. Our major component tends to be banana. We also do pomegranate, and we are adding these other crops like papaya, coffee, mangoes, some sweet orange, et c. All put together, we are expecting INR 325, and that business is quite profitable. I think we have good visibility on that.
Okay. Thank you, sir, and all the best.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the queue, please limit your questions to two per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Hello.
Yeah.
Good evening, sir. Thank you so much for taking my question, sir, and congratulations on a great set of results, sir. Sorry, sir, but I couldn't just catch the revenue guidance. You said double digit, right, sir?
Yeah.
For the FY 2025. Perfect, sir. Just wanted to ask in terms of our interest cost that is now nearly around INR 100 crores per quarter. In FY 2025, would it continue on the same trend rate, or could we see some betterment?
Actual interest outflow, I think is around INR 330 and around INR 340 crores is what we expect the interest outflow. When you see a little bit higher number on the finance cost, it is linked to the accounting treatment of 0% NCDs which we have. That is not a cash or interest being paid. Actual interest outflow would be only at max would be INR 340 crores. It could be lower.
Okay, sir. Currently, just wanted to understand from the demand perspective, like we see an indication of good monsoon. It is like nearly one and a half month of Q1 has also gone. How are we seeing the demand environment currently, sir?
The piping demand is quite good, quite strong as we see in the season. The micro irrigation has been even keel. We expect that to pick up anytime now, because it will go strong in second half of May and the June part. Pipe has already picked up since April. Overall, demand looks good in the marketplace, as I said. Again, monsoon and elections can make some changes. As things stand, we are quite positive.
If there are any changes, I think we will come back in July when we talk the June quarter results. Hopefully, positive mindset should stay, not only because of the government program, but generally speaking, a lot of our farmers are doing more value-added agriculture. They tend to make more cash crops, grow cash crops, so they make more money. If they make more money, then automatically they are reinvesting that into pipes and irrigation, etc .
Okay. Perfect, sir. Yeah, that's it from my side, sir. Congratulations. Thank you.
Thank you.
Thank you. The next question is from the line of Shyam Garg, an individual investor. Please go ahead.
Thank you for the opportunity, sir, and congratulations on a great set of numbers. My first question is with respect to capacity utilization. What is the capacity utilization for Q4 and FY 2024? As we are talking about increasing our capacity utilization in different segments, what would be the revenue from those segments at each capacity utilization since you are not doing any CapEx, net CapEx. Most of it belongs to maintenance CapEx.
Yeah. I think we are seeing current capacity utilization, again, it changes by the divisions, is only about approximately 50%, 55%, because partly it is seasonal capacity, as you know, like we do not sell much in the monsoon period, et c. For food business, you process mangoes only for two or three months, or onions only for six months. When I look at company-wide, it will be 50%, 55%. But in terms of how much using this capacity, I think we can kind of double the business from here over the next few years. Without adding much of the CapEx. Maintenance CapEx, small amount of growth CapEx is what would be required, but otherwise, we should be able to double the business from here.
Okay, sir. Sir, my second question is with respect to the order inflow in our food and agri business. Since we are only focusing on mangoes and onions, and we can add more products to utilize our facility. What is the order inflow for these two products, and what is our future growth plan for additional products, apart from pomegranate?
Yeah. Current order book which we have on the food business at the India level is about INR 335 crore, and if I look at the global console level, it is about INR 1,000 crore. That is the order book we have on the food side. The other businesses like plastic business and so on, our dealers keep placing order, we supply them, they place new orders again. You do not get accumulated orders at one end. But food business is kind of annual contract business, so you get one time order, you service through the year. Most of the time, you also do some amount of spot business. Overall, order inflows are good enough to manage the kind of growth which we are projecting.
And sir, what is the execution timeline for the same?
I mean, this entire food agri orders which we have, we need to service within the current year. So food, as I talked about food, total order we have is about INR 1,000 and odd crores in the overall food business. But FY 2024, we did about INR 1,750 crore revenue in the food business. So when you see that INR 1,000 crore is not covering the whole year, and more orders will come as we supply some of these quantities.
Okay, sir. Okay, that's it from my side, sir. I'll join back in the queue. Thank you.
Thank you. The next question is from the line of Sumit Bhalotia from MKVentures . Please go ahead.
Thanks, sir. Congratulations on good set of numbers. My question is on the retail business. If you can help us understand how this entire, the core MIS business, how has the structure evolved in the last two, three years? There is a ground feedback that farmers are now more than happy to pay. It has become a cash and carry business where farmers are more than happy to pay the amount upfront and then take it on their own books and chase for the subsidy. How is that playing out across states, and what kind of growth do you see organically in the next two, three years? Also, one of the competitors we heard, Netafim, when the business has substantially come down, how are we benefiting out of it?
Yeah. Okay. I think that is a very good question. When I look at the micro-irrigation or drip irrigation business, drip and sprinkler business, there are states where we operate on what we call cash and carry model. We are selling goods to our dealers. Dealers are almost paying full amount in advance or one week or 10 days of the credit period. But it is with no receivable and no dependence on the government type of business model. That is one set where we are operating on that basis, let us say Maharashtra or MP, Karnataka, for that matter, Rajasthan. Many of these states we operate on that business model, and there our growth is strong, our market share is very strong.
There are some states which would include Andhra, Telangana, Tamil Nadu, Gujarat, primarily these four, where government places orders on the businesses on behalf of the farmers. There government typically pays you some advance and rest later, and the time period to recover money is fairly long. In those states, our market share is low because we do not want to expose and take too much of receivable exposure into these individual states. What we have tried to do successfully over last two years is in some of these states, we are parallelly developing the cash and carry model as well. There is one model where farmers registers the orders and government places order on us.
There is other part of the business which we are doing in the same state, where farmer via dealer is placing directly order on us, even though he may not receive any subsidy from the government because he is directly placing order on us rather than via government. Our medium to longer term thought process we as a company is to reduce wherever government receivables are there because sometimes it is taking 9 or 10 months to get paid, and it just does not make economic sense. But we do not want to walk out of the market as well.
While we will maintain some amount of share with a capped exposure on receivables, our idea would be that medium-term, even in those states, we will do business via the government portal only to the tune as long as receivables don't extend, let's say, more than 180 days. But build even stronger dealer network to do more cash and carry. Average receivables for us between cash and carry business and government business then would become less than, let's say, 90 days.
That's a medium-term plan which we have. That way, I think our overall cash flows will further improve. Receivable cycle and working capital cycle will further improve. Whatever margins we make will stay more with the company rather than go towards interest payment. You mentioned one of our competitor and the fact that they are not doing well. Most of our competition, a lot of them had focused more into this government-linked portal business in those particular states.
There, as the governments are delaying the payment, individual companies, depending on what exposure they have, how much on each state, they are also trying to You can't keep on giving definitely open account credit beyond the limit. These companies, our competitors, also now restricting themselves, and therefore their revenues are coming down. They do not have that strong position into the open markets, right? Our brand is very strong. I think that's where we are scoring well, and we'll continue to maintain that. As I explained, even in the States where this business is done in this way, we have built a new business model as well.
Thanks, sir. Sir, second question on the provisioning. You mentioned about the difference between reported EBITDA and the presentation EBITDA numbers. That was for the past year. Going forward, if I look at the project business, there is a reasonably large receivables which we are expecting to come down in this year. Is there a possibility of any kind of a provisioning in this incremental receivables that we are expecting?
Over the last two, three years, we have done adequate provisioning towards more or less most of the receivable. Especially in case of these projects, as when we close, the final accounting on the projects, the inventory, the receivable, along with the government agencies, will be done at that point of time during this year. Overall, we do not expect too much of a difference between what we carry on the books and what could be finally decided in agreement with the various government clients. There could be still some provisioning might come that way, which would be, I believe, it would be non-cash basis and one time type of exceptional scenario, but I will not be able to put a finger on it today.
Compared to what we have already done, and compared to if you look at the current balance sheet size and business, I do not think it would be something which could significantly impact our company's future. It would remain within the larger context of a one-time event or one-time hit. When you discontinue a business, it will go into discontinuation business impact, and continued business would be very healthy thereafter, as it is now.
Sure, sir. Thanks. Sir, if you could tell me just one last question on the piping business.
Sorry to interrupt, Mr. Sumit. I request you to rejoin the queue for your follow-up questions.
Thanks so much.
Thank you. The next question is from the line of Kamlesh Jain from Lotus Asset Managers. Please go ahead.
Thanks for the opportunity, sir. Sir, if we see your retail business, which is roughly around 80%-plus, and we have scaled down our project business. On the retail business, how are the working capital days there?
The retail business or working capital days are, as I said, quite healthy. If I really look at it for March 2024, overall retail business, the receivable days are at 26 days, which is an improvement of almost eight days compared to March 2023. The reason it is 26 is also because the retail covers partly the dealer business, which is almost cash and carry, almost zero days. Some of it is also institutional. When we supply to contractors against letter of credit, we are providing 60 to 90 days. When you combine all of that put together, that is providing you 26 days. I hope as we move into March 2025, when we are looking at this additional further growth, our receivable days should remain similar level or actually go down further.
Sir, on the project business, what is the reason there? How are we going to move there? Are we going to have the similar volumes going forward, or this particular portion is going to remain at these levels only?
This year we did project business of INR 320 crores, approximately, in terms of revenue. Going forward, our thought process is that current year we still have about INR 200 and odd crore business which we need to complete, so that we complete all the projects which we had taken two years ago in hand, and we close them. But thereafter, from the next year onwards, that is FY 2026 onwards, our company has said that we do not want to take direct government exposure. But if somebody else is taking government exposure, we will supply them pipe or drip what they need against secured financing.
We do not have government risk and financing risk. But then that will become part of our retail institutional, because it would become from government project to the institutional. It will move from one bucket to another. As we go along, post 2025, you will not start seeing this line of the government project business being a separate revenue line. It would be all part of the retail and retail plus institutional combined entity, and then the exports.
But the working capital days would remain at 26, 25 days?
Yeah. It would remain less than 30 days, let us put it this way, 26. Less than one month.
Lastly, sir, order book position, which we report, say INR 1,900 crore on the consolidated. This is primarily because in the retail business, we never see the order book.
Okay.
We don't have the order book. This order book is primarily like you are supplying to the project businesses, as you had mentioned that this project business would be going out and it would be supplying to mainly the contractor. This is the similar thing?
Yeah. If you look at, you said INR 1,900 is consoled, including food. Food has about INR 1,000 crores. Non-food business, the orders are about INR 900 crores. Out of INR 900 crores, substantial part is this kind of a institutional contractor business. Also some of the existing government project business. This year, as I said, we still need to cover INR 250 crore. That's also part of this. From next year you will see order book position would be less, but business would still grow more than what we do now. Because in case of dealers, orders get renewed every month in totality. Also, we have a business of tissue culture, where we sell banana plantation, et c. There we receive advance from farmers, and that is also part of this order book position.
Mm-hmm. Okay. Lastly, any thought on the.
Sorry to interrupt, Mr. Kamlesh. I request you to rejoin the queue.
Thank you. Thanks a lot.
Thank you. The next question is from the line of Rishikesh from RoboCapital. Please go ahead.
Yeah, hi. Thank you for the opportunity. My question is with respect to the EPC business. What execution are we expecting to do this year? The receivables also would have an expense, right? How is it that the total receivable would go for debt repayment?
Can you repeat the first part of the question? You are talking of which business?
I am talking about the EPC business that you would, the remaining part which is yet to be executed.
Right. Okay. On the EPC business, what exactly was the question?
What are the remaining part which is yet to be executed? Against that you will be receiving the receivables that are pending, right?
Yeah.
Okay. Yes, please go on.
The business we expect to do in FY 2025 to complete the projects. We have 54 different projects which are ongoing. INR 269 crores is what we are expecting this year to complete. With that kind of INR 269 crores, out of 54, almost 50 projects will move towards closure. That is where we talked about that over next 12-18 months, INR 600-INR 800 crores we expect to recover. While with new business we will do or create new receivables would be INR 260 crore, actual recovery would be closer to INR 800 crores. In FY 2026, the remainder of the recovery of close to INR 400 crores, including what we have done this year, plus whatever remaining from the earlier period, will take place. Between FY 2025, 2026 this all would be completely finished.
Okay. Basically the INR 600-INR 800 crores pertains to the project that you have already executed in previous year, right?
Yes. But you get paid only when you complete the projects on milestone basis. As we complete the project, even earlier payments will come.
Okay. So when you complete the INR 270 crore projects this year, you would be receiving, let's say some, the targeted part, the INR 600 crore-INR 800 crore that you are targeting, right?
Right. Yes.
Okay.
While we expect lot of this to happen in four quarters, but as we have seen in the past, in the project business, there is always few days or one or two quarters do happen. That's why I'm talking 12 to 18 months. Our internal target is to try and get this done by March 2025, but it is possible that maybe it's maximum another two quarters, but within that period this INR 800 crore needs to come back to us from the various government projects.
Okay, got it. My second question is with respect to the pledge. Are we looking to take down the pledge to zero and if yes, by when if you could please share?
You are talking of the pledge?
Yes.
Yes, I think that is the thought process which we have, that as we move forward we should bring down the pledge to zero. That is definitely the plan at a family, at a promoter level we have. That is still an ongoing process, that it should get done over next year plus during that period of time it should happen. Now that covers the pledges which promoters had made to raise the funds to put that funds into the Jain Irrigation. There is certain amount of pledge which has been given to the banks of the Jain Irrigation that would stay till the time the restructuring of the bank facility is in place. That is I think comparatively smaller amount. All the earlier pledges which promoter had raised the financing, those would be totally cleaned up.
Okay. Just one last question. If you could share the market share for each of our three business segments.
If I look at drip irrigation, and again, because there are large number of players, 400 players or so, definitive data is not available, but I will just give you our estimate based on our feedback from our salespeople or our dealers. I think on drip irrigation side, our market share would be, I think, overall 30% plus. It might have actually gone up a little bit more because, recently our competition has not been doing that well while we have maintained strong business.
In terms of plastic piping business and so on, there are two segments to the business, what is called non-organized sector, where there are large number of people who do low cost, very cheap pipe, and there is organized sector, where there are few listed companies and few non-listed companies. If I look at the entire piping segment across India, plastic pipe, I think our share would be in higher single digit. But if you just look at the organized players, I would say that our share would be in high teens.
Okay. Got it. Thank you very much.
Thanks.
Thank you. The next question is from the line of Vivek Prabhakar, an individual investor. Please go ahead. Vivek? Mr. Vivek? The participant got disconnected. The next follow-up question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Hello. Hi, thank you so much for taking my question again. Just wanted to clarify, we have around INR 48 crores from loss of expense of discontinued operation. Could you just clarify what is that?
Yeah. Last year, as you know, March 2023, our overseas irrigation business was merged with a Temasek-owned company called Rivulis. Some of the expenses related to that merger came subsequent to the March period in the current fiscal year. Because we had already taken profits linked to that sell-off merger in the last year's discontinued operation line as a separate line, if you see the comparison, last year there was a INR 900 crore gain out of that transaction. This INR 14 crore is the expenses which have come out subsequently, post-March last year, in the current fiscal year, linked to that particular merger business. That's why they are related to discontinued operation, but that is now done. You will not see that entry anymore in the current fiscal. It was one time linked to the earlier period.
Cool. Perfect, sir. Just one question, sir. Now, I think we are on a steady footing. Around the next two, three years, what vision do we have? Like FY 2025, we are seeing some election impact, but FY 2026 government receivables might end. Could you just, maybe next two, three year vision, what is our aim currently, sir? A bit long term.
I think, so two to three years, I would say medium term.
Yeah.
Overall, we feel very strong and bullish about opportunity to continue to grow into, I would say, three or four business segments which we have. Drip and sprinkler will continue to grow. As more farmers are doing value-added agriculture, we think there will be more demand for something which helps them achieve that. As more and more people are eating more exotic foods and other things, I think that would continue to play important role. Just end of April, Government of India has written a letter to all the states that they want to increase more than double the area under drip irrigation over the next five years. That came just end of April, that communication.
The fact that government will do more direct benefit transfer to the farmers to buy irrigation could mean substantial, solid, constant growth in that business where we have a leadership. Our margins are quite close to 16%-18% range there in terms of EBITDA. I think that would play important role. The second part of the business within the input side is the tissue culture business, where we are seeing strong demand from our customers for banana plants or pomegranate plants or more value-added.
We have recently got into potato seedling. Tissue culture is more than 30% type of EBITDA business. Receivables are not an issue because you get advance from customers. We expect that business to maintain good growth rate, and whenever you sell a tissue culture plant, you also sell irrigation systems to farmer. The business feeds on each other. Some of these crops we buy back, like banana farmers. We buy and process about 20,000 to 30,000 tons of banana.
That way, we are creating a very unique business model in the entire agri-value chain, where you supply banana plant, you supply irrigation system, then you buy back banana, you make banana pulp, and you sell the banana pulp to, let's say, Nestlé's and Unilevers of the world or other global companies. In terms of vision, that's the word you used, the idea is that we build this type of ecosystem in more crops. Like today, we do a lot of onions. We process a lot of onions, we process garlic, we provide irrigation system to farmers. As of now, we do not make, for example, we make onion seeds, which only we give to contract farmers.
We can make onion seeds which we'll give to other farmers as well, because we are buying back from them the onions. That way, the idea would be, and that is just an example, but the idea would be, in medium term, in all these businesses which we have, which is processing on one hand, planting material on the other hand, and irrigation systems and pipes, where we provide inputs, we buy back the output and create ecosystem where we have many more touchpoints across a single value chain and do this in more and more crops. That is, in terms of growth and potential, then you think of three years, five years, seven years, 10 years, 20 years. Agriculture in India across these value chains is very disorganized today.
Overall agriculture input/output is more than $500 billion, and very few companies are either fully existing into across value chains. There are none to my knowledge except for some few, I would say. With that vision, I think we can continue to sell a lot of products and continue to work in this value chain. The second, in terms of overall, we feel that on the piping side, we have been making pipes since 1980.
Jain pipe brand is very strong. Our product quality is very good. But we are primarily focused on the rural areas, selling through dealers to the farmers in rural areas. But we have not been into building residential markets or plumbing or some of these other applications. I think over the next five years, India is going to focus a lot more on Swachh Bharat Mission. It would mean a lot of open drainages will get covered with the pipe. There would be a lot of sewerage-related demand for the pipes. Of course, as more people build homes, there could be more plumbing, and also agricultural growth will continue. So in production it's same.
Production technology, production equipment is same, whether you do applications for plumbing or whether you do applications for agriculture. So our thought process over the next two to three years would be to additionally build this distribution network into these applications where we are not present today. Apart from normal growth which will come through the agriculture market and irrigation system, we would also be growing the plastic pipe business into these other applications. So this would be, I think, our viewpoint in terms of our next three years, which way we want to go.
Thank you so much, sir, for a detailed answer. Just to summarize, sir, is it possible that in the next four years we can double our revenue?
I think that would be something definitely we, as a company, are targeting.
Perfect. Sir, thank you so much, sir.
Thank you.
All the best.
The next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.
Sir, I wanted to understand, sir. Actually, I am new to the company, so please pardon my ignorance. Sir, since we have winded down the EPC business because it was subsidy heavy, and sir, now we are talking about growth in micro irrigation. Sir, but I understand that in micro irrigation also, it is very dependent upon Government of India subsidy. At least the listed companies like Mahindra EPC, etc . If you see, they have very high receivables. Sir, so in that case, sir, we are back to the same where we were, like we are still dependent upon Government of India subsidy or we are targeting non-subsidized drip irrigation?
I think maybe I explained this in more detail earlier in the call, if you can listen to that part. But just at the cost of repetition, I would say that our focus is going to be on non-subsidy related business. On the retail business, where micro irrigation we want to focus on, our current DSOs are actually just a month on that part. The subsidy link part also we have, and as I explained earlier in one of the answers, we are looking to considerably bring down our exposure to that part of the segment.
Sir, so basically why would some farmer go for non-subsidized drip irrigation when the Government of India is giving subsidy? Because the farmer does not care that when the micro irrigation company is getting paid from the Government of India.
Yeah. That's a good question. I think answer lies that sometimes taste of pudding is in eating it. So we are getting that business. Maharashtra, for example, we are not dependent on the subsidy, and we have maximum market share, I think more than 65% in this state because of the quality of the product and the fact that when a farmer uses our drip irrigation the amount of money he's making because of a higher level of productivity is far more than and he can still claim the Government of India subsidy if he wants at a later date. It is up to him.
But as far as we are concerned, we are getting very good response from customers, and it is not easy when on one end, government is giving 80%, 90% subsidy and you say, "No, no, you please give me 100% company." So why should a farmer do it? That's a very good common sense question. But in reality, the benefits farmers get when his productivity goes up, when his cost goes down, if he gets a better quality fruit or vegetable, he can sell in the market at a much higher value, then he's willing to do what we are requesting to him, and that is working for us.
Great, sir. And sir, also wanted to understand, sir, the previous receivables that are stuck with the government, sir, are they under dispute or that the government is just delaying because the government has no money?
I think, most of them, I would say, are not in dispute. Some of them which are in dispute, we already made the provisions in the books. But I would say 80% to 90% are good. The delays are because of two reasons. Some places government has used the development money to give freebies, et c. But I think the second is that some of these projects, like 80% complete, 90% complete, but we will get paid only when they get 100% complete. It's a combination, and that's why we feel fairly confident that in next 12 to 18 months, we should receive most of it back to us, and we'll keep updating every government receivables.
But we are fairly confident in FY 2026, and as I said, over the next 12 to 18 months, that should take place, and that would help us definitely to deleverage. Meanwhile, what has been very good part of this year is 25% growth in the retail business, stable food business, very good results from our overseas plastic sheet business. Those have been very positive events. And overall company is, as I said, more stable, more secure and coming out of the restructuring, which was very deep restructuring, and complex one. And we are quite enthused looking forward, going forward to continue to build on the retail side of the business, improve the free cash flow, continue to deleverage, and create more value for all stakeholders. Thank you.
Thank you. On behalf of Jain Irrigation Systems Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.