Jain Irrigation stock has taken a sound beating on the bourses in recent months following its problems of working capital scarcity and the general drift in the market. However, the worst seems to be over for this leading agri-business company in view of its strong presence in the diverse but interrelated segments of agri value chain.
Of course, the stock markets have turned volatile with a distinct downward inclination in view of the global financial crises and domestic political turmoil. However, there are a few scrips on the BSE which have been hammered down mercilessly and therefore become attractive at the going price. One of them is Jain Irrigation, a leading agri-business company.
Just about ten months ago, its share price was around Rs. 250 (face value Rs. 2) and many analysts working in leading research houses were predicting the price to shoot and touch Rs. 300-mark.
But alas! The price charted a distinctly downward course on an avalanche of selling touched off by serious problems on the working capital front. With a disastrous delay in the government disbursement of subsidies, there was a sharp deterioration in the working capital cycle and a marked increase in the debt. As the company's business is highly working capital-intensive, the interest burden started shooting up. In the fiscal 2011, the total interest burden jumped up to Rs. 267.73 crore from Rs. 76 crore just four years ago. What is more, interest burden is reaching new heights this year with the Q1 interest amounting Rs. 77.6 crore and rising further in the Q2 (July to September 2011) to Rs. 81.43 crore! This has pushed down the net profit from Rs. 117 crore in the Q4 (January to March 2011) of 2010-11 to Rs. 96 crore in the Q1 (April-March) this year and further to Rs. 70.90 crore in the Q2 (July-September). No wonder the share price has tumbled by more than half to around Rs. 110.
Still, going against the current winds, we have selected Jain Irrigation as the Fortune Scrip for this fortnight. We strongly believe that the worst is almost over and even if the share price falls further, it can only touch Rs. 100-mark at its worst. But prospects for the company and its chances of appreciation are excellent in the medium to long term.
As is known, Jain Irrigation Inc. is a manufacturer of drip irrigation products for the agricultural, turf, greenhouse, nursery, industrial and landscape markets. It has been a leader in the industry for over 30 years offering the widest selection of micro-irrigation products such as emission devices, continuous flow path drip tape, discrete emitter drip tape, integral emitterline, fittings, filters, air vents, injectors, accessories and tubing.
There is more to JISL than irrigation. The company has multi-product industrial profile and manufactures drip and sprinkler irrigation systems and components; PVC, polyethylene (HDPE, MDPE) & polypropylene piping systems; plastic sheets (PVC & PC sheets); dehydrated onions and vegetables; processed fruits; tissue culture, hybrid & grafted plants; greenhouses, poly and shade houses; bio-fertilizers; solar water heating systems and solar photovoltaic appliances (solar lighting systems) and bio-energy sources. It also provides consultancy for complete or partial project planning and implementation e.g. watershed or wasteland and or crop selection and rotation. Just consider the following points.
JISL is undoubtedly a leading and reputed agri-business company operating in diverse but integrated segments of the agri-business value chain. It is the second largest micro irrigation player in the world and the largest manufacturer of irrigation systems in India. Again it is the largest manufacturer of mango pulp, puree and concentrate in the world besides being the third largest manufacturer of dehydrated onions. Today, the company can boast of 23 manufacturing bases spread over the five continents (8 in the USA, 9 in India, three in Europe, two in the Middle East and one in Australia). Today, the company's products find their way into as many as 110 countries with the help of 3000 dealers and distributors worldwide. Even at home, the company has a pan-India presence with 9 plants (three each in Maharashtra and AP, two in Gujarat and one in Tamil Nadu), 80 offices, 39 depots and almost 2600 dealers.
Prospects for agri business are highly promising at home as well as abroad. The government's policies are highly supportive of this sector as the thrust is on the agriculture development and the development of the food processing sector. The Government of India has targeted 17 million hectares of land on minor irrigation system (MIS) by the end of the next year.
Growth prospects for the company are highly promising. The feasible irrigated area in India is placed around 62 million hectares by experts. But the actual area covered under micro irrigation is not more than 5 million hectares. Even at the global level, not more than 15 per cent of feasible irrigated area is actually irrigated today. The company is one of the largest manufacturers of piping systems in India. Today almost all production of PVC Pipes and fittings is easily sold. And according to experts, the demand for plastics in irrigation alone is likely to more than double to 2.5 million tonnes by 2015. The company is engaged in fruit processing and in onion as well as vegetable dehydration. Today, agro processing contributes around 10 per cent of the country's manufacturing GDP. Yet, not more than 2.5 per cent of total production of farm food produce in the country is processed.
Besides these major businesses, the company is also engaged in renewable energy (solar thermal water heaters, solar power pumping systems and solar photo-voltaic lighting), tissue culture and PVC sheets. The company is setting up a non banking finance company to complement the JISL business and enlarge the balance sheet of the company.
The company is planning new initiatives to push up the pace of growth. These include micro irrigation on pulses and paddy, greater focus on cotton and oilseeds applications, contract farming for mango and tomato, processing of new fruits like sweet lime, retail packing of mango pulp and participating in micro irrigation business in Turkey, Mexico, Africa, USA and Latin American countries.
The company has huge reserves amounting to Rs. 1478.5 crore, over 19 times its equity capital of Rs. 77.10 crore. Recently it has issues differential voting right bonus shares in the ratio of 1:20. There are an excellent chances of appreciation and the current problem of stringent working capital may end within a year. The management has started active negotiations with the key state governments for subsidy disbursements. If the current trends are any indication, the company will get around Rs. 500 crore within the next 5 months or so. The share price (Rs. 117) can go down to around Rs. 100, but in the medium to long term this scrip will prove a multi-bagger.
Looking forward to your visit to our website and get free share market tips on mobile and make daily money in Indian stock market.
You
should Trade Less But Trade Accurately & this is Achieved with our Tip.
