The micro irrigation company is facing slowing sales growth, increasing delay in release of government subsidy receivables and consequently high working capital and high interest cost and yet has committed an investment of $375 million in sub-African countries
 

Jalgaon-based Jain Irrigation Systems has said that it has committed investments and projects of $375 million over next few years in sub-Saharan Africa. However, from where will it get the money, still remains unanswered. This is odd because, the company has huge debt on its balance sheet in India and has not been paying its dues to the banks. Even its receivables for FY11-12 were 343 days, which means the company has yet to receive cash for its sales done almost a year ago.

Especially, when we look at Jain Irrigation’s fourth quarter results, the situation becomes serious. The company had shown a 59% increase in its net profit to Rs173 crore for the quarter to end-March. However, this has come due to lower tax rate, availment of tax holiday and tax benefit write back from earlier years, in addition to a forex gain of Rs15 crore. Its standalone net sales remained muted at Rs1,237 crore during the fourth quarter.

Shares of Jain Irrigation have already been corrected by over 50% in the past one year on account of balance sheet concerns, its move to launch a finance company and worries of slower growth. Even today, its shares are trading at Rs76, somewhat closer to its 52-week low.

During the quarter to end-March, Jain Irrigation's micro irrigation business (MIS) sales growth remained negative due to lower credit period to farmers and the company’s failure to reduce high receivables and increase cash collections, especially from Karnataka and Tamil Nadu. Its other businesses like pipe and agro products have also shown a muted performance during the fourth quarter. This also means that whatever figures the company has shown on its balance sheet, as revenues are yet to be realised and there is no fixed period for its realisation.

As on March 2012, Jain Irrigation’s consolidated and standalone gross debt stood at Rs3,800 crore and Rs2,800 crore from Rs3,700 crore and Rs2,800 crore as on December 2011. During the fourth quarter, receivables in its MIS, its high margin business, stood at 343 days as against 340 days in December 2011 and 355 days in September 2011 and the company is planning to reduce it to 270 days in near future.

The company has witnessed a challenging FY11-12 on account of slowing sales growth, increasing delay in the release of government subsidy receivables and consequently high working capital and high interest cost and depreciating rupee, resulting in mark-to-market notional losses due to long term foreign currency assets.