I am happy to present to you one more year of positive growth. This inspite of theoverarching worries of the downturn in the larger economy. We are blessed to have yourtrust in the Company in the midst of national and worldwide financial natural and socialdifficulties. I assure you that we at Jain Irrigation are and will consistently stay firmand focused on our promise to create value for all. With our inclusive business model webelieve we have created enormous intrinsic value in the business.
Agriculture is amongst those sectors which have had a negative growth in the lastfinancial year. Rural consumption was affected drought created havoc loan waiverscreated uncertainty & consequently less access to new loans.
. Drought affected many regions especially during the second half of the monsoonresulting in reduced demand for our products during the Rabi season. Low agricultureproduce & food prices have further added to the rural distress. A mix of these hasinfluenced us yet we have accomplished growth in revenue. Consolidated revenue hasincreased by 8.63 % whereas the growth registered in the standalone revenue was 4.28 %year-on-year basis. It's also worth noting here that overall our food business in the newsubsidiary company- Jain Farm Fresh Foods Ltd. (JFFFL) has shown positive growth of 17 %.
The Company has maintained its profit margins with a 15% increase in consolidatedannual net profit. This growth has been made possible mainly by good performance in thefirst three quarters which was offset by a subdued performance in the fourth quarter.
Having mentioned the growth in revenue and profits in this challenging environment wewould also like to emphasize that we are closely monitoring our receivables which haveremained on the higher side. There is a specific underlying cause for this apart from therural distress - the state elections in Rajasthan Madhya Pradesh Hyderabad andTelangana during the year and general elections in May this year preceded by the code ofconduct and disruption to business since February. These states account for a substantialmicro-irrigation and piping business for us. Since agriculture and water are statesubjects a major portion of our micro-irrigation and piping business has exposure togovernment projects in the said states. Taking a lesson from this we intend to reducedirect exposure with our projects to the state governments. We will plan and takesubstantial steps in this direction in the upcoming months. Given our past performance wehope to bring down receivables to acceptable levels before March'20.
We are cautious yet hopeful that a good ensuing monsoon will excel the growth enginein the agri-food sector. Meanwhile we have a good amount on our order books of over INR50 billion on a consolidated basis. Our focus in
the upcoming months would be to execute these orders efficiently. While we wait forfresh policy initiatives from the new Government at the Centre we believe we arepositioned well for encashing the emerging opportunities in the sector. However this isonce we get over the current liquidity crunch and resolve our immediate challenges.
The company has a debt to equity ratio of 1:1.1 and net worth of INR 45.61 billion(including CCD) by the end of FY 18-19. Lack of reduction in receivables has resulted in ahigher amount of working capital debt. So while we had predicted that by the end of theyear we would be able to reduce the debt levels because of the higher working capitalrequirement debt levels have remained very close to what they were in the third quarterof the year. The expected reduction what we had planned and hoped for did not comethrough. Nevertheless we believe that this is a short-term phenomenon and over the nextfew quarters we will be able to address that.
The total debt of the Company was around INR 51 billion and it may rise the in shortterm. The management of the Company is committed to reducing the long term debt of theCompany by INR 20 billion within a period of 12 to 24 months. This will be done throughone or more corporate actions which will include a mix of demerger divestment and equityinfusion in the piping products business food business of subsidiary and overseasirrigation entity. Contours of precise actions will evolve in the near future. Managementis committed to pursue debt-light strategy while pursuing future growth. While 20 billionis a good starting number Company may reduce further debt if any such opportunity arises.This will help in realising intrinsic value.
Over the past couple of years national and international expansion of the businessparticularly in the Ag-Tech has been on the agenda of the management. We believe thatAg-Tech is the future. It promotes use of scarce resources optimally and sustainably whichis a critical step towards addressing the global problems of water food and energysecurity. While we are leaders in the world in drip irrigation our acquisitions in the Agtech space would help us maintain leadership in bringing the most effective solutions toour farmers. The focus area for the management in current financial year will be towardsconsolidation of business that too in a manner that it helps to reduce the debt and toimprove the receivables.
The company has farmers and farming at the core of its DNA and the human resources ofthe company are no exception to it. The rural employment generated by the company is ashigh as 90 % of the total associates (employees) strength in the company. While we willcontinue to follow our mantra to do better for the sons-of-the- soil we will also makesure that we retain the competitive edge in the world of disruptive technologies and ever-increasing competition. We will make our workforce more diverse and hire professionals asrequired to maintain the leadership positions in our respective business verticals.
We have taken one more step to improve water conveyance efficiency in the agricultureand urban water distribution systems. Traditional open canals are susceptible tosignificant water losses due to evaporation percolation and breakages of canal bundseither natural or man-made. We have commissioned new extruders which can produce HDPEpipes up to 2.5 meter diameter. Canal systems can be replaced by an underground network ofthese giant HDPE pipelines and there is no requirement of farm-land acquisition frommarginal farmers.
This has been an innovative year from the perspective of our branded food productsbusiness - with the introduction of more than 50 new SKU's in the segment of powderedstraight and blended spices under our "Valley Spice" Brand. Packaged and brandedspices are a huge market with a large growth potential. We believe that through ourdirect connect with the farmers we will be able to deliver both good quality andreasonable price to the Indian consumers. We have developed these new blends and recipesthrough our own in-house NPD team with some unique offerings like our Chai Masala Gingerpowder kitchen star masala etc. We have also completed the rebranding of our healthyfruit snack FRU2GO as well as Frozen Fruit puree offerings under the FRUZEN brand. We areensuring availability on online channels like Amazon Big basket over and above the normalretail channels so that the new age consumers who care about health and sustainabilitycan also have access to all our products.
Over the past few decades India has shifted its status from a water-adequate to awater-scarce country. More than 20 cities are feared to approaching day zero (apparentlyno water for daily use). Many countries around the globe report a similar water crisis.There is only limited water available for agriculture. This has happened because of thenon-judicious and highly inefficient use of groundwater resources for agriculture.However the rapidly increasing population and consumption and decreasing water tablesthe world is left with no option but to increase agricultural productivity manifold.
It is a matter of great pride when many of the businesses and products are being blamedfor aggravating global warming causing biodiversity loss and depleting the naturalresources of water air and land that Jain's technology comes as a saviour. Thanks to theFounder Chairman Dr. Bhavarlal Jain the farmer-centric business model developed by himthree decades ago is enabling a family of 12000 plus associates to lead the world on thepath of sustainable development. We have pioneered products and solutions which areaddressing urgent issues of water security food security climate change farmerprosperity and agricultural productivity. The farmers using Jain's micro-irrigationsystems have created a downstream water-saving impact to the tune of 76 billion cubicmeters. The corresponding greenhouse gas mitigation impact due to reduced electricityconsumption will be equal to mitigating 12 million tons CO2. In addition there is asignificant improvement in the soil health and human health indicators.
It is important to note here that the technology has created this voluminous waterconservation and climate change mitigation impact while bringing a multi-fold increase inthe yield to the users.
United Nations General Assembly adopted 17 Sustainable Development Goals (SDGs) in 2015to tackle the world's most pressing social economic and environmental challenges in thelead-up to 2030. Water and climate change are given due importance among these globalgoals. We whole-heartedly welcome the move of the new government to set up a new JalShakti Ministry' and their emphasis on clean drinking water for every household ("HarGhar Jal") by 2024 "Har Khet Ko Pani" initiative under PMKSY is pushingefficient water use technologies.
While it is not the greatest year but considering all the headwinds we faced I think9% is a reasonable growth. Still it was less than what we anticipated. The underlyingfundamentals of the business are undoubtedly robust. The Company has already started workon its stated objective of significant deleveraging. The Company is focused in the shortrun to resolve the receivables and cash flow related issues. We are making efforts tocorrect the present situation in the coming months. This is also based on our belief thatthe financial ecosystem will turn more conducive sooner than later. We are already worldleaders in micro-irrigation and Ag-Tech and over the last few decades we have also gainedthe leading position in 24 x 7 drinking water supply projects. We are providing cleandrinking water supply to the residents of more than 15 cities across the countryincluding metropolitan cities like Pune. We are optimistic that a good monsoon and thevarious initiatives announced by the government in water infrastructure and irrigationsectors would give us enough opportunities to serve the economy in the medium and longterm in a sustainable manner.
Our Founder started the business with a meagre rupees 7000 in 1963. Since then we havecome a long way.
We believe we have a much longer journey ahead to serve our local and global customerswith the best in class products & services which are so essential to the future ofmankind and the earth itself!
The only way forward is to double the focus on customers and improve cash flows. We arecommitted to do this and more to ensure that Jain Irrigation shall continue to servemillions of customers while creating extraordinary value for shareholders in every way!And in the words of our late Chairman "Leave this world better than you foundit."
|Sincerely yours |
|Ashok Anil Ajit and Atul Jain. |