Erratic weather hits Jain Irrigation’s micro-irrigation business
The domestic MIS business increased by a lacklustre 6.6% y-o-y in the March quarter
There were hopes that Jain Irrigation Systems Ltd’s mainstay micro-irrigation systems (MIS) business would bring cheer in the seasonally stronger March quarter. That’s especially after the December quarter had been a bit of a dampener with domestic MIS revenue declining by 8% year-on-year (y-o-y).
Sadly, the March quarter, too, proved to be a spoilsport as the domestic MIS business increased by a lacklustre 6.6% y-o-y.
The local MIS business contributed to 29% of total consolidated revenue last quarter. Growth was affected owing to continued unseasonal rains and hailstorms in Maharashtra and the adjoining states, along with persisting low demand in the sugarcane sector.
“The MIS business for the quarter has performed lower than our own expectations," said Anil Jain, managing director and chief executive officer, Jain Irrigation, adding that the 17% annual growth in the same yardstick for the year as a whole is decent.
For the quarter, the total MIS business (a combination of domestic, exports and overseas) accounted for 46% of the total revenue.
Jain Irrigation derived another 45% of its revenue from its other two businesses—pipes and food, both of which performed well. Overall revenue, thus, increased by 11% y-o-y to ₹ 2,042 crore.
While operating profit margins improved sequentially, the measure was little changed compared with last year.
Nevertheless, robust other income, a decline in finance expenses and the comparatively slower pace of growth in depreciation costs led to faster y-o-y net profit growth.
Net profit for March quarter increased by 31% to ₹ 98.5 crore.
What augurs well is that Jain Irrigation managed to reduce its debt, compared with the December quarter.
Standalone and consolidated net debt declined by 10% and 8% to ₹ 2,858 crore and ₹ 3,927 crore, respectively, according to an investor communication.
Still, the weak financial performance for the last two quarters could well weigh on the stock from a near-term perspective.
In fact, the Jain Irrigation stock has already declined 19% so far this calendar year in comparison with the 1% increase in the BSE 200 index of BSE Ltd.
The outlook remains tough what with the persisting challenges in agriculture and rural area.
“Revenue for this financial year can be expected to grow in double-digits," said Jain, adding that whether the growth would be on the higher side or lower will totally depend on the post-monsoon situation as better clarity will emerge then. Debt reduction, too, will be a key factor to track in the days to come. Unless investors see some optimism on those fronts, there is little to suggest a reversal in trend in the stock performance.
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