The Jain Irrigation Systems Ltd stock has fallen by 14% since it announced its June quarter earnings last week. For the first time in many quarters, the company reported a loss because of a combination of poor revenue growth and higher interest expenses.

For the June quarter, Jain Irrigation’s total revenue declined by 9% over the same period last year to 865 crore. A key reason for the decline in sales is because of a drop in the revenue from the micro-irrigation systems (MIS) business.

But then, the decline in MIS revenue should not really come as a surprise because the company has adopted a strategy to reduce its MIS business exposure in some states to keep a check on its receivables. Jain Irrigation expects this shift in strategy to lead to a decline in net subsidy receivable from state governments. Needless to say, it would be a good move. But it would also mean revenue growth would be muted in the near-term.

For the June quarter, Jain Irrigation’s operating profit margin shrunk by 300 basis points to about 21%, as other expenditure increased at a faster pace. A basis point is one-hundredth of a percentage point.

These expenses, along with higher interest outgo and a mark-to-market notional forex loss led to the company posting a loss of 17 crore against a net profit of 82 crore in the same period last year.

Even as the Jain Irrigation stock has declined post its quarterly results, over the long-term, too, it has underperformed sharply. A key worry for the company’s investors has been the balance sheet concerns. At the end of fiscal year 2011-12, the firm had long-term borrowings worth 1,232 crore and short-term borrowings worth 2,195 crore, while cash and cash equivalents stood at 332 crore.

Jain Irrigation’s much-awaited non-banking financial company is finally expected to see the light of the day in October and investors would do well to track developments on that front. But in the short run, poor sales growth is likely to play spoilsport for earnings.