Jain Irrigation to cut MIS exposure in South

Jain Irrigation is stepping up micro-irrigation systems (MIS) sales in northern states and overseas markets due to delays in disbursement of government subsidies in the southern market.

To derisk its business portfolio, the company whose over 50% revenues come from MIS, is also looking at increasing focus on non-core sectors such as food business, tissue culture and pipe manufacturing that are showing a healthy growth.

Meanwhile, the company expects a licence for operating a non-banking finance company (NBFC), which would provide loans to farmers installing MIS, to come in four to six weeks.

Anil Jain, managing director, said on an analyst concall on Monday that the management is taking a relook at the business strategy to improve cash flows.

“We are focusing more on Gujarat, Rajasthan and Haryana where subsidy realisation happens in 90 days, while planning to reduce exposure in southern states where it takes more than seven to eight months to collect subsidy,” he said.

Under a subsidy model, the state and central governments contribute around 70% and rest is put by the farmer for installing the MIS. Subsidy realisation from state governments, mainly southern states, are taking longer time, forcing the company to borrow more for working capital needs.

Jain Irrigation’s interest component, which is set to cross over Rs350 crore in the current fiscal, is over 50% over the last one.

Experts said MIS sales will now largely come from Gujarat and overseas. A move to shift from the capital-intensive southern region will help in reducing the interest burden, they said. For the NBFC, the firm has joined hands with International Finance Corp, the World Bank arm, and is looking to rope in private equity investors, an analyst from a domestic brokerage said.