Jain Irrigation plans to float a non-banking finance company to fund small farmer investments in agriculture for which it plans to seek RBI approval shortly.

Mr Anil Jain, Managing Director, said the company would consider a tie-up with banking or financial institutions for the foray. The quantum of investment and other details will be worked out by April. “Our NBFC venture will address one of the key difficulties of small farmers in getting credit when they require it,” he said.

With cost of labour, fertiliser and other farm equipment on the rise, farmers are left with few resources to invest on technology and associated infrastructure such as micro-irrigation. The erratic weather patterns, particularly during the last few harvest seasons, have also resulted in banks going slow on lending to farmers.

“The NBFC proposal will also help the company reduce receivables in the balance sheet of Jain Irrigation and improve the working capital cycle for the micro-irrigation business,” said Mr Jain.

QIP planned

The company plans to raise Rs 700-800 crore through a qualified institutional placement for investment in its renewable energy project, reduce debt and fund future expansion plans.

The Board has recommended issue of bonus equity shares with differential voting rights (DVRs) in the ratio of one DVR for 20 ordinary equity shares. Ten DVR shares will carry voting rights equivalent to one ordinary equity share.

The company has also decided to transfer its solar and renewable energy division into a wholly-owned arm.

Profits

Jain Irrigation has recorded a 25 per cent rise in net profit at Rs 71 crore (Rs 57 crore) for the third quarter of this fiscal, despite the extended monsoon restricting MIS (micro-irrigation system) business growth. Income grew 10 per cent at Rs 693 crore (Rs 631 crore).

Given the high commodity prices, the company's raw material — largely fruits and vegetables — cost rose 70 per cent to Rs 590 crore (Rs 347 crore).

It received Rs 40 crore as VAT refund (since October 2009) from the Maharashtra Government and expects Rs 7-8 crore each quarter.

“The late withdrawal of the monsoon has restricted MIS business growth. However, a good recharge of underground water levels and improved financials of farmers have resulted in good growth opportunities in the next few quarters,” said Mr Jain.

The company scrip was down five per cent at Rs 215 on Friday.

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