The non-banking finance company of Jain Irrigation Systems Ltd (JISL) will commence operations from October this year to coincide with the busy season.
The company also plans to raise up to $210 million through a combination of instruments for which it has formed two board-level subcommittees.
Anil Jain, Managing Director of JISL, in a communication to the stock exchanges, said the company has received approval from the regulator to launch the NBFC named Sustainable Agro-Commercial Finance Ltd (SAFL). This would begin operations from October. He said the NBFC would help the company execute its strategy to reduce its receivables.
He said the company had already cut its subsidy receivables by about Rs 120 crore in the last quarter and was confident of reducing it by more than Rs 500 crore in the entire year. The company was focused on reducing the cost of funds and on aligning ‘source of capital to appropriate business cycle’. While part of it had been accomplished with the help of bankers, the rest would be achieved ‘very soon with capital market transactions’.
The company’s board has also approved raising up to $210 million through a mix of equity/convertible bonds/ECBs and has formed two board sub-committees styled the Securities Issuance Committee to finalise the modalities.
Referring to the 9.40 per cent decline in sales in Q1 of this year to Rs 84.36 crore (Rs 93.16 crore), Jain said “in the past nine years for the first time we have negative revenue growth in the domestic market as well as net loss due to mark-to-market forex charge” as the INR depreciated by almost Rs 5 against the US dollar since end-March to end-June this year. But he felt this was temporary and was confident of maintaining profitability as before for the full year. (The net loss in Q1 this year was Rs16.9 crore as against a net profit of Rs 8.23 crore in the same period last year).
The JISL MD said the fall in revenue growth was expected and was part of a “deliberate strategy to change our underlying business in micro irrigation”. Over the coming few quarters, this would lead to a decline in net subsidy receivables from State Governments and “create a new business model” that would provide sustained growth with improved working capital cycle. He was confident the micro irrigation business would start delivering from the third quarter.
Jain said the pipes and food businesses and the overseas business did well. He expected significant growth in renewable energy and tissue culture activities.
The counter witnessed a healthy trading volume of 75.46 lakh shares in the NSE by 12.25 pm. However, the stock shed Rs 4.90 at Rs 81.70.