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Jain Irrigation plans to invest of Rs 200 crore over two years in its NBFC venture. The company will hold 50 per cent stake in the venture, promoter family owning 20 per cent stake and the rest distributed among the partners.
Mr Anil Jain, Managing Director, Jain Irrigation, said, “Though the plans are in nascent stage to decide on the quantum of investments we are looking to pump in Rs 100 crore for our 50 per cent stake. The NBFC will lend only to farmers we are closely associated in Maharashtra before covering other States.”
The company has identified about five to six entities including multilateral institutions, national level banks and private equity investors for the proposed NBFC, but no formal agreement has been signed, he said.
Micro irrigation
Explaining the concept, Mr Jain said whenever a farmer undertakes micro irrigation on his field he pays only 50 per cent upfront with the Government chipping in the rest as a grant.
The proposed NBFC will extend a loan to farmers up to the amount receivable from the Government so that he pays back the company that undertakes the project, he added.
“We expect our investment of Rs 100 crore in NBFC to reduce our receivable by Rs 1,000 crore increasing the cash flow into the company,” he said. The company receivable will touch Rs 1,300 crore by end of this fiscal, he added. Micro irrigation business contributes about 50 per cent of the company's total revenue.
With an interest rate of 12-13 per cent per annum incurred on the NBFC loan, farmers will be more than compensated from the competitive rates for micro irrigation offered by the company and cost savings in cultivation, said Mr Jain.
A micro irrigation system for a mango farm would cost Rs 40,000 a hectare while that of cotton would be Rs 75,000 a hectare.
On the plans to raise Rs 700 crore through equity dilution, Mr Jain said the promoter holding in the company is expected to fall to 29 per cent from the current 30.5 per cent post-stake dilution.
The company's shares on the BSE were down two per cent at Rs 189 on Tuesday.
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