Motilal Oswal

Jain Irrigation (Buy)

CMP: ₹120.50

Target: ₹170

Recently, the Centre has cut its subsidy rate to 35 per cent from 40 per cent for small and marginal farmers (<2Ha) and 25 per cent for other farmers (>2 Ha). With cut in subsidy per farmer coupled with expected increase in absolute subsidy in the upcoming Budget, we believe more farmers will be able to come under the ambit of micro irrigation system (MIS). Given the Government’s focus on MIS, we believe a clear road-map and policy for MIS can accelerate improvement in Jain Irrigation’s working capital cycle and thus drive re-rating. In our recent meeting, Managing Director, Anil Jain pointed out that JI is on track to achieve it annual growth guidance of 20 per cent and ₹300 crore debt reduction. We believe JI is on track to post 20 per cent revenue growth in FY15. The management targets to raise ₹500 crore through a 25 per cent stake in food processing business in FY15. We believe the upcoming Budget could be a key event for the company and strong reforms in the Budget can accelerate the stock’s re-rating process.