Jain Irrigation expects over 50% rev growth in FY09

Jain Irrigation has posted a Q4 FY08 net profit of Rs 36.6 crore as against Rs 34 crore in the same quarter of last year. Net sales stood at Rs 599 crore as against Rs 450 crore last year. Operating profit margin improved at 21% as against 15.6%.

Anil Jain, MD, Jain Irrigation Systems, said MIS grew 63% in terms of sales mix. He expects an FY09 topline growth of over 50%.

Excerpts from CNBC-TV18's exclusive interview with Anil Jain:

Q: Even though the growth on the topline has been about 33%, and your OPMs have also come in higher by about 300 bps, the bottomline seems to be a bit quiet?

A: That is because of two reasons. We had higher interest. But most of the impact is taxation. Last year our effective taxation rate was 23%. This year it is 29%. But most of it is deferred tax. So it is not a cash tax out. It is an adjustment on the book. But overall margin expansion has been 3% and for the year we have grown business by 38%.

Q: On the interest side, you said interest adjustment has also gone up?

A: Interest has gone up, interest has also increased. But that is in line for the interest we had for nine months. So, if you look at the entire year, last year our profits were Rs 99 crore and this year we have closed at about Rs 139 crore odd. So, this is a 41% growth in total on net basis and our earnings have grown 41%, while the business for the entire year has grown by about 38% to about Rs 1660 crore odd.

Q: Your key revenue kicker and where you have got your highest EBITDA margins is from Micro Irrigation System project. What percentage of your revenues has it contributed this time and going forward from your other revenues – food processing, plastics, and from the MIS process, what sort of revenue breakup can we see?

A: Micro Irrigation grew 63% and in terms of sales mix about 36%. So, there was a 36% contribution and 63% growth. Food processing also has been a high margin business. That business has grown 45% this year. But that amounts to only about 15% of the total revenue.

The other major division that has grown significantly is the PE piping division, which has grown 138%. The PVC and PE pipe together are about 35% of our revenue breakup. So, Micro Irrigation is about 36%, 35% in pipes and 15% in food and then the other businesses. That is the revenue breakup.

Q: Is there a concern at this point in time on the plastic business that you are feeling given the kind of slowdown that has been witnessed in the US market? Are you looking at growth slowing in this segment in FY09? If you were to give us projections on the kind of growth that you could see, what would be that figure?

A: We have a plastic sheet business. But that business effectively on a consolidated basis would be hardly 6% of our overall revenue next year. Even if there is a slowdown in the US, it won’t really impact our overall growth in margins. But if you really look at the whole company across all the divisions, we are seeing very strong momentum domestically.

On this higher growth that we have been registering over the last four years, we expect next year also we should grow over 50% on a topline basis, and our earnings growth should match the revenue growth next year as well.

Q: You recently acquired controlling stake in Thomas Machines, a company in Switzerland, what percentage of your revenues could we see coming from this end going forward?

A: That was a comparatively smaller acquisition, about Swiss Francs 12-15 million, which is the revenue size. But these numbers that we have declared today are standalone numbers, as I said about Rs 667 crore. If you look at the consolidated numbers, which will come up in the next two months, we should close the year – March ’08 – almost at about close to Rs 2100 crore. That would mean in the current year, overall we have grown almost about 65-70%.

Looking at the growth going forward on this higher base, as I said, India would continue to play a dominant role. But outside India we should have another Rs 600 crore odd of additional sales even in the coming year from our overseas acquisitions.