7 July 2014
Update | Sector: Agri
Jain Irrigation
BSE Sensex
26,100
S&P CNX
7,787
CMP: INR132
TP: INR170
Buy
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Subsidy rate cut to augment MIS implementation
JI IN
443.1
132/46
9/61/135
60.0
1.0
Clear policy on MIS in upcoming budget could accelerate re-rating
Recently, the Centre has cut its subsidy rate from 40% to 35% for small and
marginal farmers (<2Ha) and 25% 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 MIS.
Given the government’s focus on micro-irrigation systems, we believe a clear
road-map and policy for MIS can accelerate improvement in JI’s working capital
cycle and thus drive re-rating.
In our recent meeting, Managing Director, Mr Anil Jain pointed out that JI is on
track to achieve it annual growth guidance of 20% and INR3b debt reduction.
Financial Snapshot (INR Million)
Y/E March
2015E 2016E 2017E
Net Sales
70,249 84,071 99,517
EBITDA
Adj PAT
EPS (INR)
Growth (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
9,663 11,787 13,953
2,773 4,921 6,935
6.0
52.3
12.1
12.8
22.0
2.5
10.6
62.0
18.6
16.3
12.4
2.1
15.0
40.9
75.9
21.7
19.1
8.8
1.7
315.8 77.4
Cut in subsidy rate to ensure more farmers come under MIS ambit
A recent government notification suggests the central government has cut its
share of subsidy per farmer from 40% to 35% for small and marginal farmers
(<2 Ha) and to 25% for other farmers (>2 Ha) with effect from 1 April 2014. With
absolute subsidy expected to be revised upwards in the upcoming budget from
current level of INR16b and cut in subsidy rate per farmer, we believe more
farmers will be able to come under the ambit of MIS. Majority of the current
installations (70-80% of total) are towards small and marginal farmers.
However, clarity from state governments is still awaited on whether they will
increase their allocation share to keep total subsidy rate at 50%.
SAFL to work as a business correspondent for banks
Shareholding pattern (%)
As on
Mar-14 Dec-13 Mar-13
Promoter
DII
FII
Others
28.7
13.4
39.5
18.4
27.5
1.6
53.0
18.0
27.5
1.3
51.0
20.2
The Reserve Bank of India (RBI) recently permitted banks to appoint non-
deposit taking NBFCs as their business correspondents (BCs). JI intends to
capitalize on this; Sustainable Agro Finance Ltd (SAFL) will act as a BC for a bank.
This will enable SAFL to broaden relationships with farmers apart from
incrementally seeding more MIS financing through banks. SAFL is targeting a
book size of INR2.5b in FY15 against INR1b in FY14.
Note: FII Includes depository receipts
Replication of GGRC model on a pan-India basis could be a key reform
Given the government’s focus on MIS, there is a possibility of replication of
efficient models like the Gujarat Green Revolution Company (GGRC) on a pan-
India basis. Further, there are strong chances of a sharp increase in the Center’s
allocation towards MIS from the current INR16b. While increase in Center’s
allocation can drive growth for the industry, administrative reforms on the lines
of GGRC can drive significant working capital improvement for the company.
Stock Performance (1-year)
Jain Irrigation
Sensex - Rebased
140
115
90
65
40
Maintain Buy; budget announcements could accelerate re-rating
We believe JI is on track to post 20% revenue growth in FY15. The management
targets to raise INR5b through a 25% 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. We
maintain
Buy
with price target of INR170 (16x FY16E EPS), implying 29% upside.
Atul Mehra
(Atul.Mehra@MotilalOswal.com); +91 22 3982 5417
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
Investors are advised to refer through disclosures made at the end of the Research Report.

Jain Irrigation
National Mission for Sustainable Agriculture (NMSA)
Key highlights of NMSA policy document
NMSA policy document specifying MIS subsidy rates for FY15
Source: Industry, MOSL
7 July 2014
2

Jain Irrigation
NMSA policy document specifying MIS subsidy rates for FY15
Source: Industry, MOSL
7 July 2014
3

Jain Irrigation
NMSA policy document specifying MIS subsidy rates for FY15
Source: Industry, MOSL
7 July 2014
4

Jain Irrigation
National Mission for Sustainable Agriculture (NMSA)
Key highlights of NMSA policy document
Sustaining agricultural productivity depends on quality and availability of natural
resources like soil and water. Agricultural growth can be sustained by promoting
conservation and sustainable use of these scarce natural resources through
appropriate location specific measures. Indian agriculture remains
predominantly rain-fed, covering about 60% of the country’s net sown area and
accounts for 40% of the total food production. Thus, conservation of natural
resources in conjunction with development of rainfed agriculture holds the key
to meet burgeoning demands for foodgrain in the country.
Towards this end,
National Mission for Sustainable Agriculture (NMSA) has been formulated for
enhancing agricultural productivity especially in rainfed areas focusing on
integrated farming, water use efficiency, soil health management and
synergizing resource conservation.
1) Rain-fed Area Development (RAD)
RAD will adopt an area-based approach for development and conservation of
natural resources along with farming systems. This component has been
formulated in a ‘watershed plus framework’, i.e., to explore potential utilization
of natural resources base/assets available/created through watershed
development and soil conservation activities / interventions under MGNREGS,
NWDPRA, RVP&FPR, RKVY, IWMP etc.. This component will introduce
appropriate farming systems by integrating multiple components of agriculture
such as crops, horticulture, livestock, fishery, forestry with agro-based income
generating activities and value addition. A cluster based approach of 100 hectare
or more (contiguous or non-contiguous in difficult terrain with close proximity in
a village/adjoining villages) may be adopted to derive noticeable impact of
convergence and encourage local participation and for future replication of the
model in larger areas.
2)
On Farm Water Management (OFWM)
OFWM will focus primarily on enhancing water use efficiency by promoting
efficient on-farm water management technologies and equipment
. This will not
only focus on application efficiency but, in conjunction with RAD component,
also will emphasize on effective harvesting & management of rainwater.
Assistance will be extended for adopting water conservation technologies,
efficient delivery and distribution systems etc. Emphasis will also be given to
manage and equitably distribute the resources of commons by involving the
water users associations, etc. To conserve water on farm itself, farm ponds may
be dug using MGNREGA funds and earth moving machinery (to the extent
manual digging under MGNREGA is not feasible).
3)
Soil
Health Management (SHM)
SHM will aim at promoting location as well as crop specific sustainable soil health
management including residue management, organic farming practices by way of
7 July 2014
5

Jain Irrigation
creating and linking soil fertility maps with macro-micro nutrient management,
appropriate land use based on land capability, judicious application of fertilizers and
minimizing the soil erosion/degradation. Assistance will be provided for various
improved package of practices based on land use and soil characteristics, generated
through geographical information system (GIS) based thematic maps and database
on land and soil characteristics through extensive field level scientific surveys.
4) Climate Change and Sustainable Agriculture: Monitoring, Modeling and
Networking (CCSAMMN)
CCSAMMN will provide creation and bidirectional (land/farmers to
research/scientific establishments and vice versa) dissemination of climate change
related information and knowledge by way of piloting climate change
adaptation/mitigation research/model projects in the domain of climate smart
sustainable management practices and integrated farming system suitable to local
agro-climatic conditions. The dedicated expert teams of technical personnel will be
institutionalised within NMSA to rigorously monitor and evaluate the mission
activities thrice in a year and will inform the National Committee. Comprehensive
pilot blocks will be supported to illustrate functional mechanism for dissemination
of rain-fed technologies, planning, convergence and coordination with flagship
schemes/Missions like MGNREGS, IWMP, Accelerated Irrigation Benefit Programme
(AIBP), RKVY, NFSM, NHM, NMAET etc.
7 July 2014
6

Jain Irrigation
Story in charts
JI is the market leader in MIS business in India
Market share of key players in micro irrigation systems in India
MIS penetration in India is among the lowest in world
MIS penetration across countries (%)
90%
78%
55%
65%
20%
25%
55%
52%
10%
Jain Irrigation
Netafim
Others
Israel
Russia
Spain
US
Brazil
China
3%
India
Source: Company, MOSL
Source: Company, MOSL
Gross debtors set to decline due to improved strategy
Gross Sundry Debtors
369
316
255
343
352
257
200
181
Hence, debt to equity to decline from 1.8x to 1.1x
Net Debt (INR m)
2.0
1.8
Net DER (x)
1.6
1.5
1.1
34,442
35,654
38,601
35,138
FY14
FY15E
32,650
FY16E
FY09
FY10
FY11
FY12
FY13 FY14E FY15E FY16E
FY12
FY13
Source: Company, MOSL
Source: Company, MOSL
Food processing is another key opportunity for JI
RoE to improve to 18.6% in FY16E
RoE (%)
18.6
13.5
12.1
2.4
3.1
FY12
FY13
FY14
FY15E
FY16E
Source: Company, MOSL
Source: Company, MOSL
7 July 2014
7

Jain Irrigation
Financials and valuation
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2012
49,206
18.5
8,155
16.6
1,441
6,714
4,768
345
0
2,290
4
0.2
2,286
2,286
-20.6
-51
2,286
2013
50,217
2.1
7,253
14.4
1,696
5,558
4,855
668
1,245
125
80
63.9
45
495
-78.4
-14
495
2014
58,281
16.1
7,700
13.2
2,045
5,654
4,676
463
2,300
-860
-462
53.7
-398
667
34.9
0
667
2015E
70,249
20.5
9,663
13.8
2,110
7,553
4,437
351
0
3,467
693
20.0
2,774
2,774
315.8
0
2,774
(INR Million)
2016E
84,071
19.7
11,787
14.0
2,197
9,590
3,859
420
0
6,151
1,230
20.0
4,921
4,921
77.4
0
4,921
2017E
99,517
18.4
13,953
14.0
2,307
11,645
3,474
498
0
8,669
1,734
20.0
6,935
6,935
40.9
0
6,935
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2012
810
16,726
17,537
37,986
1,755
57,775
33,528
9,793
23,735
1,980
236
48,180
14,614
22,712
3,308
7,546
17,073
16,365
708
31,107
57,775
2013
910
20,770
21,680
38,051
1,841
61,572
37,726
11,640
26,086
749
38
50,405
17,231
19,547
2,359
11,269
16,636
16,095
541
33,770
61,572
2014
925
20,831
21,755
40,583
1,412
63,955
41,514
13,742
27,771
807
14
52,258
18,364
17,994
1,968
13,932
18,089
17,473
617
34,169
63,955
2015E
925
23,279
24,204
36,583
1,412
62,404
44,621
15,853
28,768
0
14
54,156
21,606
16,685
1,431
14,435
21,729
21,100
629
32,428
62,404
(INR Million)
2016E
2017E
925
925
27,767
34,161
28,692
35,086
33,583
29,583
1,412
1,412
63,892
66,285
46,921
49,221
18,050
20,357
28,871
28,864
0
0
14
14
60,230
68,165
25,137
29,896
18,051
19,515
919
1,031
16,123
17,722
26,418
31,951
25,616
30,965
802
986
33,812
36,214
63,892
66,286
E: MOSL Estimates
7 July 2014
8

Jain Irrigation
Financials and valuation
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2012
5.6
9.2
43.3
1.0
20.6
2013
1.1
4.8
47.7
0.6
588.3
2014
1.4
5.9
47.0
0.6
-68.0
91.3
22.5
2.8
1.7
12.9
0.4
13.5
14.0
0.9
165.4
108.4
121.7
2.2
2.4
10.8
0.8
139.0
125.2
113.7
1.8
3.1
10.0
0.9
109.7
115.0
96.9
1.9
2015E
6.0
10.6
52.3
0.7
11.7
22.0
12.5
2.5
1.4
9.9
0.5
12.1
12.8
1.1
86.0
112.3
98.1
1.5
2016E
10.6
15.4
62.0
0.9
8.8
12.4
8.6
2.1
1.1
7.9
0.7
18.6
16.3
1.3
77.7
109.1
100.3
1.2
2017E
15.0
20.0
75.9
1.1
7.8
8.8
6.6
1.7
0.9
6.4
0.9
21.7
19.1
1.5
70.9
109.7
103.0
0.8
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2012
2,286
1,441
0
4,157
938
-6,166
850
-5,270
-114
55
-5,330
14
8,143
-4,051
-448
3,674
-805
4,114
3,308
2013
125
1,696
0
4,855
295
-3,127
4,275
-2,943
-459
20
-3,383
3,903
-586
-4,843
-469
-1,832
-939
3,298
2,359
2014
-860
2,045
0
4,676
41
-1,551
5,731
-2,615
-407
138
-2,885
0
1,216
-4,638
-265
-3,202
-356
2,324
1,968
2015E
3,467
2,110
0
4,086
693
1,203
10,173
-2,300
0
351
-1,949
0
-4,000
-4,437
-325
-8,762
-537
1,968
1,431
(INR Million)
2016E
2017E
6,151
8,669
2,197
2,307
0
0
3,439
2,977
1,230
1,734
-1,897
-2,289
8,660
9,930
-2,300
-2,300
0
0
420
498
-1,880
-1,802
0
0
-3,000
-4,000
-3,859
-3,474
-433
-541
-7,292
-8,015
-512
113
1,431
919
919
1,031
E: MOSL Estimates
7 July 2014
9

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Jain Irrigation
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Disclosure of Interest Statement
1. Analyst ownership of the stock
2. Group/Directors ownership of the stock
3. Broking relationship with company covered
4. Investment Banking relationship with company covered
JAIN IRRIGATION SYSTEMS LTD
No
No
No
No
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7 July 2014
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10