Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil BBB-/Stable/Crisil A3’ ratings on the bank facilities and non-convertible debentures of Jain Irrigation Systems Limited (JISL). The ratings continue to reflect the established business risk profile of the company supported by leading position in the micro-irrigation systems (MIS) segment, long track record of operations and extensive dealer network. The ratings are, however, constrained by modest financial risk and liquidity profile, high concentration of revenue on the agriculture sector and direct impact of the government’s budget allocation for this sector on scale of operations. Operations remain exposed to volatility in the prices of key raw materials.

 

Revenue has seen a de-growth of 19% in the first nine months of fiscal 2025 owing to the weak demand scenario due to central and state elections, modest infrastructure spending during this fiscal (under the Jal Jeevan Mission) and extended monsoon. The plastic segment was impacted more with an on-year de-growth of 28%, while the MIS segment witnessed de-growth of 10% in 9MFY25. The international plastics segment, on the other hand, continued to grow at a stable rate of 10%. Consequently, overall revenues for fiscal 2025 is expected to witness a degrowth of 9-10%, which however is expected to grow at double digit levels in fiscal 2026 owing to expected higher spending by Govt in line with budgetary allocation, increased monsoon led to water availability and the expected release of Government orders for infrastructure (e.g. JJM in Maharashtra). Operating margin increased to 13.9% in 9MFY25 compared to 13.1% in fiscal 2024 owing to higher share of exports in MIS segment and low raw material prices. The operating margin is expected to sustain at ~13-14% over the medium term owing to better raw material and energy cost reduction measures initiated by JISL. Nonetheless, sizeable provisioning/write-off, impacting the operating margin, will remain monitorable.

 

Total debt outstanding was Rs 2763 crore as on December 31, 2024, including debt at JISL (standalone) (including acceptances) and the international plastics business. Of this, unsustainable debt was Rs 855 crore as on December 31, 2024. With scheduled repayments to be supported by expected stable operating performance, the sustainable debt to operating profit before interest, tax, depreciation and amortisation (OPBITDA) ratio is expected to remain at 3.4-3.6 times in fiscal 2025 and 2.3-2.5 times in fiscal 2026.

 

Liquidity remains critical with sanctioned fund-based bank limit of Rs 1,505 crore being fully utilized and liquid surplus being modest. Working capital intensive nature of operations has also constrained liquidity. While JISL has stopped taking up new EPC projects since September 2019, the recovery of receivables from EPC projects was slower. The receivables for EPC projects were at Rs 874 crore as on December 31, 2024 compared to Rs 880 crore as on March 31, 2024 indicating slower net recovery of project receivables keeping liquidity constrained.

 

JISL has received in principle conditional approval from the lead bank for enhancement in overall limits at a consortium level: fund based Rs 100 crores and non-fund based Rs 72 crores. Approval from other consortium lenders (facilities to be provided as per pro-rata exposure of lenders in the consortium) is awaited and is currently in process. Also, another Rs 100 crore of e-VFS facility is sanctioned and in the process of being availed from the lead bank. The lead bank is also considering dealer financing limit of Rs. 100 crores without any guarantee or recourse to the Company. The expected conversion of warrants issued in November 2023 resulting in fresh fund infusion of around Rs 150 crore by May 2025. These can provide liquidity cushion and will remain monitorable.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of JISL (standalone) and its subsidiaries and step-down subsidiaries engaged in the international plastics business. The entities, collectively referred to as JISL, have same management, financial linkages and similar businesses. Crisil Ratings has not consolidated the agro-processing business under Jain Farm Fresh Foods Ltd (JFFFL) given the minimal business linkages and restrictions on cashflow between JISL and JFFFL, following debt restructuring undertaken at JISL.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Established market position and diversified revenue stream: JISL (standalone) has a diversified revenue profile with presence across multiple business segments, hi-tech agri inputs (contributing to 58% of revenue in the first nine months of fiscal 2025), consisting of MIS; tissue culture and plastics (42%), consisting of plastic pipes and plastic sheets. The company has strong market position in its business segments. In the MIS segment, it is the leader in the domestic market supported by a strong distribution network and in-house research and development capabilities. It has an established position in the domestic pipes segment. It benefits from synergies among business segments, which are largely focused on the agricultural community.

 

Revamped business model with focus leveraging its extensive dealer network: JISL has over 4,000 dealers and sales to dealers and institutional customers contribute to over 70% of revenue, as against less than 65% a few years ago. This is a focus segment for the company especially with no new EPC orders being taken up. The orderbook of JISL shrunk to Rs 606 crore as on December 31, 2024, from Rs 808 crore as on March 31, 2024, as it only includes orders for ongoing EPC projects, export sales and sales to institutions, and does not factor in orders from dealer network (which are received on daily basis). Of the outstanding orderbook, ongoing EPC projects contributed around Rs 153 crore, majority of which will be executed in fiscal 2026. Ability to identify new revenue streams to compensate for the loss of revenue from the EPC projects segment will remain a key monitorable.

 

Extensive experience of the promoters: JISL, founded by Late Mr Bhavarlal Jain, was the pioneer of micro irrigation in India. Currently, his sons Mr Ashok Jain (Chairman), Mr Anil Jain (Managing Director), Mr Ajit Jain (Joint Managing Director) and Mr Atul Jain (Joint Managing Director) are managing overall operations of the company and are assisted by professionals, agricultural scientists, engineers and technicians managing various business segments.

 

Weaknesses:

Working capital intensive operations: Operations have remained working capital intensive. Because of focus on EPC projects till fiscal 2019, the company’s working capital requirement was large. The EPC projects segment had issues related to design approval, water availability for testing and change in government. Also, slow realisation of subsidies from government-sponsored agencies and delay in completing procedural requirement contributed to sizeable stretch in receivables, which resulted in liquidity mismatch and subsequent default on debt obligations. The company has faced similar stretched liquidity situations in the past as well, owing to delay in release of subsidy by state governments. This time around, JISL has stopped taking up new EPC projects since September 2019. The receivables for EPC projects were at Rs 874 crore as on December 31, 2024 compared to Rs 880 crore as on March 31, 2024 indicating slower recovery of project receivables keeping liquidity constrained. Completion of the pending EPC projects and recovery of EPC projects receivables remain key monitorable. Also, collection of the identified overdue receivables (IOR) with around Rs 465 crore collected as on December 31, 2024 compared to Rs 457 crore as on March 31, 2024 suggests slower than expected pace of recovery. The collection of pending IOR of Rs 202 crore over next few months will remain monitorable.

 

Modest financial risk profile: Outstanding debt at JISL was high around Rs 2,763 crore as on December 31, 2024, and includes unsustainable debt of Rs 855 crore (with coupon of 0.01%). With scheduled repayments as well as repayment of unsustainable debt, the total debt to OPBITDA ratio is expected to improve to around 3 times in fiscal 2027 from around 5.4 times in fiscal 2024. The company is expected to incur moderate capital expenditure (capex) of Rs 100-120 crore per annum, which will be funded from internal accrual.  Repayment of unsustainable debt is linked to project receivables which will be monitorable.

 

Susceptibility of profitability to volatility in raw material prices and risk related to foreign exchange fluctuations: JISL is exposed to fluctuations in the prices of polyethylene, polyvinyl chloride (PVC), polymer resins which are used as raw materials. Prices of these commodities are determined by their demand-supply scenario and by the price of petroleum. While JISL is able to pass on the price volatility to customers for a large portion of sales, profitability remains exposed to raw material price volatility for fixed price contracts. Also, operations involve sizeable export sales as well as import of raw materials and are exposed to adverse fluctuations in forex rates. While there is a natural hedge from exports for part of the forex exposure, the company also hedges its forex risk using derivatives.

Liquidity: Adequate

JISL (standalone) continues to operate on a tight rein, with sanctioned fund-based bank limit of Rs 1,505 crore being fully utilised over the 12 months through December 2024 and liquid surplus being modest. Working capital intensive nature of operations has also constrained liquidity. While JISL has stopped taking up new EPC projects since September 2019, the recovery of receivables from EPC projects was slower. The receivables for EPC projects were at Rs 874 crore as on December 31, 2024 compared to Rs 880 crore as on March 31, 2024 indicating slower recovery of project receivables keeping liquidity constrained. JISL has received in principle conditional approval from the lead bank for enhancement in overall limits at a consortium level: fund based Rs 100 crores and non-fund based Rs 72 crores. Approval from other consortium lenders (facilities to be provided as per pro-rata exposure of lenders in the consortium) is awaited and is currently in process. Also, another Rs 100 crore of e-VFS facility is in the process of being availed from the lead bank. Also, dealer financing limit of Rs. 100 crores without any guarantee or recourse to the Company is also being considered by the lead bank. The expected conversion of warrants issued in November 2023 resulting in fresh fund infusion of around Rs 150 crore by May 2025. These can provide liquidity cushion and will remain monitorable.

 

Crisil Ratings also notes that there is an Agency for Specialised Monitoring (ASM) appointed by the lenders, as part of the restructuring plan, to provide funds for timely debt servicing. A Trust and Retention Account (TRA) is maintained by lenders, wherein cash flow from operations is parked in advance against forthcoming obligation, and the balance is permitted to be utilised by the company. Continuation of the ASM led monitoring of the TRA provides comfort around timely debt servicing.

 

Cash accrual from JISL (standalone) and the international plastics business is expected at Rs 300-350 crore per annum in fiscals 2025-2027, which will be sufficient to cover debt obligation of around Rs 177 crore in fiscal 2025, around Rs 182 crore in fiscal 2026 and capex. Debt service coverage ratio (DSCR; OPBITDA divided by principal and interest obligation) of the company is expected at 1.3-1.5 times in fiscals 2025 and 2026. With bulk scheduled repayment of the unsustainable debt (Rs 855 crore as per the repayment schedule as on December 31, 2024) in fiscal 2027, recovery of EPC project receivables remains critical.

Outlook: Stable

The business risk profile of JISL will remain healthy over the medium term supported by its leading position in key operating segments and the extensive experience of the promoters. The financial risk profile will improve with better working capital management and expected equity on conversion of warrants.

Rating sensitivity factors

Upward factors

• Better than expected operating profits resulting in healthy improvement in the sustainable debt/OPBITDA to 3-3.25 times
• Continued improvement in working capital cycle with correction in debtor days resulting in improved liquidity cushion on a sustained basis

 

Downward factors

• Lower than expected operating profits or any increase in debt resulting in the sustainable debt/OPBITDA increasing to over 4-4.25 times
• Any stretch in the working capital cycle or any sizeable advances to JFFFL or any large debt-funded capex or acquisitions impacting liquidity and debt metrics
• Any change in management stance by taking up of new EPC projects
• Any adverse or unexpected conditions impacting liquidity enhancement plans

About the Company

JISL was incorporated in 1986 by Mr Bhavarlal H Jain. The company started operations by trading in agricultural inputs and equipment. In 1980, it began manufacturing PVC pipes and commenced MIS operations in 1987. JISL has diversified its presence across multiple segments throughout the agricultural value chain and operates across three broad business segment: hi-tech agri inputs, plastics and agro processing. The company underwent restructuring owing to liquidity issues and the resolution plan was implemented on March 25, 2022. As on December 31, 2024, on fully diluted basis considering conversion of outstanding warrants, the promoters held 26.75% stake in JISL, domestic banks held 9.18% (equity issued as part of restructuring), individuals held 33.99% and the remaining was held by others.

 

At standalone level, for the first nine months of fiscal 2025, the company reported loss of Rs 4 crore (Rs 30 crore in the corresponding period of fiscal 2024) on revenue of Rs 2,232 crore (Rs 2,756 crore).

Key Financial Indicators (JISL standalone)

Particulars	Unit	2024	2023
Revenue	Rs crore	3,794	3,595
Profit after tax (PAT)^	Rs crore	120	153
PAT margin	%	3.2	4.3
Adjusted debt/adjusted networth	Times	0.62	0.76
Adjusted interest coverage	Times	2.18	1.63

Note: International plastics business reported revenue of ~Rs 577 crore in fiscal 2024 and ~Rs 471 crore in fiscal 2023.

^ - reported PAT is Rs 56 crore and Rs 39 crore for fiscal 2024 and fiscal 2023 respectively. The adjustment takes into account the fair value adjustment on NCDs.

Any other information: Not Applicable