Saturday, 9 July 2016

From selling kerosene to pioneering Drip Irrigation in India, This is the story of Bhavarlal Jain and his brainchild, Jain Irrigation Systems

"We rise by lifting others"

When Bhavarlal Jain, a lawyer and with a safe and guaranteed government job in hand, got this advice from his mother, he was definitely intrigued. Belonging originally to a family of farmers by profession, his mother was deeply driven that his son do good for millions of fellow farmers. It is amazing what the need for making a difference can do. Thus came into existence, Jain Irrigation Systems, with a capital of meager Rs 7000, which was the accumulated savings of 3 generations, in 1963. The company's mission, business vision and managerial expertise has turned the initial capital of Rs 7000 into a revenue of Rs 1424 crore. In their existence of 50+ years, the company has 10,000 employees working in 28 manufacturing plants across the globe (United States, Turkey, Switzerland, Ireland and others.), dedicated to achieving the company mission. The company has 50 flagship products spread across 9 product lines wholeheartedly devoted to ease the process of agriculture in India. Here is a video describing their company and their vision.

Products of Jain Irrigation Systems : 

Financials :

JISL is listed in NSE-Mumbai at JISLJALEQS  and in BSE at code 500219.
Daily traded quantity is 42.37 lakh shares.
52 week high - 79
52 week low - 47

As the sales of the company’s products are directly related to the uncertainties of monsoon, the last two years have seen virtually no growth in sales, as those years monsoons have been well below average. However, the company managed to increase its profit for the year ending March-16 to Rs 71 crores mainly due to reduction in raw material cost. For the quarter ending March 16, the net profit has moved substantially higher at 64 crores. This is mainly due to the fact that this year ; 2016 -17 monsoon is expected to be above average and this expectation has led to higher yield on margin.

On the Balance Sheet front, there hasn’t been any major changes in Long Term Assets and Labilities. The Current Assets ratio is at a reasonable level of 1.25.

Cash flows.
Cash Flow from business operations more or less remain the same as last year at approximately 500 crores. The company, it seems, had made sufficient investment since last four years, the fruits of which will probably be seen in the coming years.
As regards the financing activities, the company probably had to resort to more financing activities for the year ending 2013, 2014 and 2015 as these years had seen very weak monsoon and consequently very fluctuating sales. However for the year ending March 2015, there has been a decrease of 25% in financing activity compared to the earlier year ending March 2014. Hence this year; 2016-17, a substantial increase in cash flow from operations can be expected.

Equity Capital

Equity Capital of the company is held as below :

  • 1.       Promoters (including foreign promoters) – 32% (Approx)
  • 2.       FII – 32%
  • 3.       Financial Institutions – 11%
  • 4.       Banks and mutual funds – 3%
  • 5.       Public – 17%
  • 6.       Others – 5%
      Considering all the above mentioned factors, I expect considerable increase in sales for the year 16-17 and consequently increase in profits, and accordingly I expect the share price to move in the range of Rs 100 to Rs 120 in the medium term from the present price of Rs 74. I feel this investment is likely to fetch a return of approx 40 to 50 %. I shall update on ensuing factors as they unfold.
Happy Investing!

DISCLAIMER : The above views are the opinions of the author. Please consult your financial adviser before taking any investment decisions. 

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