Water conservation, irrigation, food processing and plastic pipes are sectors that are destined to grow at a fast clip. Jain Irrigation is present in all these sectors.
It is sharpening its focus on drip irrigation even as it grows the other segments of the business. Anil Jain, CEO and managing director, Jain Irrigation, recently announced a preferential warrant issue for promoters.
He tells DNA Money’s Satish John that his company is destined to become the largest drip-irrigation company in the world in a few years.
Jain Irrigation is into several businesses but drip irrigation is what the company is known for.
We are in drip irrigation, plastic piping, food processing and plastic sheets. All our businesses are growing on a consistent basis in the past 4-5 years. We are identified mainly by our drip-irrigation business.
It is quite prominent and we have been pioneers in India. We believe this is a huge opportunity. India has the largest acreage of land under cultivation. And very little has been brought under drip irrigation.
What is the potential that you see in the drip irrigation business?
We have not even scratched the surface. The technology we have is very good for Indian conditions. Drip irrigation helps save water, energy, fertilisers and labour.
All these are important savings for a farmer and at the same time drip irrigation also improves productivity. India has one of the lowest productivity ratios in the world.
If a farmer can get more income with less input costs what more can one ask for?
I believe that drip irrigation is a single technological intervention that can change the face of Indian agriculture. And wherever it has been used or applied or adopted it has resulted in a significant benefit to the farmer. So our business has grown very well.
Can you elaborate on your statement that you have just scratched the surface?
Just look at the numbers. India has nearly 140 million hectares of land under cultivation. Approximately 70 million is irrigated.
So that’s the potential for drip irrigation from the irrigated land. Against that, hardly 1.8 million hectares are being covered by drip irrigation.
What about your plastic pipes business?
Pipes business is also growing. In pipes, we make PVC and polyethylene and it has gained traction because of the sudden focus towards improving our country’s infrastructure.
Where are your pipes used?
Our pipes are used by telecom companies for cable ducting applications. They are also used by gas companies for city gas distribution. GAIL has identified 200 odd cities for city gas distribution. We are already suppliers to Indraprastha Gas and Gujarat Gas etc.
A lot of our projects that we have won in recent times have accrued from potable water. What’s more is that sewage infrastructure is just starting to happen in India.
Plastic is playing an important role in pipes. Now we can 0make pipes in excess with one metre diameter. So we can now compete with steel and concrete pipes for business.
Are they as strong and durable as metal pipes?
Yes. They are fit for that purpose. And better in certain aspects.
There are other companies such as Finolex that make pipes.
They make PVC pipes. PVC is used only for irrigation or water transportation. There are other applications. Growth is coming from rural areas. We make PVC pipes. The government has some programmes called drinking water for each village.
That’s where the PVC pipes come from.
Tell us about the composition of the revenues flowing from each of your business?
About 30% of our business accrues from micro (drip) irrigation, 35% is from pipes and 15% from food processing (fruit and vegetables). The balance accrues from plastic sheets business.
Can you identify the growth engines?
Irrigation will grow faster than all our other businesses. food processing will be another huge growth area.
So ultimately you may see micro-irrigation at 40%, food at 20% and sheet business will be pared down overall in percentage terms. Pipes would provide 30% of our revenues.
And the most profitable segment?
Drip irrigation. It enjoys 25% Ebitda margins.
