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Jain Irrigation Systems Ltd
Clarifies on NBFC plans, Micro Irrigation growth potential intact
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
Clarifying on its NBFC plan company said that it will hold less than 50% in the
NBFC while an outside entity like IFC will hold about 30%. The rest will be owned
by promoters.
NBFC will primarily focus on funding only the subsidy portion of the micro
irrigation purchases initially. Even in the later stages its portfolio will mainly
consist of govt backed receivables.
As per the company main rationale behind forming the NBFC is to overcome
limitations on factoring from banks in a tightening interest rate scenario.
Company mentioned it will generate marginal free cash flows in FY11 before
turning significantly free cash flow positive in FY12.
Management expects micro irrigation to keep growing at 30-35% CAGR in the
next 2-3years. As per the company, new competition is yet to be offering serious
competition and it will take another 2-3years for a significant competition for Jain
Irrigation.
Price objective basis & risk
Jain Irrigation Systems Ltd (JNIDF)
Our PO of INR270 is based on a 20x 1yr fwd PE and a 0.5x 2yr PEG, in line with
a range of 0.4 to 0.6 for other mid-cap growth companies. We maintain our bullish
view on the micro irrigation market, given i) <5% market penetration, ii) increasing
focus of government on improving water usage efficiency. Risks: i) demand risks
from a bad monsoon, ii) better-than-expected performance from Andhra Pradesh
and iii) an adverse change in government subsidies.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jain Irrigation Systems Ltd
Clarifies on NBFC plans, Micro Irrigation growth potential intact
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
Clarifying on its NBFC plan company said that it will hold less than 50% in the
NBFC while an outside entity like IFC will hold about 30%. The rest will be owned
by promoters.
NBFC will primarily focus on funding only the subsidy portion of the micro
irrigation purchases initially. Even in the later stages its portfolio will mainly
consist of govt backed receivables.
As per the company main rationale behind forming the NBFC is to overcome
limitations on factoring from banks in a tightening interest rate scenario.
Company mentioned it will generate marginal free cash flows in FY11 before
turning significantly free cash flow positive in FY12.
Management expects micro irrigation to keep growing at 30-35% CAGR in the
next 2-3years. As per the company, new competition is yet to be offering serious
competition and it will take another 2-3years for a significant competition for Jain
Irrigation.
Price objective basis & risk
Jain Irrigation Systems Ltd (JNIDF)
Our PO of INR270 is based on a 20x 1yr fwd PE and a 0.5x 2yr PEG, in line with
a range of 0.4 to 0.6 for other mid-cap growth companies. We maintain our bullish
view on the micro irrigation market, given i) <5% market penetration, ii) increasing
focus of government on improving water usage efficiency. Risks: i) demand risks
from a bad monsoon, ii) better-than-expected performance from Andhra Pradesh
and iii) an adverse change in government subsidies.
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