Jain Irrigation Systems Limited (500219) Earnings Call Transcript & Summary

A very warm good morning to each and every one of you. It gives me great pleasure to welcome you to the 33rd Annual General Meeting of Shareholders of Jain Irrigation Systems Limited. The corona crisis is the most disruptive event in modern human history. The result on economic crisis has compounded the global communities hardships. However, I have no doubt, India and the world will achieve faster progress, greater possibility and new quality of development for the COVID crisis. And I also strongly believe that every adversity presents multiple new opportunities. Please observe silence for 1 minute in memory of departed souls who died in the natural calamities, terrorist attacks, pandemic and other accidents for the period from last AGM to this AGM. [Foreign Language] Mr. Ghodgaonkar?

Ashok, you can start.

Yes. I call the meeting to order. Since notice, conveying the meeting is circulated well in advance, as permitted, the same together with the explanatory statement may be taken as read. I declare that as per the provisions of the Companies Act, 2013, all register of directors and key managerial personnel shareholding are available at the meeting place for inspection of members up to the conclusion of meeting. Now I place Item #1 of notice regarding adoption of financial statements for the financial year 2019, '20 before meeting for decision. Now I invite auditor representative to present audit report.

Good morning, friends. My name is Snehal Shah. I'm representing Haribhakti & Co. as statutory auditors of the company. I will be now reading out auditor's report of Jain Irrigation Systems Limited. Independent auditors report to the members of Jain Irrigation Systems Limited our opinions. We have completed [ now are accompanying -- ] we have audited the accompanying standalone in this financial statement of Jain Irrigation Systems Limited, which comprised the balance sheet as at March 31, '20, the statement of profit and loss, including other compressive income, the statement of changes in equity and statement of cash flow for the year then ended, and the notes to the standalone in this financial statement, including a summary of significant accounting policies and other explanatory information, here-in after referred to a standalone in this financial statement. In our opinion and to the best of our information and according to the explanations given to us, the same standalone index financial statements give the information required by the Companies Act, 2013, the Act, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, including the Indian Accounting Standards described under Section 133 of the Act of the state of the affairs of the company as at March 31, '20, its loss, including other comprehensive income, changes in equity, its cash flow for the year ended on that. Now we have issued unqualified audit opinion, and there are no observations in CARO or IC reports. So with the permission of Chair, can I take other part of report as well?

Yes. Yes.

Yes. Thank you.

Thank you.

We have not received any queries or observation on 33rd annual report for year 2019/2020 from the shareholders. The consolidated results of e-voting and poll, if any, shall be declared by the company through its website, the stock exchange, NSE and BSE within 48 hours of conclusion of meeting, and shall additionally be publishing newspaper as prescribed. I place Item #2 of notice regarding reappointment of Shri Anil Bhavarlal Jain as Director before meeting for decision. Consolidated results of e-voting and poll, if any, shall be declared by the company through its website in the stock exchange NSE-BSE within 48 hours of conclusion of meeting and shall additionally be published in newspaper as prescribed. I place Item #3 of notice appointment of Singhi & Co. Chartered Accountants from Kolkata as statuary auditors from the conclusion of the meeting for decision. The fees of statutory auditors was finalized after the Board meeting held on December 8, 2020, while the AGM notice was sent to shareholders, Hence, now it is declared that the remuneration without breakup between audit fees, LRPs, tax audit fees, as was decided by the Board of Directors in consultation with the partner of the firm of auditors, is INR 65 lakh for year '21. The Chairman -- the consolidated results of e-voting and poll, if any, shall be declared by the company through its website, the stock exchange, NSE-BSE within 48 hours of conclusion of meeting, and shall additionally be publishing newspapers as prescribed. I place Item #4 of notice for ratification of remuneration of the cost auditors of the company for the year 2019/2020 before meeting for decision. Consolidated results of e-voting and poll, if any, shall be declared by the company through its website, the stock exchange, NSE-BSE, within 48 hours of conclusion of meeting, and shall additionally be published in newspaper as prescribed. I place Item #5 of notice regarding alteration in the Articles of Association for Article #111. It is for amendment to increase the maximum number of directors before meeting for decision. Consolidated results of e-voting and poll, if any, shall be declared by the company through its website, the stock exchanges, NSE-BSE, within 48 hours of conclusion off meeting, and shall additionally be published in newspaper as prescribed. I place Item #6 of notice regarding appointment of Dr. Narendra Jadhav as an Independent Director for a period of 5 years before meeting for decision. Consolidated results of e-voting and poll shall be declared by the company through its website, the stock exchanges, NSE-BSE, within 48 hours of conclusion of meeting, and shall additionally be publishing in newspaper as prescribed. I place Item #7 of notice regarding appointment of Ms. Nancy Barry as an Independent Director for a period of 5 years before meeting for a decision. Consolidated result of e-voting and poll shall be declared by the company through its website, the stock exchanges, NSE-BSE, within 48 hours of conclusion of meeting, and shall additionally be published in newspaper as prescribed. I place Item #8 of notice regarding appointment of Mr. Mukul Sarkar as an EXIM Bank of India, Nominee Director, not subject to retirement by rotation before meeting for decision. Consolidated results of e-voting and poll shall be declared by the company through its website, the stock exchanges, NSE-BSE, within 48 hours of conclusion of meeting, and shall additionally be published in newspaper as prescribed. I place Item #9 of notice regarding appointment of Mr. Uday Garg as a Mandala Rose Co-investment Limited, Nominee Director, subject to retirement by rotation before meeting for decision. The consolidated result of e-voting and poll shall be declared by the company through its website, the stock exchanges, NSE-BSE, within 48 hours of conclusion of meeting, and shall additionally be published in newspaper as prescribed. The result of e-voting already done and the poll, if any, shall be declared through stock exchanges and website of the company and through newspapers within timelines prescribed by, therefore, in regulation. I invite Shri Anil Bhavarlal Jain, Vice Chairman and Managing Director, to address the shareholders.

So good morning, everybody. I had started speaking, but I think I was on mute. So this is our first ever digital shareholder meeting. This is our 33rd Annual General Meeting. And that shows that this pandemic has really caused all of us to do things in a very different way. It has impacted all of us in our personal lives, in business and professional lives, and overall economy in general and humanity, in particular. But we hope that with the vaccines, now things will be in control over next 1 or 2 quarters, and then business can get back to normalcy. Now apart from vaccine, it is also good to see and note that overall cases -- caseload of corona in India has been coming down consistently over the last 2, 2.5 months, and that's a positive news, which we should see. But at the same time, we, as a global company, note that in some of our operations in U.S. or U.K. or other places, they are seeing second or third wave of the coronavirus cases. And again, there are more lockdowns being imposed, where our operations are getting impacted. So this is such an issue, we cannot be complacent. We must try and run our operations in a most efficient and effective manner, wherever possible, whenever possible, by keeping all the safety instructions by following very sensible and a cautious approach, so that the health and safety is never compromised. And we have installed all the necessary protocols in all our operations to ensure not only the health and safety of all the associates working within Jain, but also all the stakeholders connected with our operations also should remain safe. And we will continue to remain focused on that. But at the same time, as an economic entity, we have to try and run the business to the best of our ability considering this situation and still try and come out on the top, which is going to be a challenging task, but nonetheless, we have been at it. Now shareholder friends, when we look at -- look back at year '19-'20, it has not been one of the greatest year, as you would know. We have had a significant amount of losses in the year, which has passed. And part of the reason in the last quarter was maybe the impact of the pandemic. But if you see the -- we started feeling the heat already in the September quarter last year. And that was primarily because we, as an agriculture input company and irrigation company, over a period of time, we have taken a lot of EPC projects. And these projects, there were delays in finalizing the projects and getting them off the ground. And that has also resulted in the delay in the payments. And in various places, the delay in payment by the various authorities on one hand, also delaying payment by certain state governments related to our drip irrigation projects, which are being implemented for benefit of retail farmers, combination of these, the delays in the project funding as well as delay in the government funding for the farmers, resulted into significant increase in our overall receivables. At one-time last year in '19, the total expected receivables from the government, which were delayed or which were not being paid, we're almost close to INR 1,800 crore, and that created a significant liquidity problem for us, which resulted into delay in honoring our obligations to various stakeholders and also to the lenders. And because of that, we were termed out as a company which has defaulted in payment to the lenders and the rating was brought down to D. And thereafter, the lenders in India decided to invoke under the RBI Circular and decided to go for some kind of a restructuring and the resolution plan for the company's debt, which has been there now since last July and August. The process of getting this done is quite complex and multi-layer one, and it involves various audits by the various agencies, also techno-economic viability, getting together all the lenders. So they've all done all that, whether it has been forensic audit or stock audit or inventory audit or techno-viable commercial study or the asset valuation. Various things have been done over the last 1 year plus. And then once all of that is done, then the resolution plan, which is prepared, goes to rating agencies, and they provide a rating called RP4. And once that rating becomes available, then the banks are able to take the plan and put it for their own internal approvals. So we are in that last phase now after having gone through the entire exercise. And I must say that it has been found during all these analysis, 3 things: one, that company faced genuine difficulties in terms of liquidity due to the delay in the -- receiving the receivables, mostly from the government authorities. Second part has been that company's product have great future. The agriculture remains very relevant. That drip irrigation pipes, other products which we make, remain very relevant to the economy and to the overall ecosystem of humanity and agriculture. And therefore, they have good future going forward. So once we address our liquidity issues, then the business can come back to normalcy, and company will get back to overall earlier days when we were continuously growing and be profitable. The third part is that we had genuine difficulty. We have this, what you call, good future for all of our products and systems. Company continues to maintain its leadership, the scale, innovation, R&D, the quality. So all these things are quite positive. And I must share with you a small thing that post-pandemic lockdown and when we wanted to start business end of April, early May, our dealers supported us by sending advance because company was still in the liquidity crunch due to all the issues I described, and that is how we restarted the business. So that showed faith by the community, the dealers, the distributors who are touch points to the farmers and the farmer themselves. They want -- so as long as Jain product is available, they don't want to go and buy somebody else's product. So that market leadership that brand equity continues to remain. Of course, during such difficult time, sometimes you get some kind of blemish or spot, but I think as we move forward, we can clean that up and burnish our credentials again. We service our customer base and deliver them all the product and services, which they need and which we can provide, so that they also become prosperous, more productive, more profitable as farming should be. So that has been a good news during this difficult period. That commitment from the -- our dealer community and the end customer and their continuous trust and faith in the Jain product and technology has been very, very helpful and very heartening to see. Now the resolution plan, we are expecting that it gets completed very soon. So definitely, in the March quarter, maybe earlier, but within that quarter, it will happen. That's the commitment given to us by various lenders. And as we see the processes, which are going through, that would help. As we look at the -- what we did in the last year. So despite all these difficulties, and we had significant ones, right, in the September, December and March quarters, overall, we managed to do almost close to INR 6,300 crores, a little bit less revenue for the whole company, globally speaking. And business was not profitable because capacity utilization was low, our interest cost went up. All of that happened significantly in India. Especially, our revenues came down close to about INR 2,000 crores from the earlier year of close to INR 4,300 crores, INR 4,400 crores. So due to that significant reduction, it impacted us and company lost money. But what needs to be seen is that while in India, because of this specific issue we came down significantly, we managed to hold on to our operations in all other territories around the world. And there, the reduction was very slight. And that impact was also mostly because we could not supply them, and they could not sell it onwards certain products and commodities. So that impacted the overseas operations. But otherwise, it's what you see the reduction in the sales last year, FY '20. And the significant losses mostly came out of the impact of the Indian operations. And as we continue in that, I think current year also, you see a similar thing. The lockdown in India was far more severe than other places. And therefore, what I want to say is that we would continue to see in the FY '21 also that overseas operations continue to do well, while Indian operations have remained challenging. And once the restructuring resolution is in place in the coming quarter, we expect the FY '22 to be a great year in totality. Now for the FY '20, quickly, if you look at INR 6,300 crores as a revenue, India was about 34% of that, Europe was 25%, north America was 33% and Others, 7%, so that was the mix. Typically, normally, India is usually 50%. But last year, India was 34% of the revenue. And if you look at various business lines, Hi-tech Agri, which includes MIS, was almost close to 49% of the product mix, and Plastic division was 18%. Our Food division was about 30%. So that was the revenue segmentation for the last year. So apart from getting the resolution done with the banks and the lenders, where we would get some amount of additional working capital where we would get certain concession on the interest based on unsustainable debt and some tweaking of the interest rates also on the sustainable debt and -- company needs to also focus on making its operations more efficient, do certain amount of value monetization, sell some of the noncore assets. That's the whole package, which is ongoing, and it will get implemented over the next couple of years once it gets approved. But apart from that part, which would give us some breathing space in terms of liquidity and lower cost of interest, but what's important is that we are also restructuring the business itself, where we plan to focus more on the building the dealer networks and doing the retail sales directly to the farmers, which would have far better cash flow and reduce working capital cycle. We also are planning to reduce our focus on the government EPC projects. And while we need to continue and complete all the existing projects, which we show and that's already work has started on that, but we are not likely to take any new projects for some period of time, and ensure that we never get into the similar track going forward. And company will remain focused on continuous improvement on cash flow and ensure that the retail business and direct connect with the end customer would remain the focus. The second part, which -- as a part of business restructure the company wants to do is building a better digital architecture to ensure that our product and services reach to the customers in a more seamless manner with the quickest service levels. And we are able to deliver them exactly what they need without any delay. And their use in technology, use in digitization in every sense within the overall company is going to be very helpful. And so that's one part, right, improving the processes. Second part is introducing the new technologies, digital technologies within the agriculture. And there, our continued R&D and innovation from our business in Israel, our business in California and the business in India and Australia, these are the 3 or 4 places we are focused on continuous building of technology-oriented solutions for our agriculture customers. So that also we will continue to do. The third part, in terms of the governance, company is aware that as we renew ourselves and as we go through this churn with what is happening right now, company needs to further enhance its standard of governance. Company has recently broad-based its Board. Some of the resolutions, which we saw earlier, we have taken some additional independent directors. We have new nominee directors, and I would like to welcome all of them now on to the company's Board. Company is going to stay more focused on the risk mitigation, and the Board Committee is working in that area of the governance risk mitigation, are going to be more active as soon as we get the whole restructuring done in place to ensure that as we come out of this crisis and it is crisis, no doubt, that company gets back to normalcy and become a better company as we move forward in every sense. While we have always been, I would say, a great company in terms of our product portfolio, our intent to serve the farmers, especially small farmers, our global, I would say, spread in terms of distribution, our leadership in R&D and innovation, our commitment generally to the society entire ecosystem on living this world better than you found it, and also our ability to grow deeper and in terms of broader for the entire agriculture value chain, that's what we have done. We have been quite unique in that sense for a very long period of time. But sometimes these cycles, they affect you. And when they affect you, the option is either you feel why me and how did it happen or you accept what has happened and -- but learn from it and try and improve from that point onwards and ensure that these things never happen again on one hand. And on the other hand, you try and continuously get into the self-improvement mode with the acute, I would say, realization that we have let our shareholders down, we have let other stakeholders down. And as a management, we must take a flag for that, which we have taken. And -- but at the same time, we must remain resolute to move forward with courage, with vision, and ensuring that we do not lose our values of empathy for the farmers and the whole ag system, our awareness about what environment means and our desire always to build scale so that we can be more competitive around the world. I must say that during this period, all the people working in the company we call associates, have remained stayed and true to the company. Despite all the difficulties, including delayed salary payments and other things, they have continued to stay committed to the company and its overall objectives and the goals. And I think that's a very -- great statement that during this difficult time, right, people show that this is a place they want to continue to stay and work because it means something. It is really adding value in every sense. People talk about triple balance sheet and so on. We, as a company, have been doing that for a long time. So as we come out of this really bad financial hardship and the period, we are very confident that already from the March quarter onwards, company will be profitable, that's one. FY '22 is going to be far better than FY '21 and would be a profitable year. And as we are restructuring the business as well as the finances both, we would start creating far more shared value, which can be shared amongst by the -- all the stakeholders and especially also the shareholders. So I think as we would like to continue to communicate with -- to the shareholders, as we move forward, as some of these things get done over the next few months, actually behind us, getting the resolution plan approved, everything else is done. I think we will be communicating more with you as we move into the next fiscal year, starting coming April. And with that, I would like to end what I had to say today. So again, we continue to remain very focused. And we are making sincere efforts to make things work, bring things back to normalcy. Underlying business continues to remain strong. We are seeing good signs going forward because monsoon was good. And we believe company will come out of the current crisis in a good way that the next decade would be good for all the stakeholders of Jain Irrigation. And from really bottom of my heart, I would like to say that all people who have stood by the company during this most difficult period from various stakeholders, we really appreciate them. And we will continue to deliver in every way, every sense with a full 360-degree of the company. Thank you.

I invite Shri Atul Bhavarlal Jain, Chief Financial Officer, to place motion for Board of thanks before the meeting.

Good morning, everybody, all the shareholder friends and stakeholders. Thank you very much for being on this first ever digital online AGM in the history of the company in the last 33 years. All of us have gone through all this pandemic-related challenges in our life and unfortunately, so has our company. But I would take this opportunity to thank you everybody -- thank everybody who attended the meeting today, also all our auditors, all our Director to Board for being present here. And I would also take this opportunity to sincerely appreciate and recognize the support of all our stakeholders, particularly the shareholders in this difficult and challenging times that the company is going through. But as MD sir has mentioned, we are all working together. All our hearts and our heads are together to sell through these difficult and challenging times, and quickly, we will be bouncing back with the support of all of you. So once again, I take this opportunity to thank everybody who has been attending this meeting, and also wish everybody a very healthy, joyful, happy and prosperous year to come. Thank you very much.

Once again, thank you to everybody, and Happy New Year to everybody. I declare the Annual General Meeting to be closed. Thank you very much.