Brokers’ call: More pain for Jain Irrigation

Accordingly to Espirito Santo the management of Jain Irrigation expects another couple more quarters of pain, while hopes things to improve as the NBFC leads to declining receivables, and the fund raising lowers leverage.

The management continues to make the long-term growth case given poor penetration of micro irrigation in India, and expects the government to meaningfully' increase subsidy allocation towards irrigation in the FY14 Union Budget.

But long-term prospects mean little unless short-term cash flow improves. The management is clear and open about the working capital challenges faced by the business, and the steps required to improve this. It is upbeat about the impact of the new NBFC as it becomes operational in Q3FY13.

The management argues that the historical delay in subsidy payments was due the fact that subsidies are disbursed only four times in a year.