NAARM

PGDM-721-4

Case - Jain Irrigation Systems Limited

NH Rao

Nov 2013

PGDM (Agriculture)

NAARM

Owners: Jain family (>50% shares DVR; > 30% equity); listed

Products: • Micro Irrigation Systems and Components - Drip and Sprinkler

• Pipes and plastics :PVC, Polyethylene (HDPE, MDPE) and Polypropylene Piping Systems, Plastic Sheets (PVC and PC sheets)

• Processed products: Dehydrated Onions and Vegetables, Processed Fruits (banana, guava, pomegranate, papaya, and tomato)

• Inputs: Tissue Culture, Hybrid and Grafted Plants, Greenhouses, Poly and Shade Houses, Bio-fertilizers

• Renewable energy: Solar Water Heating Systems and Solar Photovoltaic Appliances

•2nd largest manu facturer of MIS globally; largest in India

•world’s largest processor in pureed mangos and third-largest in dehydrated onions.

•Presence:

• Countries – 116; Plants – 30; Offices & Warehouses / Depots – 116• Distributors - 5,485; Global workforce > 8000; • Agri and irrigation Scientists: Engineers, Technologists and Technicians > 1526

•Lobbied for Infrastructure Status to Micro Irrigation & Farm as Industry – leading to subsidies

About

NAARM

Vision : Establish leadership in whatever we do at home and abroad.

Mission: Leave this world better than you found it.

Goal: Achieve continued growth through sustained innovation for total customer satisfaction and fair return to all other stakeholders. Meet this objective by producing quality products at optimum cost and marketing them at reasonable prices.

Guiding Principle: Toil and sweat to manage our resources of men, material and money in an integrated, efficient and economic manner. Earn profit, keeping in view commitment to social responsibility and environmental concerns.

Values•We value our employees, customers, and stakeholders and treat them with respect and dignity

•We will service our customers without fail

•We pursue a safer work place

•We conduct business honestly and with integrity

•We promote technologies that save water

•We are good stewards of our company resources

•We value a strong work ethic and a balanced life

•We strive to make improvements in all that we do every day

Quality Perspective: Make quality a way of life.

Work Culture: Experience : Work is life, life is work.

NAARM

•Priorities/core principles

•Committed to well being of small farmers for inclusive growth:

•Continually improve value and productivity of farmer’s land

•Win trust - Education and training; demos and visits

•Improve value with best technology

•Procurement and market support

•Finance support

•Leadership role in Land and water management

•Leadership role in global food system in partnership

•Ideology of high volumes and low margins – to penetrate market with speed; profits through innovation in all aspects of business

NAARMPerformance revenue mix

NAARMperformance

NAARM

• Low cost, hi-tech products and services integration across the value chain built around MIS - for rapid market penetration and gaining goodwill

• Designing customized solutions for small farmers: soil and water survey and sampling, irrigation system planning, design and installation, services (provide after sales, technical, credit, agronomical services, training, demos)

• Reach – wide dealer network (>3000)

• Back end integration for MIS: Manufacturing plant – to meet demand – global acquisitions

• Backend integration for processing plant: Contract Farming: buy back farm produce at pre-determined prices; inputs: Tissue Cultured Plants and Hybrid Seeds; Bio-fertilisers fortified with microbial cultures and soil fertility enhancers

• Front end integration for processing plant: B to B; exports

• Finance: Own finance co – for payments upfront; avoid capital lock up in subsidy releases

• Develop dedicated employees – associates, farming background, Jalgaon area

• Emphasis on R&D based innovation- largest private sector team of agricultural engineers, technicians and scientists; 2000 acre research park

• Relationships: with government, industry, govt, NGOs, academic and research instns, across the food chain

• Partnership for global leadership

• with leading academic and research institutions (ICRISAT, IRRI, CIMMYT)

• Agribusinesses (Monsanto, Syngenta, coke, pepsi, nestle)

Business model

This integrated approach results in a value addition at every stage and completes the agricultural value chain. It makes Jain Irrigation a unique micro irrigation systems company

NAARMValue creation for farmer:

• MIS - improved productivity, quality for higher price;

• Contract farming: lower transaction costs; risk cover

• Improvements in land quality

• Water savings

NAARM

Goal: Grow to 5 b dollars in 5 years and 10 b dollars by 2020

 OpportunitiesPotential Market size: Annual - based on cultivated area (140 mha) = $ 28 b (at $ 100/ha; life cycle of 5 years)Annual based on irrigation potential : 60 mha = S 12 b JISL estimate ; 15 mha by mid 2010s: 15 mha from 3.7 mha in 2011; additional 2 mha per year ; JISL target: 1 mha per year Challenges:History (2005-2010): Rs 6 to 35 b in 5 years; CAGR 40%; 2012-13 growth not encouragingdependence on government subsidy to farmers for MIS – credited 6-12 months after delivery, high cost of locked up capital; can be withdrawn, restricts expansion in other sectorssubsidies to water and energy, discourage farmers from investing in more-efficient irrigation practicescompetition – new companies eying potential in irrigation market (Mahindra)potential backward integration by institutional clients (Coke, Pepsi, )    The company currently earns 30% of its revenues from overseas. About 50% of the company’s shares are held by foreign institutional investors.

Strategy for next 10 years

NAARM

Growth history: revenue growth 10 times (Rs 50 billion in 2012 to 500 billion in 2020; CAGR 30% compared to 40% in 2010)MIS segment (40to $ 4 b (30-35%, 4 million farmers from current 250000-300000):

market expansion – North and IndiaInternational (Africa; current international revenues about 30%)move away from subsidy model -

target high growth in food processingincrease consultancy services – including internationalInvest in HRD, R&D and marketing for product differentiation at lower costsExploit high growth potential of processed foods where it has a has first mover advantage – increase share to 40%

NAARM

NAARM

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