PGDM (Agriculture)

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PGDM-721-4

Case - Jain Irrigation Systems Limited NH Rao Nov 2013

About
Owners: Jain family (>50% shares DVR; > 30% equity); listed
Products: Micro Irrigation Systems and Components - Drip and Sprinkler

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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 manufacturer of MIS globally; largest in India

worlds 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

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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.

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Priorities/core principles Committed to well being of small farmers for inclusive growth:

Continually improve value and productivity of farmers 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

Performance revenue mix

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performance

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Business model

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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)

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

Value creation for farmer:

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MIS - improved productivity, quality for higher price;

Contract farming: lower transaction costs; risk cover

Improvements in land quality Water savings

Strategy for next 10 years

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

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Opportunities Potential 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 encouraging dependence 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 sectors subsidies to water and energy, discourage farmers from investing in more-efficient irrigation practices competition 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 companys shares are held by foreign institutional investors.

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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 250000300000): market expansion North and India International (Africa; current international revenues about 30%) move away from subsidy model target high growth in food processing increase consultancy services including international Invest in HRD, R&D and marketing for product differentiation at lower costs Exploit high growth potential of processed foods where it has a has first mover advantage increase share to 40%

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