Jain Irrigation Systems Ltd (NSE: JISLJALEQS) Q2 2025 Earnings Call dated Oct. 28, 2024
Corporate Participants:
Anil Jain — Chief Executive Officer and Managing Director
Analysts:
Ashwini Trivedi — Analyst
Sanjay Kohli — Analyst
Praneet — Analyst
Soman Paul — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Jain Irrigation Systems Limited Q2 FY25 Earnings Conference Call, hosted by KRChoksey Finserv Private Limited. [Operator Instructions]
I now hand the conference over to Ms. Ashwini Trivedi from KRChoksey Finserv Private Limited. Thank you and over to you, ma’am.
Ashwini Trivedi — Analyst
Thank you. Hello, everyone, and welcome to Jain Irrigation Systems Limited Earnings Call to discuss Q2 FY25 results. Today we have on call Mr. Anil Jain, CEO and Managing Director; and Mr. Bipeen Valame, Chief Financial Officer. We must remind you that the discussion on today’s call may include certain forward-looking statements that may involve known and unknown risks, uncertainties and other factors, and must therefore be viewed in conjunction with the risk that the company faces. Future results, performance or achievements may differ significantly from what is expressed and implied by such forward-looking statements. Please note the results and the presentation are available on the exchange and on our company’s website.
I now request Mr. Anil Jain to take us through the company’s business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you and over to you, sir.
Anil Jain — Chief Executive Officer and Managing Director
Thank you. Welcome to all for second quarter result discussion and to also see what is the way forward. This has not been a great quarter in terms of revenue or the earning numbers, and it has come less than our own expectations if you think in terms of Y-o-Y, because especially our business is not sequential, it does get impacted with seasonality.
While India business did not do that well in terms of revenue, as well as overall growth, but other businesses, our subsidiary business for food or our plastic sheets business did very well. So, it kind of resulted into approximately 12%, 12.5% negative growth compared to the same period earlier time. But still company was able to clock close to INR1,200 crores of revenue during this quarter and earned close to INR140 crores, a little bit less EBITDA. And for the first six months, when you think about it, beyond the quarter, it’s — overall on a PAT basis, our company has almost no earning, even though the EBITDA is, for the six months close to INR318 crores.
So, when we look at what went right and what went wrong during the quarter, that both the businesses in India where we sell drip irrigation to the farmers via dealers and we sell the pipes and other materials, similar materials also, both of these did not do as well as anticipated. Primarily it was like a lot of rains across the area where we sell. On an average, rains have been about 20% to 30% more than last year or similar period, which augurs well for subsequent next four to six quarters. But in this particular quarter, because of consistent incessant rains, it became an issue where fields remained wet and demand for pipe and drip both could not pick up at the farmer level. In addition to that, there was a fact that there were some states where we could have done a little bit more business, but we could not or we did not because the earlier recoveries were still not good enough. And therefore, we decided not to take that additional exposure. And some reduction is linked to the project business, where we have decided to kind of wind down the project business. So that was naturally expected.
All in all, company has done overall INR2,670 crore revenue for the first six months. And typically, compared to our normal revenue, we get about 35% to 40% first half and 60%, 65% second half. And it seems this time for us to be able to meet our annual targeted numbers, we might have to do 67%, 68% kind of in the second half, apart from what we could achieve in the first half. So, when we think about that, what’s going to happen in second half, I think with the kind of good rains which have been there, and they’re just stopping as we speak, right up to last week, it has been thinning [Phonetic] across the country. A normal monsoon withdrawal starts end September, early October, but it has been delayed by about three weeks or so. And so, we’re anticipating, and that’s the feedback from our dealers, marketplace, that things should pick up considerably post Diwali holidays. And so November, December and January to March, the entire five months should remain positive.
Some of the business we lost in this quarter, the first half, has been linked to some of the business such as the JJM business where we have a contract and those orders are going to come through, but I think they will come through in the second half. So that can be recovered, what has been lost, can — would be recovered.
We’ve recently got some additional orders related to solar water pump and that would also partially help us to reduce the deficit in the first half, so that, overall our annual target, we remain close to when we had started in April. Despite these reductions in the revenue and consequent reduction in the earning, we have been able to maintain a better cash flow. And in fact, if I look at overall consol debt profile, we have reduced the debt by almost close to INR57 crores during the quarter, despite this being a weak quarter in terms of overall revenue and earnings.
And if I look at the cash flow statement, our overall investment into maintenance capex etc. is almost same as last year at this time for the first half, close to about INR94 crores. And we anticipate that our overall spend on maintenance capex and small amount of growth capex will remain actually a little bit better than the last year. Having said this, if I look at overall as a company consol level, including all the businesses put together, we have generated net cash from operating activities for the first half to the tune of almost INR340 crores, which last year for the same first half was INR303 crores.
So, there is improvement in net cash being generated from operations. And that’s a good number to have when we consider the fact that last entire year we had generated only INR534 crores to generate INR340 crores in the first half, I think is definitely positive. And if I just speak about the current quarter, the overall for the standalone cash flow generated from operating activities is INR198 crores. So, when you think about that, it shows you that — it shows that the company has been able to manage its operations efficiently to generate better cash flow, reduce the debt, and continue to focus on, overall, improving the balance sheet in totality.
When you look at individual businesses, our food processing business has managed to grow globally at about 6%. Our plastic sheet business for the first half, again, overseas has managed to grow almost close to 15%. We have seen that while in India the businesses have been slow, our export business from India has also grown substantially. So, too much of rain or these issues were a cause of concern, but where we could, management focused in terms of exports or overseas business or the food business and that helped us to reduce the impact of negative business sentiment in the domestic market — domestic agriculture market.
All in all, I think as we — as where we are overall, we think the second half looks good. And as I said, one, because partly rains have been quite good, that should generate demand itself. We have also seen the cash flow in the ecosystem. So a lot of cash, which was not released due to election and whatnot, has been released as a direct benefit transfer to the farmer, which creates a better ecosystem. That has also happened over the last few weeks. So that’s positive compared to where we were in July or August. And generally speaking, our polymer prices, which is our main raw material for drip and pipe business, have remained benign, even though recently oil had gone up all the way close to $80, but it has started — it has come down again. But if you think globally, whether China, Europe, or US, those economies are not really growing that large. So, we expect over the next few quarters, polymer prices, unless there’s some kind of a global shock either way, polymer prices should remain benign, and that should help to grow the business.
Our planning in terms of the retail business and our overall strategy, generally speaking, right, between ’21 to ’24 has done well. In 2021, our total retail business was hardly, I think, around INR1,200 crores. And March ’24, our overall business was very close to INR2,400 crores. So over four years, between ’21 to ’24, we kind of doubled the retail business. And the idea over next three to four years would be, again, double the retail business, right, because as we deepen the network of the dealers and as we cover the additional geographical area, I think that would — and also add more urban thing to our piping sales and try and sell pipes also beyond agriculture, while our primary focus has been agriculture, but we have evolved and developed new product ranges, which will cover all types of pipe requirements, right, whether that’s for drainage or that’s for rainwater, whether that’s for fire sprinklers, whether for subsoil drainage, for flood control, or desalination project, or in power plants, piping systems are required everywhere. So we have spent last few quarters to evolve and develop all types of new piping systems where we can go and address markets beyond agriculture, which kind of partly help us derisk and also de-seasonalize the business we have.
So I think that is what the quarter has been. So while revenue and earnings, it has been not up to the mark but I think in terms of cash flow and balance sheet, on that it has done quite well. And we think in the second half, as the revenues and earnings come back and the discipline on the cash flow as well as earnings from the operating activities would allow us to create far more favorable, I think, financial health of the company. And not only financial health, but it would help us to actually set the stone or set the foundation for significant growth going forward.
So I had talked about the cash flow even in the current quarter. At the consol level, net cash generated from operating activity is about INR212 crores. So as I have said, overall, that basis, the company is well poised. We have good production capacities. We have better network than we had a couple of years ago. Raw material prices are quite reasonable and benign. And I think we are raring to go as the market starts, to go and capture higher market share where we can. And apart from also consolidating on the higher growth we have in food business or plastic sheet business, where we have done well.
So with that note, considering these are start of Diwali holidays, we would not like to take a lot of time from all the investors. And with that, I would like to close my opening statement and we will be very happy to answer any or all queries which you will have. Thank you again.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Sanjay Kohli. Please go ahead.
Sanjay Kohli
Good afternoon, Mr. Jain. How are you doing?
Anil Jain
I am doing fine. Thank you.
Sanjay Kohli
Great. So, Mr. Jain, this clarification which you made on the second half that now we have to work harder and get to about 66%, 67% for the overall — to maintain the overall guidance. We are still maintaining the overall revenue guidance of close to INR7,000 crores, or we have to — because this quarter there has been a bit of a setback, do we sort of revise it a little lower?
Anil Jain
I think any of our guidance, right, it is bit qualified with the seasonality, but I think while this quarter was bad, right. If I look at the first half in total, If you look at it, company has done, compared to last year almost INR500 crores. And then, let’s say, we were planning to grow at least double-digit growth, 10% to 12%, so we lost INR200 crores there. So total shortfall in the first half compared to our estimation is in total INR700 crores. Out of INR700 crores, based on specific orders we have in hand, which were not there this time and so on, I think about INR400 crores to INR500 crores will be covered. The remaining INR200 crores, whether it will be covered or not, depends on how strong the season is in the month of February and March. That is a little bit difficult to say.
So I think if our original expectation was this 10% to 12% growth, I would say, at least 7% to 8% we are still calculating for sure. Anything above, right, despite this INR700 crores reduction, let’s say, compared to estimation, as a Y-o-Y comparison, we are still feeling okay.
Sanjay Kohli
Okay. Thank you. I’ll rejoin the queue, sir.
Anil Jain
Thank you.
Operator
Thank you. The next question is from the line of Praneet, an Individual Investor. Please go ahead.
Praneet
Hello. Thank you so much for your time, Mr. Anil. Sir, question is about basically the trade receivables. So right now — in the last four to five years, we’ve taken a loss allowance of about INR200 crores. I’m curious about how much was it a factor of the government-linked projects and something else. And you also mentioned in previous con calls that there’s a few states like Andhra, Gujarat, Telangana, and Tamil Nadu to have — that government procures on behalf of the farmers. And Andhra has a higher level of trade receivables. To what tune is the trade receivables in overall this particular channel of government procuring for the farmers? And how is it with Andhra’s trade receivable situation at this point of time?
Anil Jain
So I think Andhra trade receivable is better than — right now compared to, let’s say, what it was in June quarter. So they have been able to release some of the old receivables over last four to eight weeks. And indications from the government is that by end of November, early December, so let’s say before end of December quarter, they will be able to clear all the old outstandings. So that’s quite positive news. We saw over the last four to eight weeks again that from Gujarat itself considerable amount of old outstandings were released. So at least two states we have seen a definite positive indication of old receivables getting down to the lower level.
Overall, where the state’s view on orders on behalf of the farmer, there is no delinquency, right? There is a delay. But as I said, two of these major states, we see significant improvement. And we anticipate by December everything old would go away and only the new receivables which we create now should stay. So that’s a positive development. And that is what you see that overall cash flow generation has been, generally speaking, better for us despite weak sales.
Overall, the second part of the government, right, which we have these EPC projects, against that — against those projects, against those accumulated receivables for a long period of time, we have taken some provisions over the last few years. And as we complete this project — over a period of time we have been trying to complete them and bring them to closure. And now, I think, over next — maybe somewhere between two to four quarters, we expect to kind of more or less 90%, 95% projects will get fully done and completed. And then the remainder of the cash flow should already come through between FY25 and the remainder of six months in FY26. And we don’t anticipate on our books any receivables left post-FY26 linked to the project business, which is currently around INR850 crores outstanding. So we anticipate between FY25 and FY26 that entire portfolio should come through from where it is now.
Praneet
So we don’t expect to take a further impairment loss or provisions going forward in the next one, two years where we expect to receive the rest of the amount, right?
Anil Jain
I don’t think it would be any significant sum. As we close the project, there could be small amounts here and there because you won’t know unless you close the project and government does measurement, etc. So it’s a little bit of unknown, but based on all what we know and what we are doing, we don’t anticipate — like in ’23, I think ’22 and ’23 we took significant provisioning. We won’t anticipate that type of provisioning related to receivables from the project business.
Praneet
Understood. One more thing about the tissue culture. Tissue culture division has been providing immense amounts of growth to the company. And you mentioned that it has also significantly EBITDA contribution going forward. So I’m curious about basically the inventory holding cycle of this particular business. As we are growing, because it’s an organic product, it tends to be perishable, right? So how long can it stay in our inventory before it has to be sold? And what kind of inventory losses or inventory write-downs we need to take if the inventory stays with us for longer? Like, with what is the duration between the finished product and the sale of products, like what is the — how many amount of days we can keep it as inventory after it’s finished? And on top of that, curious about the scaling process. In FY23, we did about INR50 crores investment in the business and we’ve managed to increase our production by around, like. 20% from FY23 to FY24. Is this the maximum amount of increased production we can take out of the INR50 crores we invested in FY23 or is there more to go?
And one more thing regarding the inventory. Right now, this year, I think we have around 206 days worth of inventory for tissue culture business itself. So how do we see this trend going forward? Is it going to remain in a similar way, or as it matures, it might go down a little?
Anil Jain
So I think there are a lot of questions in one question. But by and large, I would say that in the tissue culture business which we have, we are growing plants, right? And the plants are delivered to the farmers, so that they can plant in the field. So just to take example of our main product, which is bananas. So some of the farmers across the country, let’s say, would be planting banana in January, or then in March, like over a longer period of time, depending on season in each geographical area. So the amount of the inventory we carry is at a different stage. So plant — let’s say a plant — once we start — from a tissue, we generate a plant, a plant would be one week, then it will grow to two weeks, like that, right. And it will be with us at least, I would say — let’s say for about six months give and take. At different stages when it is growing. So let’s say 24 weeks, right? So I will have some inventory of two-week-old plants and some inventory of 24-week plants. Now, the selling model for us is, all of our plants are kind of booked by customers saying that, look, I want — so now only I know that up to February or March all my plants are sold. So all customers have already booked the plants. And as they get made or as they reach the maturity of six months, so that they’re ready to be planted in the field, they will get delivered to the farmers. And then we start new again, right, in the cycle. It’s an ongoing cycle.
So inventory is dynamic to the production and the market demand, both. I think as the overall tissue culture business for us has been generally improving over a period of time. We expect, even in the current year, business to grow, I think, overall to about INR300 crores to INR350 crores type of scenario. And because it’s higher-level profitability, even if you carry a little bit of inventory, part of the inventory gets paid because you receive advance from the farmers. When they book, they provide 30%. And on the day of delivery, you get fully paid. So it has its own working capital cycle. But all in all, I think, I would say for the total capital employed in tissue culture business, we get, I think, more than 20% return on that capital.
Praneet
Understood. But, like, you had a two-phase plan for this particular business. In the phase one, you wanted to reach INR500 crores and in next five to seven years you want to reach INR1,000 crores. So at each phase what EBITDA margin could we expect, an EBITDA contribution we could expect for the entire business? Like, from this business to the overall business, what could the EBITDA margin profile be with individual level and what is likely to ge the contribution level to the overall business?
Anil Jain
So I think the margin for last few quarters has been hovering around 30% at the EBITDA level. And — but some of the — what you call, the cost of the –ingredients or the soil-less media, etc., have gone up with overall inflation. So we are in process of actually improving our prices to customers, so that we can capture that and maintain our overall profitability. So I think medium to long term, this level of profitability would be maintained, even though there could be particular quarter or two where it may go down till the time it gets adjusted in marketplace. But all in all, despite the new growth or higher growth in the revenue, we anticipate the profitability to be maintained at this level.
Now, as we go along, you talked about INR300 crores to INR500 crores. Now INR300 crores to INR500 crores would mostly happen with similar product lines which we have today. So more of bananas, more of pomegranates, more of potato, these four, five major product lines, more sweet orange, etc. But when you want to move from INR500 crores to INR1,000 crores, right, we’ll be adding other product lines and they may not have the same level of EBITDA profitability. They might have 25%, for example. So it’s very difficult to predict as of now what would be the EBITDA profit after five or seven years. But I think for the next two, three years, we feel comfortable to say that whatever growth we are hitting to go beyond that INR500 crores number, we should maintain this level of profitability.
Praneet
Understood. Going along the lines of pricing itself, you mentioned that you could raise the price or what — it might be dynamic. So in most of the products we operate in, we are the market leaders, whether it be tissue culture for banana or irrigation, everything. So does this market leadership position avail us a price premium on an overall basis or like how is it? Because you mentioned in previous con calls, despite the volume of price fluctuations, you are able to maintain your margins. With piping — with regards to piping, you told that you changed the price depending on the time, like dynamically, it was always varying. What about the irrigation business and tissue culture business, like, do we charge a premium or how is it compared to its competitors?
Anil Jain
So I think if you look at irrigation business, typically — and in India, a large amount of ecosystem of people who produce drip and sprinkler, I think more than a few hundred people, right? 300, 400 people. So maybe there are more — let’s say, 20 organized players and 380 non-organized players. Non-organized players will be typically 30%, 35% cheaper to us. They will sell non-ISI products, etc., etc. Among the organized players, where the states are providing orders themselves on behalf of farmer, pricing is similar for everybody. But there are markets like Maharashtra where everybody is free to do their own pricing. There, our product carry premiums because of the quality, the brand, the knowledge transfer which we provide to farmer, etc.
In case of tissue culture also, there are lots of labs in the country who provide tissue culture plants at, I think, 30% cheaper than us. But again, because of quality and the higher output farmer gets for every plant he buys from us, they continue to pay us those higher prices. So we always try and optimize, right, that whatever pricing we have should give us the necessary margins to continue to grow the business and reinvest in the business. But at the same time, it is cost-competitive for the customer. So that’s the right balance we follow. But we have a price leadership in both of these businesses.
Praneet
Understood. With exports in the previous communication [Speech Overlap]
Operator
Sorry to interrupt sir, Mr. Praneet, could you please fall back in the queue for further questions?
Praneet
Yes, sure. It’s one last question, if you don’t mind.
Operator
Sir, actually, there are participants waiting for their turn.
Praneet
Got it. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Soman Paul from Relay Investment [Phonetic]. Please go ahead.
Soman Paul
Yes. Hi, sir. I just wanted to ask, could you just mention the number of — I mean, could you just give the receivables which we have completed in this quarter vis-a-vis end of FY24? And by when do you think we can practically assume because we had earlier guided for closer to Q4 of FY25? So, that is the first question. I’ll follow up next.
Anil Jain
So, I think if I look at March ’24, and if I understood your question correctly, overall gross outstanding, the retail, where about INR1,988 crores was the receivable at March ’24, which is now at INR1,930 crores when I look at the India business, which is more, let’s say, receivable focused due to the government subsidies and the long projects, etc. So, it has improved overall compared to March. And, when you look at individual breakup within that, right, in terms of retail versus institutional, government projects, etc. So, when I really see the government and non-government projects, government, I think, project outstanding September end is almost same as it was March end. The reduction which we have achieved is also on some of our export receivables. We have achieved receivable reduction where government places order on behalf of farmers.
We talked about earlier a little bit about Andhra and Gujarat where we have recovery of old receivables. There it has gone down. But as we have said earlier, I think by March of this year, FY25, you will see significant improvement in this number of INR1,930 crores because of reduction, one-time reduction as the project receivables come through as we close the project. And then our overall days outstanding, DSO, would also be substantially improved.
If I really look at, right now, non-government receivables there maybe close to already 98 days or so. And the government receivables are much higher, but as I said now sales are going down and receivables still remain high, but as you go into March, you will see a substantial change.
Soman Paul
Sir, I think my question was more pertaining to the ones, not the regular state of business, but just on the government side because I think I have been hearing this that we are on course of reducing the receivables. But like you said, there has been no significant number on the government part. So, sir, given the fact that I think Maharashtra election dates are around and then there will be Code of Conduct. So, how do you think that can we kind of manage a significant — because this is something which has been a bit of a bother, other than the factors which are beyond your control like [Indecipherable]. Can you just throw some light on this particular part?
Anil Jain
Yeah. I think specifically Maharashtra, we expect post 23rd November things should get back to normal once the results are announced. But out of the project business Maharashtra is not that big, right? Out of the receivables, Maharashtra has maybe 15% of the project receivables.
Just to quickly cover what you are saying, if I really see and I will just look at last four years, right, quickly. So, ’21, on the government projects, we recovered INR500 crores. In ’22, we received INR667 crores. In ’23, we received INR857 crores. In ’24, INR436 crores. So, when you look at just over last 4 years on government projects specifically, close to about INR2,500 crores have been recovered. But at the same time, as we are completing the various projects, we have done also the new billings, which is maybe close to INR2,100 crores. So, if I see in last four years, so new billing on government projects has been, as I said, close to INR2,100 crores. We have recovered INR2,500 crores. So, overall reduction of INR400 crores has happened during that period of time, but today we are not now doing — our billing this year may be down to INR250 crores, INR300 crores as we complete the last stages of the project. And next year it may be down just to maybe INR100 crores, INR150 crores. That is the remainder part. But we need to recover around 850, plus whatever the remainder billing I spoke about.
So, over the next two years, close to maybe INR1,150 crores, INR1,200 crores would come, and that way overall receivables currently, as I said, INR1,930 crores is the overall receivable. We expect out of that about INR800-and-odd crores will simply go away for all the time. And company’s receivable size will be down to INR1,000 crores, INR1,100 crores of all other businesses which are there.
Soman Paul
I really hope, sir, because I think the reason why you said that a lot of people are doing good business with government as of now, but I think that is the reason why we are having the current market cap, right, because there are too many past activities for which we are overdue.
Sir, one more thing. I just wanted to ask. Do you kind of foresee that beta from our tissue business itself outgrowing or outpacing all the other segments combined together, because that, I think, is the jewel in your crown currently, that less receivable, high EBITDA kind of margin, where your leadership and Jalgaon specifically being that banana hub for not only India, I mean, mostly going for export. So, on a longish view, do you kind of foresee that EBITDA from tissue itself should outgrow or be more than combined other businesses together?
Anil Jain
See — so, let’s say, even tissue culture grows to INR1,000 crores, and at 30% EBITDA if you maintain, it will be INR300 crores. But drip today, let’s say, at INR2,000 crores with 15%, 16% EBITDA is already more than INR300 crores. And drip will continue to grow going forward as well. So, when we look at businesses, we are looking at — the idea is that the drip [Technical Issues] as we move forward, once the projects are out of our life. My normal receivable cycle on drip is also quite low. The retail cycle of drip will be less than 30 days in terms of receivables. And on that business, to move as we improve production capacity utilization, move from current 15%, 16% to 18% EBITDA, that could provide a great ROC as well as, let’s say, tissue culture is providing.
So, our focus is not just on absolute EBITDA, but overall improving the ROC cycle. And there, the idea of going forward, as we use this government receivable as they come back, we use to deleverage ourselves to pay off all the term debt and NCDs, etc. The idea going forward that individually, as per the new business cycle, the retail business cycle, whether for drip or whether for pipe or tissue culture, should all be generating north of 20% ROCs for sure. And so, that’s where our focus is on, that’s where we want to bring our working capital cycle to. And while drip may be 16% to 18% EBITDA, pipe may be 12%, 13% EBITDA, tissue culture may be 30%-plus EBITDA, but overall then when you look at capital involvement, then each of business should be focusing on more than 20%. And, I think, definitely we see ’26 onwards achieving these numbers.
Soman Paul
Sir, just one small last personal thought, sir. I think, we’ve been trying to be aggressive, but fortunately or unfortunately, we’ve been falling below our guidance. So I would really hope, sir, we have a time where we are at least able to at least meet the guidance which we are giving and perhaps exceeding, that would be beneficial because we are really far off from what we should be — from where we should be. So that’s a personal comment. Thank you.
Anil Jain
Thank you.
Operator
Thank you. The next question is from the line of Praneet [Phonetic], an Individual Investor. Please go ahead.
Praneet
Yeah. Thank you for the chance again. So I was curious about the exports. So the company was expecting to achieve around 30 million from the year one of the partnership between Rivulis and us. So how are we on track with the particular plans of that? And in Q1 of this year, we did INR86 crores of revenue from exports. Do we expect to follow the similar run rate going forward in the year? And out of this INR86 crores and overall contribution over the year, what is expected to be the contribution of Rivulis and other direct exports from Jain to neighboring countries?
Anil Jain
I think, generally speaking, exports are improving. I think, apart from the good exports which we had in the first quarter, this quarter also we have registered very good number on export growth. And it is combination, whether Rivulis or the other customers which we have in totality. In fact, if I look at in the second quarter, overall exports, we have registered close to about 14.5%. So, almost INR100 crores I think we had in the second quarter. And for the overall first half, our exports are at INR188 crores as against last year’s INR146 crores. So, registering 29% growth. So, it’s combination of Rivulis plus others.
And, there are some other, I think, projects related to exports which are in pipeline as we speak. Order flow is also good from Rivulis, as well as other customers. So, we feel quite okay on the export side in terms of what is in pipeline, what we see already — kind of we have a view on it and rest, so that export what we have maintained this year, first half 28% growth, I think, would be something that is our target for the whole year, to maintain similar level of the growth.
Praneet
But in next two, three years — two to three years, how do we see this trend going forward? Like, is it going to — because you mentioned — highlighted Bhutan in one of the earnings call saying that we have been giving a significant amount of product to Bhutan and we are also expecting it to go to other neighboring countries, because as part of the partnership, we are not supposed to go further than that. It’s only mostly neighboring countries for the irrigation business. So, how do we see the direct sales from Jain to neighboring countries going forward? Like, to what quantum can we expect sales from neighboring countries in the next two to three years at this current [Phonetic] INR200 crores or INR300 crores? And from Rivulis itself, how do we expect these revenues to grow in the next three years because we expected 30 million in the first year and I don’t think we are close to that yet — as of such? But going forward, can we expect 100 million run rate for this particular partnership or how is it going to be?
Anil Jain
I think, the idea over long term is there that we should grow to that level, but as of now, the first stop was to go and hit that 30 million number, but company — let’s look at the overall export. This year, our target is cross INR500 crores, total exports. And that’s not just irrigation export but also piping. I think we have some good traction on piping. We export plastic sheet and drip irrigation. And our internal target is, while this year we close or cross INR500 crores, but the strategy which we are setting up is that over next three to four years on that INR500 crores, how do we double the exports of the company to take it to INR1,000 crores. And good part of that, apart from Rivulis which you have mentioned, has to come from the piping export, has to come from nearby countries where we can sell irrigation. But if you think about Bhutan and Nepal and Bangladesh and Sri Lanka, etc. these countries do not have very large budgets of their own. So they will depend typically on multilateral funded projects, right, to improve their agriculture or irrigation systems.
And we are working on some of these. If they come through, then that would give a big leg-up to this growth potential in the region. But meanwhile, currently, we are supplying to Bhutan and I think, as I said — so what you see this year first half growth of 29% means we are selling more to Rivulis, we are selling more to nearby countries, as well as our pipe exports are also growing. And as I said, this particular quarter, in fact, exports have grown close to overall 15%. And within irrigation, irrigation growth was 48%. So, again, quarter-to-quarter variations can come. But generally speaking, if we are thinking that domestic market in India will grow to 10%, 15%, our thought process internally is that exports must grow 20% to 30%.
Praneet
Understood. So I think plastics have lifted the boat for the last two, three years very much, after especially the drop in revenues after our sale of international business. Plastic has taken it up. And we have been growing significantly in the plastic division. And you mentioned that plastic sheet division, especially, has been giving you north of 20% ROCE in the overseas business. How do we see that panning out going forward? Like, what is the volume expectation — amount expectation we might see in the next three to five years for only overseas division? And how big is it in the plastic division on an overall basis, because piping — and one more thing about piping is that you also mentioned, you wanted to go to the urban markets and actually grow apart from the agricultural use at this point of time. So what are the efforts we are putting into this? And how can we make inroads, like, in the next two to three years can we see that we actually meaningfully get market share in this particular urban or residential market, or how do we see it?
Anil Jain
So I think you have to — I’ll break your question into two. One is about the overseas plastic business and one is domestic. So if you look at our overseas plastic business, that has done well. I think if I look at the first half, this business has grown 15%. As you know, most of economies in Europe or U.S. are growing 2% or 3%. So, overall, our business has been doing well. But because overall economic growth is not very high, as long as we maintain this 10%, 15% growth, I think, through mostly organic but maybe some inorganic-aligned opportunities that would be good. And it has, as I said, good ROCE, good level of profitability, because I think that business also has maintained close to now 13%, 14% EBITDA. So our long-term plan is to be about 12% EBITDA. And it is somewhat a commoditized business, right? But within that we have some value-added products for the US building market, etc.
So it’s not plastics. It is more, you could look at as a building materials product as part of our portfolio. And as I said, doing well. We expect to continue to do well despite headwinds in some of the markets around the world because of high interest costs, etc. Now they have started bringing down the interest costs, so hopefully their economies spur more. And we have strong balance sheet overseas, so that looks good.
In terms of domestic piping business, overall plastic, as you rightly said, has done quite well for us to take the company out of difficult times, and it really supported us. Again, this quarter was the overall week for all product lines, including piping. But generally speaking, I think we are very, I think, not just ambitious, but we feel very confident about piping business because whatever business we have, right, close to INR2,000 crores or whatever that size is as a plastic business, we are still in only limited part of the country selling our products. So larger, rural area, we still cover other geographical parts of India. And within the areas we are already operating, selling to urban applications, such as plumbing, residential buildings, etc. That whole portfolio has kind of built. We are still slow on uptake on building distribution into urban areas, but I think you will start seeing, maybe from January quarter, a lot more revenue coming from this particular aspect.
So again, if we are — we’re talking a little bit of medium-term, three-year-plus scenarios, we are very gung-ho on the plastic business, especially, because that particular business is not linked to any subsidies. It’s not linked to specific government policy. There’s still a lot of demand in that sector. And as we increase our availability and our dealer base into areas where we are not operating, and despite the fact there’s a lot of competition, but there is always a market for good quality brand, which we have. And so, we might be operating just in30% of the market, which is focused on quality, but we would still be able to get certain market share there.
So, all in all, very positive on the plastic pipe business in India. Overall, quite happy with the overseas plastic sheet business, but I won’t say overseas plastic sheet business can do miracles, right, because those economies grow small, and the numbers we already have, whether ROCE, whether growth, profitability are already good. So to maintain that would be nice, but stupendous growth one would anticipate would come only from India plastic pipe business.
Praneet
Understood. But I think we primarily grew in plastic division because of our innovation, right, during projects or whatnot. So what was the project size in the overall plastic business, because you mentioned that there’s a small division in plastics that you’re doing EPC or like projects with. So what was the size of that? And going forward — and you also advocated for the point that you wanted the entire piping industry, especially PVC, to get together to join a coalition just to enter the market similar to cement or other piping. So how is that going so far? And like, how do we expect us to enter this market, because you mentioned that you’ve been slow in entering the residential in these markets, right? So how are we doing — how are we expanding our distributor network right there?
Anil Jain
As I said, we continue to grow the piping business Into new areas as well, where we are developing new dealer network. I answered your specific question related to plumbing, etc. There we have been slow, but the normal retail business we are already growing across the country.
In terms of the EPC part in piping, we are not taking — we have not taken any new EPC projects in piping for last three years. We are only completing — and most of the existing projects we have completed. One last project, which is for drinking water supply in a large city, we need to complete I think over next 12 months. Maybe that gets completed in FY26. It would be done and over with [Phonetic]. That will still bring about INR200 crore of additional revenue to us as we complete that project, but thereafter our focus is on retail, because again, retail brings best ROCE and huge amount of volume growth with an excellent working cap cycle.
Praneet
Got it. So, like, going forward, we want to reduce the debt by a combination of infusion, receivables and all of that. Right? So how confident are you going forward? You mentioned that you’ll be probably reaping about INR200 crores a year in overall principal payments and whatnot just by keeping up with the payments. So, like, how do we see that — how much do we expect to prepay as soon as we get the money? And, like, how are we planning on repaying it? Because right now the EBITDA has been under pressure due to headwinds and whatnot. In the case this is going to continue for the next few quarters, what is the plan for the company going forward to make sure they keep up with the debt payments and how are we planning on prepaying the debt and reducing the — deleveraging the overall business?
Anil Jain
Yes. So I think we did not have any pressure on repayments even though business was down this particular quarter. And as you saw, we have overall reduced the debt. Between now and March ’26, we have close to — a little bit close to INR300 crore of debt which is falling due for repayment, right? So that will get repaid on the dates based on the internal accruals, plus the receivable collections which we have from the government projects as a combination. And there is enough room or cushion there, where we don’t have to worry about repaying the debt.
The other part is this 0% NCDs we have in India. Part of them needs to be again paired between — overall that needs to get repaid between now and 2028. So we have about three years to pay off that — about INR800-and-odd crore of those NCDs. So between — again, our accruals, even at the current level of accruals, let’s say, just March ’24 level of accruals, without even growth and some receivables coming from the projects should suffice to provide for full repayment of those NCDs [Indecipherable]. So after the payment of these NCDs, as well as normal debt which is falling off between now and ’26, what would be left would be only INR1,500 crores cash credit working capital debt into the main company. And that — by then, hopefully, EBITDA is INR700 crores, INR800 crores, right? So then you can sustain INR150 crores of interest, of lower interest on INR750 crores of EBITDA. So we don’t foresee that as an issue thereafter.
So, generally speaking, right, we had big debt issue three years ago. We are quite balanced now on the debt issue. It is no more a concern. Of course, it needs to get repaid. And I think for two, three years, majority of debt will get repaid through internal accruals and better working capital management. And overall, our equity is INR5,000 crores, debt is INR3,500 crores. And as we go along, debt will continue to go down as profits come in. So debt-to-equity ratio would be, I think, going forward less than half. So all in all, I don’t foresee debt as an issue.
Praneet
And in the agro division, I think, we were not able to concentrate on the division because we were going through a little bit of trouble in the main company, right? But, like, how do we see it going forward? Because many companies in the space will get on to the PLI scheme to grow their businesses in a very effective manner because government support was there. So how are we going forward on the capex of this and capacity utilization on the overall basis, because scaling up production in this business also is very capital intensive, right? How do we plan to sustain this growth we are expecting of 10% to 15% despite it being a mature business? So how do we see that going forward? And in terms of the spices also, are we also planning on catering to the international markets, such as exports?
Anil Jain
So, first, quickly, we do export. Actually, out of agro processing business, almost 40%, 45% is already being exported to 50 countries around the world. Second, we already have good level of production capacities. So I don’t think we need to put a lot of capex to take the revenues to the next level. As things are stabilizing overall into the business, I think next three years we can grow, especially India business. Food again has two components, India and overseas. So let’s say this year if we do INR1,800 crores, let’s say, India would be, INR700 crores, INR800 crores and overseas is INR1,000 crores, INR1,100 crores. That’s the breakup. Overseas is doing quite stable. And as, again, those economies are going to 3%, we should maintain growth of 8% to 10% overseas business on annual basis.
And the India business, as we use more production capacities, we will have ability to take this INR600 crores, INR700 crores to maybe — or three years to INR1,200 crores, INR1,300 crores, depending on the market and the demand. And there is a competition and people get PLI and all of that, that is true. And we were not there at that point of time. And, because you said that business is working capital intensive, because that is the nature of the business, that you process inventory in short period of time and sell over a longer period of time. We are also conscious of that fact, and as a group, as a combined consol entity, we want to take our working capital cycle, free cash flow, we have a focus. So we won’t be investing that much more unless the business terms change to improve working capital cycle. But I think next two, three years, we have a clarity there, without putting too much of new capital into the business, we will still manage this level of growth which I am talking about, as well as better earnings.
Praneet
So we don’t expect to see, like, substantial any debt reduction from the main company side to infuse into the business, right?
Anil Jain
I did not get your question.
Praneet
Sir, I was wondering if the main company would wanted to invest further into the subsidiary to improve, let’s say, most of its working capital, right, to reduce some of the working capital and further infuse equity, that is not in the books, right, at this point of time?
Anil Jain
No, we would not be investing new money out of the parent into the subsidiary. I think we would expect subsidiary on its own to improve its balance sheet.
Praneet
Understood. And sorry for bothering you with so many questions, but like one last one regarding —
Operator
Sir, the time has exceeded. We will move on to the next question. Okay? It’s from the line of Sanjay Kohli from Gold Stone Capital. Please go ahead.
Sanjay Kohli
Sir, wanted to know the relationship with Rivulis in the domestic market, basically. We are selling to them. They’re doing their own brands. There are competitors. What is the trade relationship with Rivulis [Speech Overlap] they’re competitor.
Anil Jain
They are our competitor. They have their own business. We have our own business. We compete with each other as far as Indian market.
Sanjay Kohli
Where do they source? How do their products — they’ve got manufacturing sites here in India as well?
Anil Jain
Yeah, they have manufacturing sites and they have been existing here. I think they are manufacturing here for more than a decade. It’s quite old. And they operate on their own. We don’t have any view into their business. They are arm’s length market competition.
Sanjay Kohli
But we are exporting to them also. We export to them. We have now investment in their parent company, they are our competitors here and they owe us money on a trade basis. They are our customers as well.
Anil Jain
This is part of a complex international deal, right? We did a deal, we got a $500 million validation for our business from Temasek. That helps us to reduce our debt by $350 million. We continue to hold the stake into the company. They continue to buy product from us. We continue to compete with them in India. Those are the facts. They are all transparent. They’re all arm’s length. They are all market-based.
Sanjay Kohli
And do they have any tech which they provide to us for our products?
Anil Jain
No. We have adequate tech. We ran a global company. So we have every technology which we need to sell in India or any other place.
Sanjay Kohli
Okay. Great. Thanks.
Anil Jain
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today’s conference call. I would now like to hand the conference over to the management for their further closing comments.
Anil Jain
Yeah. Thank you. Thank you all for a lot of questions and a lot of insightful questions. Overall, as I said, this quarter was a weak quarter for us because, again, this is typically the weakest quarter, but it was even more. And we were surprised, despite so much of rain, overall rural demand was slow. All the feedback we have from customers is that it would pick up post-Diwali. And with some additional specific projects or work or orders we have, which we have negotiated, we feel the second quarter would be much more robust compared to this particular quarter or the first half.
Within organization, we are trying to keep up the momentum and tempo to try and meet the original target. We might fall a little bit short of the original target, especially I would say, maybe on the revenue side, but with whatever efforts we are doing on the cost and better product mix that, at least on the earning side, we will try and stay what we had guided at the start of the year.
Having said this, generally speaking, each of business in medium-term, whether irrigation or piping, our focus is to continue to improve working capital efficiencies because that would generate that free cash flow, which would allow us to continue to deleverage ourselves while growing at the same time and unlock the value for the business.
Overall, the company maintains its leadership in technology, in marketplace, in brand, in pricing power, but some of the legal issues like this project receivables is still holding us back. And I think as that gets sorted over the next few quarters, we as a company will be more nimble and will be able to move faster during that period of time.
So, this quarter, again, not great, but overall I think with the positive free cash flow we have generated, a lot of cash we have generated from operations, the fact that we have been able to reduce the debt during this quarter, speaks volume of generally overall team working towards a particular goal, and as demand starts coming back, I think second half should be much better. And overall, I think when we speak in April or May, hopefully we see a positive outcome for FY ’25.
We thank you for all your interest and I wish you again everybody a happy, prosperous Diwali and good time with your family. Thank you.
Operator
[Operator Closing Remarks]