Jain Irrigation Systems Ltd
NSE:JISLJALEQS
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Jain Irrigation Systems Ltd
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Ladies and gentlemen, good day, and welcome to the Jain Irrigation Systems Limited Q2 FY '25 Earnings Conference Call hosted by DRChoksey FinServ Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Ashwini Trivedi, from DRChoksey FinServ Private Limited. Thank you, and over to you, ma'am.
Thank you. Hello, everyone, and welcome to Jain Irrigation Systems Limited Earnings Call to discuss Q2 FY '25 results. Today, we have on the 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.
Thank you. Welcome to all for second quarter results 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 is some less than our own expectations. If you think in terms of Y-o-Y because officially, 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, our overseas plastic sheet business did very well. So it kind of related into approximately 12%, 12.5% negative growth compared to the same period earlier time. But still, company was able to clock close to INR 1,200 crores of revenue during this quarter and earned close to INR 140 crores, a little bit less EBITDA. And for the first 6 months when you think about it, it's beyond the quarter, it's overall on a PAT basis, company has almost no earnings even though EBITDA is for the 6 months, close to INR 318 crores.
So when we look at what went right and what went from during the quarter that both the businesses in India, where we sell drip irrigation to the farmer through a dealer and we sell the pipe and other materials, similar materials also. Both of these did not do as well as anticipated. Primarily, it was -- it's a lot of rains across the area where we sell. On an average rains has been about 20% to 30% more than last year or similar period, which augurs well for subsequent next 4 to 6 quarters. But in this particular quarter because of consistent incessant rains, it became an issue where fields remain 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 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 INR 26,674 million revenue for the first 6 months. And typically, compared to our normal revenue, we give 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 are just stopping as we speak, right up to last week it has been raining across the country.
A normal monsoon withdrawal starts end September early October, but it has been delayed by about 3 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 5 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 JJM business, where we have contracts and those orders are going to come through, but I think they will come through in the second half. So that can be recovered of what has been lost can -- would be recovered.
We 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 earnings, 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 INR 57 crores during the quarter despite this being a weak quarter in terms of overall revenue and earnings.
And if I look at cash flow statement, our overall investment into maintenance CapEx, et cetera, is almost same as last year at this time for the first half close to about INR 94 crores. And we anticipate that our overall spend on maintenance CapEx and small amount of growth CapEx will remain actually 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 INR 340 crores, which last year for the same first half was INR 303 crores. So there is improvement in net cash being generated from operations. And that's a good number to have when we consider fact that last entire year, we had generated only INR 534 crores to generate INR 340 crores in the first half, I think is definitely positive. And if I just speak about the current quarter the overall -- for stand-alone cash flow generated from operating activity is INR 198 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 a better cash flow, reduce the debt and continue to focus on overall including 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 focus in terms of exports or overseas business or the food business and that helps us to reduce the impact of negative business sentiment in the domestic market, the domestic agriculture market.
All in all, I think as we -- as where we are, overall, we think 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 past few weeks. So that's positive compared to where we were in July or august.
And generally speaking, 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 to close to $80 but it has started -- it has come down again. But if you think globally, whether China, Europe or U.S., those economies are not really growing that large. So we expect over the next few quarters, polymer prices, unless there is some kind of a global shock, either way our 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 INR 1,200 crores. And March '24, our overall business was very close to INR 2,400 crores. So over 4 years, between '21 to '24, we kind of double the retail business. And the idea over next 3 to 4 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 evolved and developed new product ranges, which will cover all types of pipe requirements, right, whether it's -- that's for drainage or that's for rain water, 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 deseasonalize 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 earning 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 as I talked about the cash flow even in the current quarter at the consol level, net cash generated from operating activities is about INR 212 crores. So as I said, overall, that basis, company is well poised. We have good production capacities. We have better network than we had coupld of years ago. Raw material price is 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 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.
[Operator Instructions] The first question is from the line of Sanjay Kohli.
So Mr. Jain, this clarification which you've 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 so close to INR 7,000 crores?
Yes. So...
Or we have to because this quarter has been a bit of a setback. Do we sort of revise it little lower?
I think any of our guidance, it is a bit qualified with the seasonality. But I think while this quarter was bad. If I look at the first half in total, if you look at it, company has done compared to last year, almost INR 500 crores. And then, let's say, we were planning to grow at least double-digit growth 10 to 12, so we lost INR 200 crores there.
So total shortfall in the first half compared to our estimation, is in total INR 700 crores. Out of INR 700 crores, based on specific orders we have in hand, which were not there this time and so on, I think about INR 400 crores to INR 500 crores will be covered. The remaining INR 200 crores, whether 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 at least 7% to 8%, we are still calculating for sure. Anything above, right? Despite this INR 700 crore reduction let's say compared to estimation as a Y-o-Y comparison, we are still feeling okay.
The next question is from the line of [Praneet], an individual investor.
Sir, questions about basically the trade receivables. So right now, in the last 4 to 5 years, we've taken a loss allowance of about INR 200 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 like a few states like Andhra, Gujarat, Telangana and Tamil Nadu to have -- that government procures on behalf of the farmers. And Andhra has had a lot of -- had a higher level of trade receivables. To what tune is the trade receivables in overall in this particular channel government procuring for the farmers. And how is it with Andhra's trade receivable situation at this point of time?
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 4 to 8 weeks. And indications from the government is that by end of November, early December, so let's say, before end of December quarter, they would be able to clear all the old outstanding. So that's quite positive news.
We saw over last 4 to 8 weeks, again, that from Gujarat itself considerable amount of old outstandings were released. So yes, at least 2 states, we have seen a definite positive indication of old receivables getting down to the lower level.
Overall, these, where the state's view on order from behalf of the farmer, there is no delinquency. There is a delay. But as I said, 2 of these major states, we see a significant improvement, and we anticipate by December, everything old will 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, which we have with EPC project, again that, again those projects against those accumulated receivables for a long period of time. We have taken some provisions over 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 2 to 4 quarters, we expect to kind of more or less 90%, 95% projects would get fully done and completed. And then the remainder of the cash flow should already come through between FY '25 in the remainder of 6 months in FY '26. And we don't anticipate on our books any receivable flat post FY '26 linked to the project business, which is currently around INR 850 crores outstanding. So we anticipate between FY '25 and '26, that entire portfolio should come through from where it is now.
So we don't expect to take a further impairment loss of provisions going forward in the next 1, 2 years, we will expect to receive the rest of the amount, right?
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 et cetera. So it's little bit of unknown. But based on all what we now 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 on the project.
Understood. One more thing about the tissue culture. Tissue Culture division has been providing immense amount of growth to the company and you mentioned that, it has also a 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 what is the duration between the finished product and the sale of product. Like what is the -- how many amount of days you can keep it as inventory after it's finished?
And on top of that, here is about the scaling process. In FY '23, we did about INR 50 crores investment in the business. And we've managed to increase our production by around like 20% from FY '23 to FY '24. This is the maximum amount of increased production, we can take out of the INR 50 crores we invested in FY '23 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 the 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?
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 plant. Now so -- and the plants are delivered to the farmers so that they can plant the new field. So just to take example of our main product, which is banana. So some of the farmers across the country, let's say would be planting banana in January or even 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, plant once we start from a tissue we generate a plant. Plant will be one week, then it will grow to 2 weeks like that. And it will be with us at least, I would say, let's say, for about 6 months give and take at different stages when it is growing.
So let's say 24 weeks. So I will have some inventory of 2-week old plants and some inventory of 24 week plants. Now the selling model for us is all 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 6 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, in the cycle, it's an ongoing cycle.
So inventory, 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 throughout to about INR 300 crores to INR 350 crores type of scenario. And that because it's higher level of profitability, even if you carry a little bit of inventory, part of the inventory gets paid because you receive advance from those farmers. When they book they provide 30%. And on the day of delivery, you get to be 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.
Understood. But like you had a 2-phase plan for this particular business. In the Phase 1, you wanted to reach INR 500 crores and in next 5 to 7 years you want to reach INR 1,000 crores. So at each phase what EBITDA margin could we expect any EBITDA contribution we expect for the entire business like from this business to the overall business like what could the EBITDA margin profile be for individual level? And what is likely to be the contribution level to the overall business?
So I think the margin for last few quarters has been hovering around 30% at the EBITDA level. But some of the what you call, the cost of the ingredients soilless media et cetera 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 2 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 we maintained at this level.
Now as we go along, you talked about INR 300 crores to INR 500 crores. Now INR 300 crores to INR 500 crores would mostly happen with similar product lines which we have today. So more of bananas, more of pomegranate, more of potato. This 4, 5 major product lines, more sweet orange et cetera. But when you want to move from INR 500 crores to INR 1,000 crores, 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 5 or 7 years. But I think for the next 2, 3 years, we feel comfortable to say that whatever growth we are getting to go beyond that INR 500 crores, we should maintain this level of profitability.
Understood. Going along the lines with pricing itself, you mentioned that you can raise the price or what it might be dynamic. So in most of the products we operate in, we are the market leaders, where there's a big tissue culture for banana or irrigation, everything. So does this market leadership position avail as a price premium on an overall basis? Or like how is it because you mentioned in previous con calls, despite the polymer price fluctuations, you are able to maintain your margins. If it's piping regards to piping, you told that you changed the price depending on the -- 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?
So I think if you look at the irrigation business, typically, in India has large amount of ecosystem of people who produce drip and sprinkler. I think more than few hundred people, 300, 400 people. So maybe there are more, let's say, 20 organized players. And 380 nonorganized players. Nonorganized players will be typically 30%, 35% cheaper to us. They will sell non-ISI products, et cetera, et cetera.
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's is free to do their own pricing. There, our product carry premium because of the quality, the brand, the knowledge transfer which we provide to farmer et ceteral.
In case of tissue culture also, there are lots of labs in the country who provide tissue culture plans at, I think, 30% cheaper than us. So -- 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 that, whatever pricing we have should give us 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.
Understood. With exports, previous communication...
Mr. [Praneet], could you please fall back in the queue for further questions.
Yes, sure. It's one last question, if you don't mind.
Sir actually, there are participants waiting for their turn.
The next -- [Operator Instructions] The next question is from the line of [ Sumant Kohl ] from Relay Investment.
I just want 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 FY '24. And -- by when do you think you can practically assume because we had earlier guided for closer to Q4 of FY '25. So that is the first question, I have a follow-up.
So I think if I look at March '24, and if I understood your question correctly, overall gross outstanding, the retail, were about INR [ 1,988 ] crores was the receivable at March '24, which is now at INR 1,930 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, et cetera. So it has improved overall compared to March.
And when you look at individual breakup within that, in terms of retail versus institutional, government projects, et cetera. 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 approved is also on some of our export receivables. We have achieved receivable reduction in this -- where government places order on behalf of farmers, we talked about earlier little bit what Andhra and Gujarat, where we have recovery of -- there, it has gone down.
But as you have said earlier, I think by March of this year, FY '25, you will see significant improvement in this number of INR 1,930 crores because of onetime reduction as project receivables come through as we close the project. And then our overall days outstanding, right, DSO would also be substantially improved.
If I really look at right now, nongovernment receivables they are 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.
Sir, I think I was more pertaining to the banks, not the regular state of business, but just on the government side because I think I've been hearing this -- we are also on course of reducing the receivables. But like you saying there has been no significant number on the government part. So, sir, given the fact that I think Maharashtra elections dates are around, and then there will be code of conduct. So how do you think that you 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 you have mentioned. Can you just throw some light on this particular part, please?
Yes. I think basically, 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. Out of the receivables, Maharashtra is maybe 15% of the project receivables. Just to quickly cover what you are saying, if I really see -- and I'll just look at last 4 years, right, quickly.
So '21, on the government projects, we recovered INR 500 crores. In '22, we received INR 667 crores. In '23, we assume INR 857 crores, in '24, INR 436 crores.
So when if I look at just over the last 4 years, on government project specifically, close to about INR 2,500 crores have been recovered. But at the same time, as we are completing the various projects, right, we have done also the new billing which is maybe close to INR 2,100 crores. So if I see in last 4 years so new billing on government project has been, as I said, close to INR 2,100. We have recovered INR 2,500. So overall reduction of INR 400 crores has happened during that period of time. But today, we are not now doing our billing this year, maybe down to INR 250 to IN 300 crores as we complete the last stages of the project, right? And next year, it may be down just to maybe INR 100 crores, INR 150 crores. That is the remainder part.
But we need to recover around INR 850 crores plus whatever is the remainder billing I spoke about. So over next 2 years, close to maybe INR 1,150 crores, INR 1,200 crores would come. And that way, overall receivables, currently, as I said, INR 1,930 crore is the overall receivable. We expect this -- out of that, about INR 800-odd crores will simply go away for all the time. And company's receivable side will be down to INR 1000 crore, INR 1,100 crores of the -- all of other businesses which are there.
I mean 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, because there are too many past activities for which we are overdue.
Sir one more thing I just wanted to ask, do you can to foresee that EBITDA from our tissue business itself outgrowing or outpacing all the other segments combined together because that I think you said is the jewel in your crown currently is that less receivable, high EBITDA kind of margin, where you have a leadership and Jalgaon specifically being the banana hub for not only India, mostly going for exports. So I mean, on a longish view, do you kind of foresee that EBITDA from tissue itself should outgrow or be more than combined other businesses together?
See, so let's say, even tissue culture grows to INR 1,000 crores and at 30% EBITDA, if you maintain it, it will be INR 300 crores. But drip today, let's say, INR 2,000 crores is 15%, 16% EBITDA is already more than INR 300 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 as we move forward, once the projects are out of our life, right, my normal receivable cycle on drip is also quite long.
Would be -- the retail cycle of drip will be less than 30 days in terms of receivables. On that business to move as we improve production capacity utilization, move from current 15%, 16% to 18% EBITDA that could provide great ROCE as let's say, tissue culture is providing. So our focus is not just on absolute EBITDA, but overall improving the ROCE cycle. And there, the idea going forward, right, as we use this government receivable as they come back, we used to deleverage ourselves to pay off all the term debt and NCDs, et cetera.
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 generating north of 20% of ROCE 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 maybe 12%, 13% EBITDA, tissue culture may be about 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 26th onwards achieving these numbers.
Just one small last question, 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 been 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.
The next question is from the line of [Praneet], an individual investor.
So I was curious about the exports. So the company was expecting to achieve around $30 million from the year 1 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 INR 86 crores of revenue from exports. Do we expect to follow the similar run rate going forward in the year. And out of this INR 86 crore and overall contribution over the year, what is expected to be contribution of Rivulis and other direct exports from Jain to neighboring countries?
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 a 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 INR 100 crores, I think we had in the second quarter.
And for the overall first half, our exports are at INR 188 crores as against last year's INR 146 crores, so registering 29% growth. So it's a 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 or what we see already, we have a view on it and the 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.
So -- but in the next 2 to 3 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 do to other neighboring countries because as part of the partnership, we are not supposed to go further than that. So 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 2 to 3 years let's just say, INR 200 crores or INR 300 crores.
And from Rivulis itself, how do we expect these revenues to grow in the next 3 years because, right, we expected $30 million in the first year, and I don't think we are close to that yet as of such. So but going forward, can we expect $100 million run rate for this particular partnership? Or how is it going to be?
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 the $30 million number. But company, let's look at the overall export, right? This year, our target is cross INR 500 crore, 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 closed or crossed INR 500 crores. But the strategy which we are setting up is that over next 3 to 4 years from that INR 500 crores, how do we double the exports of the company, take it to INR 1,000 first. And good part of that apart from Rivulis, which I mentioned, has to come from the piping export as to come from nearby countries where we can sell irrigation.
But if you think about Bhutan and Nepal and Bangladesh, Sri Lanka, et cetera. These countries do not have very large budgets of their own. So they will depend typically on multilateral funded projects, to improve their agricultural irrigation system. And we are working on some of these. If they come through, then that could give a big leg up to this growth potential in the region. But meanwhile, currently, we are trying to do that, 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 neighboring 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%.
Understood. So I think plastics has lifted the boat for the 2, 3 years very much after especially, with the drop in your revenues after our sale of international business. Plastic has taken it up. And we've been growing significantly in the plastic division. And you mentioned that the plastic sheet division, especially has been giving you north of 20% ROCE in the internal overseas business. How do we see that panning on going forward? Like what is the -- like volume expectation, amount expectation we might see in the 3 to 5 years on for the only overseas division? And how big is it in the plastic sheet 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 agriculture 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 2 to 3 years, can we see that we actually meaningfully get market share in this particular urban or residential market? Or how do we see it?
So I think you have to just break your question into 2. One is about the overseas plastic business. And one is plastic. So if you look at overseas plastic business, that has done well. I think if you -- 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 to -- 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 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 we think that we have some value-added products for the U.S. building markets, et cetera.
So it's not plastic sheet is more or you could look at it 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 et cetera. Now they have started bringing down the interest cost. So hopefully, their economies spur more. And we have a 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 time. and it really supported us. And again, this quarter was overall weak 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 INR 2,000 crores. So whatever the size is, as a plastic business, we are still in only limited part of the country, selling our product.
So larger rural areas, 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, et cetera. 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, lot more revenue coming from this particular aspect.
So again, if we're talking a little bit on medium terms ,, 3-year plus scenarios. We are very gung ho on the plastics business, especially because that particular business is not linked to any subsidiaries, not linked to a specific government policy. There is 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 is a lot of competition but there is always a market for good quality brand, which we have. And so we might be operating just in 30% 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 piping business.
Understood. But I think the primarily grow in plastic division because of innovation during projects or whatnot. So what was the project size in the overall plastic business? Because you mentioned that there was small [Technical Difficulty] that you're doing EPC or like projects with. So what was the size of that?
And going forward, and you also advocated to 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 pipings. 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 and these markets. So how are we doing? How are we expanding our distributor network right there?
As I said, we continue to grow the piping business into new areas as well where we are developing new dealer networks. I answered your specific question related to plumbing, et cetera. 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 3 years. We are only completing and most of the existing projects were 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 competed in FY '26. It would be done and over with. That will still bring about INR 200 crores of still additional revenue to us as we complete that project. But thereafter, our focus is on retail because, again, retail brings the best ROCE and huge amount of volume growth with an excellent working capital side.
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 we'll be probably repaying about INR 200 crores a year in overall principal payments and whatnot just by keeping up with the payments. So like how do we see that? We expect to keep -- how much do we expect to prepay as soon as we get the money and make -- 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 overall business?
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 26th, we have close to a little bit close to INR 300 crores of debt, which is falling due for repayment, right? So that will get repaid on the debt based on the internal accruals plus the receivable collections, which we have from the government project side, combination. And there is enough room or cushion there where we don't have to worry about repaying the debt.
The other part is the 0% NCDs we have in India. Part of them needs to be, again, paid between -- overall that needs to get repaid between now and 2028. So we have about 3 years to pay off that about INR 800-odd crores 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 project should suffice to provide for full repayment of those NCDs. So after the payment of these NCDs, there was normal debt, which is falling off between now and '26. What would be left would be only INR 1,500 crore cash credit working capital debt into the main company.
And that -- by then, hopefully, EBITDA is INR 700 crore INR 800 crores. So then you can sustain INR 150 crores of interest or lower interest on INR 750 crores of EBITDA. So we don't foresee that as an issue thereafter. So generally speaking, right, we have big debt issues 3 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 2, 3 years, majority of debt will get repaid through internal accruals and better working capital management. And overall, our equity is INR 5,000 crores, debt is INR 3,500 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.
And in 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 this space took advantage of the [PLI] scheme to grow their businesses in a very effective manner because government support was there. So how is going forward on the CapEx of this and capacity utilization on the overall basis because scaling a production in the business is also very capital intensive, right? How do we plan to sustain this growth, we are expecting of 10% to 15% despite being a mature business. So how do we see that going forward? And in terms of the sizes also, are you also planning on catering to the international markets like such as exports.
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 capacity. So I don't think we need to put a lot of CapEx to take the revenues to the next level. As things are capitalizing overall into business, I think next 3 years, we can grow, especially India business.
Food, again, has 2 components: India and overseas. So let's say, this year, if we do INR 1,800 crores, let's say, India will be INR 700, INR 800 and overseas is INR 1,000 crore, INR 1,100 crores plus the breakup. Overseas is doing quite stable. And again, those economies are growing 2%, 3%. We should maintain growth of 8% to 10% overseas business on an annual basis. And the India business, as we use more production capacities, we will have ability to take this INR 600 crores, INR 700 crores to maybe or 3 years to INR 1,200 to INR 1,300 crores.
Depending on the market and the demand. So 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. But -- 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 comes seeing to improve working capital cycle. But I think next 2, 3 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'm talking about as well as the better earning.
So we don't expect to see like substantially any debt reduction from the main company side to infuse into the business?
I did not get your question.
I was wondering if the main company would wanted to invest further into the -- subsidiary to improve, let's say, most of it's working capital to reduce some of the working capital and further increase equity. That is not in the books, at this point of time?
No, 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.
Understood. And sorry for bothering you with some many questions. But like one last one. Regarding...
Sir, the time has exceeded. We will move on to the next question, okay? It's from the line of Sanjay Kohli from Goldstone Capital.
Sir, I wanted to know the relationship that Rivulis in the domestic market, basically, you're selling to them. They're doing their own brands. They are our competitors. What is the trade relationship with Rivulis in terms of drip irrigation? They are competitors.
They are our competitors. They have their own business. We have our own business. We compete with each other as per the Indian market.
And if they source -- how do their products -- are they -- they've got manufacturing sites here in India as well?
Yes, Yes, they have manufacturing site. 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, it's arms length market competition.
But we are exporting to them also, we export to them, we have our investments in their parent company, they are competitors here. And they owe us money on a trade basis. They are our customers as well.
This is part of a complex international deal, right? We did a deal, we got a $500 million valuation for our business from Temasek that helped 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're all transparent. They're all arms length. They are all market based.
Do they have any tech, which they provide to us for our products?
No. We have adequate tech, right? We ran a global company. So we have every technology which we need to sell in India or any other place.
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.
Yes. Thank you. Thank you all for a lot of questions and lot of insightful questions. Overall, as I said, right, this quarter was a weak quarter for us because, again, this is typically weakest quarter, but it was even more. And we were surprised despite so much of rain, overall rural demand was slow. And 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 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 earnings side, we will try and say what we have guided at the start of the year.
Having said this, generally speaking, each of business in medium term, whether irrigation or pricing, 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, company maintained its leadership in technology, in marketplace, in brand, in pricing power. But some of the legacy 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 would be able to move faster during this 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 quarter -- sorry, 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, happy, prosperous Diwali, and a good time with your family. Thank you.
On behalf of DRChoksey FinServ Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.