Business Details
Jain Irrigation System is Agriculture Equipment and Plastics sector Company. It has 33 manufacturing plant located around the world. It has presence in wide range of items. Below are different category of products created by Jain Irrigation Systems
- Drip and sprinkler irrigation systems and its components
- Irrigation automation systems
- PVC and PE piping systems
- Plastic sheets
It ranked 7th on the Fortune’s ‘Change the World’ list in year 2015. In year 2011 World Economic forum listed it as one of the 15 “Sustainability Champions”.
The Company has approx 50% market share in Micro irrigation system, 20% market share in HDPE pipes and 19% market share in PVC pipes.
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Stock Performance
The stock chart of Jain Irrigation shows fall of a once market darling stock or stock which was multi bagger once and then shocked investors. It went from 10 INR level to 250 INR level giving 25 times return in one decade. In next decade the stock tumbled and has became Penny stock.
The dividend yield looks great because of price depreciation over the time. So one should not get carried away with that. The stock is under Additional Surveillance (ASM) for long term due to recent price actions.
Below are the details from Company website.
My Opinion
Jain Irrigation System is a case study for all Retail Investors. It teaches you how a market darling stock covered by famous business news channel bites dust with some wrong business decisions.
Jain Irrigation System is now loss making Company and have huge debt as well. The Promoters have pledged around 50% holding which is severely negative for the Company. It has low interest coverage ratio as well.
The Company is caught in huge debt cycle and it has to pay interest to for it. The huge debt on Company is very negative and management is planning to sell assets for repayment.
Every investors should always check Debt of a Company. If the debt is increasing beyond the capacity of Company then it is hugely negative. Ideally Debt free Companies are better bets but even if Company has debts then it should be in limits.
This should be primary check for every retail investor. As of now I am not planning to invest in this Company. This is falling knife and debt issue will haunt the Company.