Jain Irrigation Systems Ltd

After growing at a scorching 9% plus rate in 2005-06 to 2007-08, Indian economyconsolidated at 6.7% in economic downturn of 2008-09 and recovered moderately to 7.4% in2009-10 as per RBI’s quick estimates. The 2010-11 projections are closer to 8% butmacro headwinds are indicating a consolidation at over 7% for the current year.

The progress of monsoon has been good while geographical distribution is expected to beeven.

The low growth phenomenon has continued with developed economies of Western world. Theyare grappling with problems like high borrowings and likely sovereign default in EUcountries and if these were to happen, it would be catastrophic as many internationalcommercial banks have exposure to EU countries. Energy prices have remained high throughthe current year so far but developments in various parts of world have moderated thedemand expectations and hence prices have stabilized now at lower than top price achieved.The lower commodity prices and hence lower inflation expectations as a corollary may forceRBI to either pause the policy rate hikes. However RBI has continued with it’shawkish stance – due to high food inflation. In fact, food inflation issue is moresupply side issue and partly can be addressed by improving agricultural productivity byusing micro irrigation and other technologies being propagated by your Company.

The quick estimate released by RBI indicates that the economy grew by 7.7% in Q1 Fy2011-12. The Manufacturing sector grew by 7.2 while Mining sector grew only by 1.8%.However, the Agricultural sector grew by heartening 3.9% which is an encouraging sign.

Today need for your Company’s product is even more intensifying & continueddeployment of these products will allow Company to full-fill it’s objective ofmeaningfully addressing issues, like water conservation and food security, being faced bythe nation.

1. Overview of Business

Your Company (JISL) is leading agri-business Company, operating in diverse butintegrated segments of the agri-business value chain. It is the second largest microirrigation Company globally and is largest manufacturer of irrigation systems in India. Itis also the largest manufacturer of Mango pulp, puree and concentrate in the world andalso third largest manufacturer of dehydrated onions. JISL is also India’s largestmanufacturer of polyethylene pipes, leading PVC pipe manufacture and is furthermore thelargest manufacturer of Tissue Culture Banana Plants in India. JISL is additionally intohybrid & grafted plants; greenhouses, poly and shade houses, bio-fertilizers, solarwater heating systems, Solar panels, Solar water pumps and wood substitute plastic sheets.JISL renders consultancy for complete or partial project planning and implementation e.g.watershed or wasteland and / or crop selection and rotation..

2) The Strategy

Our goal is to leverage our strengths to continue to expand our capacities in each ofour respective business lines and expand into complementary product lines to continue ourgrowth in India and to compete in the global market. The principal elements of ourstrategy are:

a) Continue expansion of our micro irrigation products in India.

We are currently one of the largest suppliers of micro irrigation systems in India. Ourstrong brand name, extensive agricultural expertise and broad network of dealers hascontributed to our aggressive growth in India and we aim to continue this growth byfocusing on states such as Maharashtra, Karnataka, Gujarat, Rajasthan, Himachal Pradeshand Haryana – while continue working in other states such as Andhra Pradesh, TamilNadu, Madhya Pradesh etc.

We attained a compound annual growth rate of 42.9% from fiscal 2008 to fiscal 2010 forour micro irrigation sales in India. We hope to continue this growth by developing newproducts such as automated greenhouses, developing micro irrigation system educationefforts for paddy and new crops such as pulses, oil seeds and cotton and high densityplantations such as mango, guava. We are expanding to new states in our manufacturing anddistribution networks.

We aim to provide farmers an end-to-end water solution by transporting water, creatingnew water reservoirs, creating irrigation systems and assisting with agronomy through ourcanal command area programs. We also believe that the Government allocated agricultureareas next to cities to control food inflation will provide us with new opportunities.

b) Expanding into new growth products and markets and continue focus on agriculturalvalue chain.

We will continue to expand our product range with continued emphasis on theagricultural value chain. We also plan to enhance our distribution reach by adding newdealers and distributors to penetrate Indian and international markets, particularly inTurkey, Mexico, Africa, the USA and Latin American countries. For example, we set up agreenfield plant in Turkey for growth of MIS sales in Turkey and regional MENA countries.We also plan to add new fruits and vegetables to our vegetable dehydration and fruitprocessing capabilities, adding to our capabilities in the agricultural value chain andmeeting demands for new products and food ingredients for consumers We believe this willfurther diversify our revenues to insulate our sales from adverse conditions. We are alsoadding new products in our renewable energy segment, including integrated photo voltaicmodules, which can be used on roof tops and in building, full aperture collectors,hygienic hot air dryers and Solar Water Pumps.

c) Focus on financial management and synergies of creating an affiliated financingentity.

Our fastest growing business is micro irrigation which has a relatively protracted cashcollection cycle from the invoice date. It takes between 9 and 12 months after delivery ofproducts to receive the government incentives portion, which makes up at least 65% of thepurchase price. We are focused on having sufficient financing facilities in place to fundfuture growth. Additionally, we continuously monitor interest cost and optimise ourborrowing mix in line with changes in market dynamics. We hope the creation of a financeentity (NBFC) in which we will have a minority stake will significantly shorten the cashflow cycle by disbursing funds to us at the time of delivery of our products.

d) Maintaining our cost competitiveness through technology.

We seek to be a cost-competitive high-quality producer and are focused on maintainingour cost competitiveness in our domestic and international markets. We have invested andwe continue to invest in advanced equipments which provide us with consistent and costeffective production rapidly while maintaining quality. Due to our backward and forwardintegration, we have optimised capital investment on a per ton basis for our productionfacilities. We continue to pursue the one-stop-shop and integrated system approach whichallows us to maintain lower sales and distribution costs resulting in costcompetitiveness. We have invested in and have evolved our own unique processing technologyand special seeds which allows us to improve yields in our food processing division,thereby increasing competitiveness. We buy major polymers which are our raw materials atreduced prices due to our scale. We have automated various processes in our plants so asto reduce manpower costs. We have started new plants in different states in the last twoto three years and we plan to build more such plants across India, thereby reducinglogistic and other costs. Our continuous research and development in-house and on-fieldhas allowed to optimise our product and system design, thus rendering our end offering tobe more cost competitive. In our micro irrigation business, we have focused on helping ourcustomers to improve their production and productivity thus increasing value propositionof our product. We have also invested in green technology for the generation of energywhich is expected to generate carbon credits. We plan to further increase productivity andproduction while reducing our costs by continuing to invest in new equipment, improvingour material management systems to minimize wastage and production losses, improving ourworking capital cycle to reduce our interest costs and refinancing our higher cost debtwith lower interest.

e) Growth through select strategic partnerships and investments in other ventures andmergers and acquisitions.

We aim to be among the top global players in each of our major business segments andbecome an international brand in the agricultural business. In addition to organic growth,we will evaluate on a case-by-case basis potential acquisition targets that can grow ourbusiness, provide new technology, increase production capacity and/or expand ourcapabilities or geographic reach. For example we purchased Chapin Watermatics Inc., a USACompany, to incorporate their subsoil irrigation technology. We invested in NaanDanJain anIsraeli irrigation Company, to incorporate their controlled irrigation technology andmicro sprinkler products; THE Machines, a Swiss Company, to adopt their equipment andmachine manufacturing expertise, and more recently Sleaford (UK), a UK food distributionCompany, to have direct access to a large market with value-added new food products. Weplan to acquire the minority stakes from past acquisitions to further integrate thesebusinesses into our operations. We intend to pursue those acquisitions that are related toour key strengths, are synergistic and in our assessment, have manageable integrationrisks.

3) Corporate Structure : The below table sets for the current corporatestructure of the Company

* Jain (Americas), Inc. USA has increased stake in Cascade Specialities Inc. after31st March 2011 from 88.10% to 95.10% according to shareholders agreement.

** Jain Europe Ltd. UK has increased stake in SQF 2009 Ltd. UK after 31st March2011 from 80.00% to 85.00% according to shareholder agreement.

4] A) Overseas Holding Companies

a) JISL Overseas Ltd., Mauritius is a wholly owned subsidiary of the Company andwas incorporated in 1994 under the laws of Mauritius. JISL Overseas Ltd. acts as a holdingCompany for the overseas subsidiaries and all of the overseas subsidiaries are directlyheld by JISL Overseas Ltd. For the year ended 31st March, 2011, JISL Overseas had sharecapital of approximately US$ 86.06 million. The said Company had a loss of US$ 810,782 forthe year ended 31st March, 2011.

b) Jain International Trading B.V., Netherland is a wholly owned subsidiary of theCompany and is incorporated in 2010 under the laws of Netherland. The said Company had aloss of US$ 388,047 for the year ended 31st March, 2011.

c) Jain Overseas B.V., Netherland is a wholly owned subsidiary of the JISL OverseasLtd., Mauritius and was incorporated in 2007 under the laws of Netherland. The saidCompany had a profit of US$ 152,227 for the year ended 31st March, 2011.

d) Jain (Israel) B.V. Netherland is a wholly owned subsidiary of the Jain OverseasBV., Netherlands and was incorporated in 2007 under the laws of Netherland. The saidCompany had a Loss of US$ 345,157 for the year ended 31st March, 2011.

e) JISL Global SA, Switzerland is a wholly owned subsidiary of the Jain OverseasBV., Netherlands and was incorporated in 2007 under the laws of Switzerland. The saidCompany had a profit of CHF 3,317 (approx. US$ 3,308) for the year ended 31st March, 2011.

f) JISL Systems SA, Switzerland is a wholly owned subsidiary of the JISL GlobalSA., Switzerland and was incorporated in 2007 under the laws of Switzerland. The saidCompany had a loss of CHF 13,580 (approx. US$ 13,543) for the year ended 31st March, 2011.

g) Jain Irrigation Holdings Inc. Delaware, USA is a subsidiary of the Jain AmericasInc., USA and was incorporated in 2007 under the laws of USA.

a) Jain (Americas) Inc., USA (Including NuCedar Mills Inc., USA merged w.e.f. 31stMar 2011) is a wholly owned subsidiary of the Company and was incorporated in 1994, underthe laws of Ohio, USA. It is our key marketing, distribution investment arm in the UnitedStates. For the year ended 31st March, 2011, Jain (Americas) Inc. had sales of US$ 22.06million.

b) Jain (Europe) Ltd., UK is a wholly owned subsidiary of the Company and wasincorporated in 1996, under English laws. Jain (Europe) Ltd. is our key marketing anddistribution arm in the UK and other European countries. For the year ended 31st March,2011, Jain (Europe) Ltd. had sales of GBP 25.19 million (Equivalent to US$ 39.18 million).

a) Jain Irrigation Inc., USA (Including Chapin Watermatics Inc. merged w.e.f. 1stApril 2009) is a wholly owned subsidiary of the Company through the Jain Americas Inc.Jain Irrigation Inc is engaged in drip tape manufacturing and distribution business basedin California. For the year ended 31st March, 2011, the Company had reported revenue ofUS$ 55.86 million.

b) Cascade Specialities Inc. USA is owned to the extent of 95.10% by the Companythrough the Jain (Americas) Inc. It is engaged in onion and garlic dehydration businesswith specialization in natural low bacteria and organic dehydrated products. For the yearended 31st March, 2011, the Company had reported revenue of US$ 19.87 million. The Companyhas definite agreement to acquire remaining ownership in the next year from othershareholders at an EBIDTA multiple.

c) NaanDan Jain Irrigation C.S. Ltd. Israel is owned to the extent of 50.001% bythe Company through Jain (Israel) B.V. It is engaged in the manufacturing of drip /sprinkler irrigation. NaanDan also has manufacturing facilities in Chile, Brazil, Spain.For the year ended 31st March, 2011, the Company had reported revenue of NIS 418.54million (Equivalent to US$ 114.06 million). The Company has a call option to acquireremaining ownership over the next 6 years from other shareholders at an agreed fixedprice.

d) THE Machines SA, Switzerland is a Switzerland based manufacturer of plasticextrusion equipments with laser technology. The Company is owned to the extent of 69.75%through JISL Systems SA. For the year ended 31st March, 2011, the Company had reportedrevenue of CHF 28.18 million (Equivalent to US$ 28.11 million). The Company has a calloption to acquire remaining ownership over in the next few months from other shareholdersat an agreed prefixed price.

e) Jain Sulama Sistemleri San. Tic. A.S., Turkey, is a Turkey based manufacturer ofdrip / sprinkler irrigation. The Company is owned to the extent of 100% through JainOverseas B.V. For the year ended 31st March, 2011, the Company had reported revenue of TRy19.44 million (Equivalent to US$ 12.87 million).

f) SQF 2009 Ltd., UK is based in Sleaford town in Lincolnshire County in the EastMidlands region of England. The Company is owned to the extent of 80% through Jain(Europe) Ltd., UK. For the post acquisition period, the Company had reported revenue ofGBP 11.66 million (Equivalent to US$ 18.14 million). The Company has a put option toacquire remaining ownership over the next 3 years from other shareholders at an EBIDTAmultiple each year.

g) Eurodrip S.A. Greece

In February 2006, we acquired 7.39% in Eurodrip through Jain (Europe) Ltd. The Companyis one of the largest micro irrigation companies in Europe with its headquarters inGreece.

5. Competitive Strengths

We believe that the following are our principal competitive strengths :

a) Strong brand and leadership position in our businesses in India.

We are one of India's leading manufacturers of micro irrigation systems, piping systemsand agro-processed products. Our MIS products are customised to assist in meeting thespecial requirements of our customers in India. We have worked with farmers to providethem training and introduce them to more advanced processes and technology as well as withIndian state governments and international organisation to develop technology and supportnew initiatives to assist farmers. We have maintained our leadership position withextensive research and development to improve our products. We have built an extensive andloyal distribution and dealership network throughout semi-urban and rural India, sellingflagship brands such as Jain Drip, Jain Sprinklers, Jain Pipes, Chapin and FarmFresh,which we believe are well known in our Indian and international markets. We believe thatour strong brand presence and leading market position and understanding of our customer'sneeds makes us well-placed to capitalise on growth opportunities in the Indian andinternational markets for our products.

b) Total solution provider across the agricultural value chain.

We have utilised our agriculture expertise and relationships to participate across theagricultural value chain and diversify our revenue. In addition to our micro and sprinklerirrigation systems, plastic piping and solar pumps which are used in irrigation, we alsosupply bio-tech tissue cultures which help farmers reduce growing time and create highercrop yields. In addition, we work with our customers on a turnkey basis providingengineering, soil and water analysis, water resource estimation, crop planning, irrigationand fertigation scheduling, marketing assistance and other agronomical and technicalsupport and training. We purchase onions, tomatoes and other vegetables for vegetabledehydration from our contract farmers and others and are a major consumer of mangoes forour fruit processing operations. We believe that being involved across the value chainleverages our knowledge, relationships, brand name and strong distribution network andprovides total solutions for farmers.

c) Diverse revenue streams.

We have production and processing facilities across India and our sales have beengrowing in various states in India and internationally, which makes our sales andproduction less susceptible to weather or other risks in a particular region. We aim toexpand internationally by looking for opportunities for future growth, especially inprogressive agriculture markets. Our revenues are further diversified across the widerange of products we sell. Additionally, no single customer accounts for more than 5% ofour revenues in fiscal 2011. This diversification can help insulate our overall sales andoperations from adverse conditions affecting any one of our business segments or products,a particular region or a particular customer.

d) Experienced management and large pool of agriculture professionals.

Our senior management team has deep experience in the industries in which we operate.We believe that the experience of our management team in the agriculture sector andinternational markets will help us increase our penetration internationally and expand therange of our product offerings. Our management team also has long-standing relationshipswith many of our major customers, distributors/dealers and suppliers Further, we have oneof the largest pools of agricultural scientists, technicians and engineers in the privatesector in India, comprising over 900 agricultural scientists, technicians and engineers.Our after sales support, training and other services are one of our main selling points.

e) Flexible and scalable business model.

We believe that the flexibility and scalability of our existing production facilitiesand distribution network will help us meet increased demand for our products. Our presencein India with nine manufacturing plants provides us a low cost, centralised manufacturingbase.

The scalability of our existing facilities enables us to increase our productioncapacity through the installation of new equipment and production lines. Our manufacturingfacilities enable us to produce a wide range of products with different specifications,such as inline tubing, flat dripper tubing, PC emitters, sprinkler pipes, impactsprinklers, PVC/PE pipes, casing and screen pipes and duct pipes with different diametersand working pressure ranges, and processed and dehydrated fruits and vegetables usingdifferent organic feedstocks. This assists us in meeting the specific demands of ourcustomers and reducing the impact of seasonal changes in production volumes for specificproducts such as our agro-processed products and piping systems.

f) Wide dealer and distribution network.

We have over 2,500 dealers in India selling our products exclusively. Most of thesedealers come from farming backgrounds and are influential in their respective regions.This strong local sales force gives us a deep understanding of the needs of our customersin India and assists us in providing strong after-sales support and sharing our knowledgewith our customers We can leverage our production facilities to further expand ourdistribution reach by adding additional dealers in new areas.

6) Overview of Segment

A) High-Tech Agri Input Products

The segment comprises of Micro and Sprinkler irrigation systems, PVC Pipes, biotechtissue culture and other agri inputs. The segment has grown at almost 26.7% over theprevious year at Rs. 22,859.8 million. The main growth engine was the MIS/SIS business ata robust 31.6% growth. PVC pipes also grew at reasonable growth rate of 10.4%. The segmentprofit has grown by an impressive 40.1% over the earlier year’s level, while thecapital employed grew at a little over 30% reflecting the creation of additionalcapacities during the year.

i) Industry

The industry is broadly divided into the organized and unorganized segments in thecountry. The Company is the largest player in the organized sector. In view of theinvolvement of a large number of components in a system, all of which are not availablewith a single manufacturer, it is difficult to hazard a guess about the exact size of theindustry as most of the figures are derived on the basis of information available fromdifferent sources. While the Company controls 55% of the Micro Irrigation business in thecountry, it has a market share of 35% in the Sprinkler irrigation business in the country.The current estimate of industry size is Rs. 30 bn. and it is growing at a fast pace.Currently only 5 million Ha (7% coverage) of the possible 69 million Ha area is coveredunder the micro and sprinkler irrigation in the country. However, as per Government taskforce 17million Ha of land can be easily brought under micro irrigation coverage in thecountry by 2012, while by 2030 the extent of MIS/SIS coverage may reach 69.5 mn Ha.

The prospect for global growth of the MIS industry is strong. Experts estimate that by2025 the majority of developed countries will confront issues resulting from a scarcewater supply, with all major economies switching to MIS to mitigate the disruption thatsuch a shortage could cause. Although MIS’s popularity continues to grow, highestablishment costs have hindered its wider circulation. Despite this, over the last 20years, there has been a six-fold increase in the area under micro irrigation. NorthAmerica and Europe have the highest rates of utilization, with the United States being thefirst country to employ micro irrigation technology in its fields and achieving thehighest micro irrigated area. Asia is in the development phase in its use of thetechnology, with both India and China adopting the technology, albeit with low utilizationrates. India and China both represent attractive growth opportunities for the MISindustry.

ii) Performance

The business contributes a little over 51% of the Company’s turnover. The divisionhas been growing at a CAGR of 46% in last five years on the back of projects in the Statesof Andhra Pradesh, Gujarat, Tamil Nadu and consistent growth in Maharashtra. The businessadded 53,060 MT of capacity during the year under review, while Fixed Assets addition wasto the tune of Rs.1962 million.

iii) Opportunity & Outlook

Almost 50% of the arable land in the country is still rain fed. The Government (Centraland State) provide 50% capital subsidy for promoting the use of Micro Irrigation byfarmers While targeting an agriculture growth of 4% per annum the government had alsoplaced higher targets for farm credit and agriculture investments at 2% plus of the GDPfor the XII plan period. Very recently in 2010 the Cabinet Committee of Economic Affairsapproved the "National Mission on Micro Irrigation" (NMMI) during the EleventhPlan period. This again demonstrates the sustained focus of the government on pushing themicro-irrigation as a tool to conserve the water and address the issue of food security.The Union Budget reflected an overall increase in thrust towards agriculture.

During the year under review, the 22nd manufacturing plant was inaugurated at Bhavnagarin Gujarat. The plant at peak capacity shall have a capacity to manufacture 15,000 MT perannum of MIS/SIS, 25000 MT per annum of PVC Pipes & Fittings. It will serve the stateof Gujrat and help the company improve its penetration levels in this important state inwestern India.

Your Company has continued its training & extension activities throughout thecountry. Thus, during the year under review the extension activities were carried out inover 165 districts in the country covering over 164,000 farmers in 15 states. All in all,outlook for this industry in very positive and opportunity is immense.

iv) Risks & Challenges

Government policies and allocation amount towards central subsidy could influence thegrowth prospects of this business. Delayed cash-flow, could, apart from causing pressureon managing the working capital requirements, also have negative impact on theprofitability of this business. With very high working capital requirements causing higherinterest cost, the net profit margin of this business remains under check for theindustry.

The growth in industry requires a large pool of trained sales people on continuousbasis and skilled people are also required for implementation of the system and alsorequire a dedicated dealer network in the far flung areas of the country. The unevendistribution of rainfall in the country, consecutive drought like situation for 2/3 yearsand fluctuations in the polymer prices are constant threats faced by the industry. Due tofragmented land holding in the country, the average farmer holds very small piece of landbut irrespective of his size of holding the services required are almost the same. Thisfragmented holding therefore results in high transaction cost for the Company.

There are a large number of players in the industry whose influence is restricted to asmall surrounding area, who neither maintain quality nor are able to give any qualityservice. These players tend to spoil the market due to their practices and may providebacklash against the concept of Micro Irrigation.

i) Industry Indian Scenario

India’s plastics industry is projected to grow dramatically in the coming yearsThe country’s plastics processing sector, for example, is expected to grow from69,000 machines to 150,000 machines in 2020. The PVC industry is integral to the MISindustry. The PVC pipes business is driven in large measure by demand for pipes used inagriculture, including agriculture unrelated to MIS. With agriculture expected to continueits rapid growth in India, and the positive correlation historically observed between thegrowth rates of agriculture and PVC, experts project that the PVC sector will grow byaround 9% over the next two years.

Jain Irrigation, with a 15% share, is one of the three (3) major players in theorganized market. Rest of the industry, being small and medium scale in nature, isunorganized, fragmented and scattered near the user belts in the country. Increased microirrigation spends, higher allocation towards rural water infrastructure for potable water,push for urban infrastructure by government agencies and Command Area DevelopmentProgramme will improve the demand situation for the industry.

ii) Performance

During the Fy 2011, this business contributed 18.1% revenue for the Company. Thebusiness has grown at a steady 10.4 % in revenues over last year. The business added35,145 MT of capacity during the year under review, while the Fixed Assets addition was tothe tune of Rs.196 million.

iii) Opportunity & Outlook

While the expansion of capacity undertaken last fiscal year is complete, in view ofincreased budgetary allocation from government, demand is expected to continue toincrease. While the government infrastructure spends are increasing all the time, thegovernment programmes continued for safe drinking water, urban and rural sanitation,rain-water harvesting and integrated watershed management programme etc. are expected togenerate substantial demand for piping products in the coming years. The Company isconsidering establishing two more production centres in the north part of country in nearfuture. A large part of the Urban Infrastructure projects in the current five year plan istowards irrigation, drinking water supply & sanitation.

iv) Risks & Challenges

Delays in government decision/spending and limited availability of PVC resin in Indiais the potential threats to the otherwise rosy picture for the future of the industry. Lowcost and low quality manufacturers continue to twist healthy markets. Volatility in priceof raw material PVC resin is another dampening factor on demand. Due to heavy anti dumpingduty, cost of PVC resin has been artificially increased for domestic processors, affectingend product demand.

i) Industry

The industry is broadly divided into two segments

1) Fruits and vegetables

2) Leafy Plants and flowering Ornamental Plants.

The industry is not organized although some big names did start forays in this industryin the mid 1990’s. Most of the players are engaged in tissue culture for cut flowerexports, where the model of business is quite different. The Company started with bananaas the main crop for tissue culture and the efforts have really paid off. The industry isstill growing at an estimated 25% per annum.

ii) Performance

The sales in business crossed Rs.270.0 million during the year, reflecting a 20.3%growth over the previous year. The quantity increased to 22.5 million plantlets Keepingquality of plants as the top priority Company had implemented four stage disease testingprogram. Unit has also maintained various certification standard for commercial tissueculture laboratories.

iii) Opportunity & Outlook

The outlook continues to be excellent and demand shows improved off take in the comingseason. Now, many State Governments are evincing keen interest in promoting tissueculture. The Company has opportunity to diversify the business & produce fruit &ornamental plants & other fruit plants. your Company has also started production oftissue cultured pomegranate plants, onion and even mango. Research and development is onto create Citrus plants. There is also an export potential to other Asian countries whichcan be tapped.

iv) Risks & Challenges

Lack of skilled work force and the risk of legal problems in case of non-performance ofthe planting material in the farmer’s field are the major challenges facing thebusiness.

B) Industrial Products

The segment business includes the varied business lines like PVC Sheets, PolycarbonateSheets, PE pipes for industrial applications, Fruit processing, and onion and vegetabledehydration. Business in this segment has grown at 13.7% over the earlier year’slevel at Rs.10,449.21 million. The major growth came from Solar business at 112% growth inrevenue terms on a small base.

i) Industry

The applications of PE pipes are growing at a fast pace and yet new applications arebeing developed for the product. In applications like sewage & effluent disposal, dueto the tougher environmental laws and stricter application of the same by the Govt.departments, the replacement of cement/metal pipes by PE pipes is becoming very relevant.Such possibilities are significant especially since the larger diameter PE pipes are nowindigenously available within the country itself. The Company’s presence in gas andcable duct segments of the PE pipe business is commanding and hence the overall marketshare is in excess of 30%. The Company is operating in all segments of the applicationslike cable duct, sprinklers, gas distribution, water conveyance, house service connection,Sewage conveyance, Effluent disposal, sand stowing, dust suppression etc.

ii) Performance

This business has grown in Fy 2011 by 5.8% and volumes grew by 15.4%. However, with alluser industries like telecom, gas, water and sewerage having good plans for growth andcapital expenditure, the future is bright for this business.

iii) Opportunity & Outlook

The Company has successfully continued to get large supply contracts with multinationalcompanies for supply all over the world as a preferred supplier with very encouragingrevenues. The massive infrastructure projects undertaken under the Bharat Nirman yojana,increased investments by telecommunication industry and plans for piped gas in cities,continue to be the potential demand drivers for the industry. All the Gas Distributioncompanies are continuing their growth plans as newer cities are being added every year.The telecom sector in India is growing well, more so the recent allocations of licence for3G applications augur well for the telecom sector.

The demand for next 18 months is expected to be over 275,000 kms of duct pipes. Inwater transmission and distribution business there are around 200 firms registered withBIS, but the national players are only 3 and Jain Irrigation is the only player tomanufacture pipes up to 1600+ mm dia. Jain Irrigation now, has developed the capability toprovide a complete solution to Water Management, Waste-water Treatment and judicious useof treated water.

iv) Risks & Challenges

The unstable raw material prices and business cycles of the end users and delay inimplementation of projects remain the major risks faced by the business segment. Lack ofawareness about quality needs at the customer end provide significant challenge. Alsoconversion to HDPE from steel or concrete is still not easy due to unwillingness to changeold specification at engineering levels.

i) Industry

Dehydrated Onion is the largest used general food ingredients. This industry isdominated by USA, followed by India and Egypt. Dehydrated Onion industry uses less than 2%of world’s total fresh onion production. Agro processing in India provides animportant link between the country’s rural and urban economies by combining foodproduced in farms and villages with growing demand in the cities for high value, packagedfood. As a result, the agro processing industry has expanded, growing at about 14% andcontributing to 10% of India’s manufacturing GDP and 13% of the country’sexports. India’s total food market turnover is over US$69.4 million, of which the"value-added" food market of the agro processing industry now contributesUS$22.2 million. Even accounting for the industy’s recent growth, agro processing inIndia remains underdeveloped. Only 2% of India’s total agriculture and food produceis processed. India’s dairy industry is the sector with the highest processing ratesat 35%, with only 13% processed by the organised sector.

ii) Performance

During the year under review, product sale remained approximately same in terms ofvalue and quantity. The Company achieved this sales growth under the adverse scenario ofbad onion crop, increased raw material cost, volatile rupee, etc.

In order to maintain its leadership position the Company has upgraded and maintainedits quality management system to ISO 22000 apart from other certifications like BRC, GMASAFE, Kosher, Halal etc. Company's Indian operations have also been certified under ISO14001 and OSHAS 18001 for Environment and Occupational Health and Safety.

iii) Opportunity & Outlook

Outlook for vegetable dehydration industry in general and dehydrated onion industry inparticular looks positive. Large multinational companies with very popular householdbrands are looking towards consolidating the number of suppliers and trying to align withselect few suppliers who can provide better traceability and sustainability. This puts theCompany in a very good position due to its backward linkages, relationship with farmers,contract farming programs, ability to supply from two different origins with differentseasons and product quality attributes and Company’s sustainability in general.Worldwide Onion dehydration industry is estimated to be around 180,000MTPA. The industryis growing globally at 3-5% per annum. The Company now has capacity to produceapproximately 26,000 MT per annum of finished products between its three plants in twocountries. This makes the Company the third largest dehydrated onion producer in theworld. Demand for naturally produced low micro products and organic dehydrated vegetablescontinues to grow. The Company estimates that with growing demand of its finished productsand general upward movement of food prices globally, the Company will be able to achievefurther growth in sale and better realization in the coming year. The Company is alsolooking at increasing production of value added products like fried onion, frozen onionand other vegetables in the coming years.

iv) Risks & Challenges

The biggest challenge for any agro processing industry is the availability of rightquality material at right price and the required quantity. Poor monsoon, changing climate,competing crops etc pose risk in terms of availability of the raw material itself, whichcan result in lower production in a particular year. Part of this risk is mitigated by thecontract farming program undertaken by the Company, under which the Company secures 100%of its raw material for its US operation and a substantial portion of the Company's rawmaterial requirement for its Indian operations. Apart from challenges on raw materialavailability front, the other challenge is the rising energy and other costs. Company alsofaces stiff challenge from low cost / low quality producers who can adversely affect theoverall market.

i) Industry

The fruit and vegetable processing industry has a huge potential in India, with Indiaranking 2nd in the world in production of fruits and vegetables but is at the lower rungof the value chain in terms of processing. The availability of fruits and vegetables isvaried due to diverse agro climatic conditions. Despite the large production of fruits andvegetables, it is estimated that only up to 6 per cent of total agro output of India iscurrently processed as against up to 60-80 per cent in some developed countries. India'sshare in the global food trade is only 1.5%. All of this implies that there is a greatpotential to grow this industry. An increase from 6% to 20% in terms of processing andincrease in value addition from 20% to 30% will translates in to quantum jump in the sizeof the processed fruit and vegetable industry.

The installed capacity of India’s fruit and vegetable subsector has increased from1.1 million tonnes in January 1993 to 2.1 million tonnes in 2006. It is estimated thatprocessing fruits and vegetables accounts for around 2.2% of India’s totalproduction. The major items of this subsector include fruit pulps and juices, fruit-basedready-to-serve beverages, canned fruits and vegetables, jams, squashes, pickles, chutneysand dehydrated vegetables. Recent additions to the space include vegetable curries inreportable pouches, canned mushroom and mushroom products, dried fruits and vegetables andfruit juice concentrates.

ii) Performance

This division forms an important part of the Company’s approach to integratedfarming model, wherein the Company supplies the farmer with high-tech agri inputs, and isready to buy back the surplus output to add value and offer the same locally and inInternational markets, thereby completing the agri value chain. The division clockedyearly revenues of Rs.3,087 Mn. during the year under review. The business grew at 14.8%in value terms. The division processed 115580 MT of fruits during the year. The divisionadded new capacities in Aseptic, Frozen and IQF part of the business. Company processedvarious different fruits like Mango, Pomegranate, Amla, Guava, Banana, Papaya, Tomato, etcin the year under review.

The division continues to retain its accreditation under various quality standards suchas ISO 22000, SGF, Kosher etc. The business unit has also achieved accreditation under ISO14000 and OSHAS 18000 standards. With the increased capacity, improved plant utilizationand reduction in raw material transport cost; this division has become cost efficient anda high quality producer of fruit purees and concentrates.

Your Company is a strategic supplier to Coca Cola system worldwide for supplying MangoPulp/Puree and concentrates. The Maaza brand of Coca Cola Company is a brand leader in thefruit beverages category and continues to clock compounded annual growth rate of up to30%.

iii) Opportunity & Outlook

India’s Economic development has registered a growth rate of 8% over 2006-2009.Contributing to this flourishing economy is the agriculture sector, where productivity isshowing an increasing trend. Keeping pace with the world production of Fruits andVegetables the production in India has also grown and now accounts for 15% of world’svegetable production and 8% of world’s fruit production. The focus has now changedfrom grains and cereals to fruit and vegetables owing to change in consumption patternresulting in increase in demand for fruits and vegetables.

The fruit and vegetable processing industry is critical to fruit and vegetable sector.Although the horticulture sector has grown by 10%, only just over 2% of the produce isprocessed, resulting in huge post harvest losses. Fruit and vegetable processingestablishes the vital linkage between agriculture and industry. In order to sustain thegrowth in the economy, Govt. has realized the need to support this vital link and has beenproviding support to accelerate growth in the sector. The sector has seen exponentialgrowth with demand for fruit juices, beverages, convenience foods growing by around 30%yoy.

The demographic profile of the consumers has been changing. With increase in disposableincomes and standard of living, the consumption pattern is shifting from basic foods tomore healthy, convenience foods resulting in growing demand for processed food in generaland processed fruits and vegetables in particular.

There is a marked shift in the International markets with emphasis being laid onwellness products and products having nutritive/ therapeutic properties. There is also ashift from the usual products such as Citrus and Apple to more exotic products like Mango,Guava, and Pomegranate etc. which are being increasingly being researched for theirwellness aspects.

New markets such as China, Russia and Africa are opening up and the existing marketssuch as Middle East are moving up the value and quality chain.

With opening up of US and Japanese markets for fresh Mango, the taste profile iswitnessing a change, resulting in opening up of these markets for processed products also.

The demand for tropical fruit purees and concentrates and processed vegetables isgrowing rapidly within India as well as in International markets. The new format storeshave added a different dimension to the distribution and sale of products, opening upopportunities, hitherto nonexistent. The packaged juices have seen a growth of more than30% yoy and the consumption of fruits and vegetables as whole has shown an increase of2.3% CAGR whereas that of cereals has decreased.

With a view to offer products with therapeutic values, the Company is working onoffering products from Amla (Gooseberry) and Mangosteen in the International markets.

Company is also working on setting up a processing line for processing Mosambi, themost widely consumed juice in India and also other citrus varieties. The Company wassuccessful in standardizing process and technology for these products, hitherto notprocessed in India.

Orange being the largest processed and consumed juice in the world and to be able tomeet the growing demand for this juice within the country, the Company has drawn up plansto cultivate the processing variety of Oranges in India.

iv) Risks & Challenges

The biggest challenge in any agri processing business is the availability of requiredquantity of raw material at the right time and at the right price. The changing climaticconditions are adding uncertainty to the entire agri and horti sector with year of plentyfollowed by severe scarcity. To mitigate this risk the Company is pro-actively working toexpand its sourcing base and is promoting the concept of integrated development ofagriculture and establishing backward linkages. The successful model of contract farmingin Onion and integrated development in case of Banana is being extended to other fruitcrops such as Mango, Pomegranate and Tomato. Company has successfully evolved the conceptof 'Ultra High Density' plantation of Mango, which will revolutionise the mango growing,making it one of the most profitable crops for the farmers Company has also evolved abasic standard of good agricultural practices in association with IFC, called 'JainGAP',which has been recognised by Global GAP as the intermediary standard and is beingimplemented by the Company both in its contract farming program for Onion as well ascontact farming program of Mangoes. This will result in higher productivity at the farmlevels, better availability and price stability for the Company apart from taking in toaccount the concern of traceability to farm get and health of the farmer and farm labour.

The other major risk being the ever increasing cost of energy. The spiralling fuel oilprices are not only mounting pressure on the processing costs, but also directly andindirectly increasing the cost of various inputs. The Company is working towards utilizingits bio-waste to generate energy to offset these rising costs.

There are fiscal and non fiscal trade barriers in the form of multifariouscertifications being put by importing countries adds to cost.

i) Industry

Major markets for Company’s products are Europe and United States of America. Themarket is divided into two segment; Sign & Graphics (S&G) and Building MaterialsMarket (BMI)

In the BMI segment, Lumber the traditional building material was being replaced by PVC.The basic uses of PVC in BMI was in Trim, used as surrounds for windows and garage doors,Corner Boards, Soffits and interior applications such as Wainscoat and Beadboards. Theinherent qualities of PVC such as impervious to water absorbtion; protected against insectattacks and a life term warranty promulgated the product over traditional Lumber. Further,availability of good quality wood was a problem as resources were drying up and cost ofprocessing was escalating.

The market is serviced by 7 manufacturers and some Chinese imports.

The S&G market has been using PVC sheets in manufacturing Sign and Graphic boards,Point-of Purchase displays and large print mediums. This industry has stayed with PVC forover 3 decades. This segment is serviced by 5 manufacturers Some China products haveattempted to penetrate the market.

ii) Performance

This business has stedy growth rate in Fy 2011.. it accounted for around 22% of therevenue. Improved 2nd half helped achieving the same level of revenue at Rs. 1394 Millioncompared to Rs.1143 Million in the previous year.

iii) Opportunity & Outlook

The economic downturn has resulted into some players exiting the market and othersredefining their basket of offerings. This consolidation in the industry will benefit boththe manufacturer and the end user. US housing market has started showing sign of recoveryand is expected to come back on growth track, while signs are positive, nothing can becertain. We have introduced several new products to the market place: A Digital printsheet for optimum print quality, Sheet for the environmentally (EFS) conscientious marketplace which has been received well.

iv) Risks & Challenges

The economy has been slow and this poses a challenge. Jobless rate is another factoradding to the uncertainty in the marketplace. However, other indicators such as the stockmarkets show a reasonably healthy trend. Major corporations are showing profits and theDetroit car industry has shown a very a very healthy recovery. The market continues toadopt ‘just in time’ requirements and this has the manufacturers carrying theinventory burden. Housing statistics show an improvement but has been slow paced. yourCompany has modified its marketing strategy which has resulted in current year surpassingseveral previous results. The trend going forward is cautiously optimistic.

7) Risks and concerns at corporate level

Your Company has significant experience in managing risks related to farming, weather,seasonality, global markets and impact of government policy. During last few very volatileyears, this experience and expertise has helped Company to navigate turbulent times in asmooth manner resulting in sustained growth, improved margins and increasing market share,despite historical financial meltdown and violent disruption of all types of globalmarkets.

The risk management, inter alia, shall provide for periodical review of the proceduresto ensure that executive management controls the risks through a properly definedframework. The Company has identified the risks and their owners within the organisationand following risks have emerged as the top 5 risks:

• Continuous fund requirement

• Seasonality in agriculture and monsoon

• Currency fluctuations

• Aggressive strategies of competition

• Integration and profitability of acquisitions

Continuous fund requirement : Challenges in managing cash to cash cycle (paymentfor procurement to collection for sales) needs continuous fund infusion. This results inincreased capital requirements. This risk is especially relevant for a growth orientedCompany and the kind of business Company operates in.

Seasonality in agriculture : Company’s performance is also dependent on theseasonality in agriculture sector.

Currency fluctuations :Adverse changes in the exchange rates leading to erosion inexport income. Also large amount of Company borrowing is in foreign currency. Thereforeexchange rate movement of Rupee can result into notional profit or notional loss for markto market accounting treatment.

Aggressive strategies of competition : The competition adopts aggressive strategies(large sales force, credits, products offered at multiple price points etc.) andcompetition from unorganised sector (aggressive pricing) results in pressure onsales/margins.

Integration of acquisitions : Inability to capitalize on the opportunities arisingfrom the acquisitions due to sub optimal integration of the people, process and technologyfrom the acquired entities is one of the risks associated with the recently completedacquisitions.

a) Net sales

Sales excludes export incentives

Net Sales on corporate basis has increased by 20.8% to Rs.32,507 million vis--visRs.26,917 million in the previous year. This increase in revenues primarily reflectedincreased domestic sales of Micro Irrigation Systems, and Agro Processed products &Solar Systems

Our total domestic revenue increased by 26% in fiscal 2011 to Rs.27,349 million fromRs.21708 million in fiscal 2010. The revenues from exports have decreased by 1.0% infiscal 2011 to Rs.5,158 million from Rs.5,209 million in fiscal 2010. Export salesaccounted for 15.9% corporate sales in fiscal 2011 as compared to 19.4% in fiscal 2010.

i) Micro Irrigation Systems : Revenues from domestic sales of our Micro IrrigationSystems increased by 32.4% in fiscal 2011 to Rs.16,116 million from Rs.12,175 million infiscal 2010, primarily due to increased retail sales in States like Maharashtra, AndhraPradesh, Gujarat, and Punjab and project sales in Karnataka, & Rajasthan States.During the same period, exports of Micro Irrigation Systems increased by 4.4% to Rs.867million from Rs.831 million mainly due to sales to overseas subsidiaries.

ii) Piping Products : Revenues from domestic sales of our Piping Systems increasedby 18.4% in fiscal 2011 to Rs.9,180 million from Rs. 7,756 million in fiscal 2010. Theretail business in Maharashtra, Madhya Pradesh, Karnataka, Gujarat and Rajasthancontributed to the increased domestic sales of PVC pipes and Duct distribution, Gasdistribution & water distribution pipe all three segments contributed to the increaseddomestic sales of our PE pipes. The revenues from export of Piping Products decreased by57% in fiscal 2011 to Rs. 281 million from Rs. 658 million in fiscal 2010,

iii) Agro-Processed Products: Revenue from exports of Agro-Processed Productsincreased by 5.4% in fiscal 2011 to Rs.2,684 million from Rs.2,546 million in fiscal 2010mainly on account of higher mango puree demand in our European &Middle East markets.Revenues from domestic sales of our Agro-Processed Products increased by 17.6% in fiscal2011 to Rs.1,743 million from Rs.1,483 million in fiscal 2010.

iv) Plastic Sheets : Revenues from our Plastic Sheet products de-accelerated by 8%in fiscal 2011 to Rs.1,402 million from Rs.1,523 million in fiscal 2010, mainly due toclosing down the polycarbonate business in third quarter of year 2010.

v) Other products : Other product includes Solar Water Heating systems, SolarPhotovoltaic Systems, Tissue Culture Plants and Agricultural products. Revenues from otherproducts increased by 79.30% in fiscal 2011 to Rs.1142 million from Rs.637 million in thefiscal 2010, mainly due to higher sales of tissue culture plants & solar products.

b) Operating Income

Operating income includes accrued export incentives & assistance under VKyU Scheme& Transport Assistance Scheme of GOI for our agro processed products division and Megaproject incentive from Maharashtra Government.

c) Raw materials consumption

Raw materials consumption increased by 25.9% to Rs.21,281 million as compared toRs.16,905 million in the previous year mainly due to increased higher growth in the majorsegments and also partly due to raw material price increase during the year.During thesame period, polymer consumption increased to 217,506MT from 185,722 MT representing anincrease of 17%; however in value terms the increase is 34%. The consumption of fruits andvegetables has decreased to 200,171MT from 258,216 MT representing adecrease of 22.4%,however in value terms, the increase is 38.9% reflecting the significantly price increase.

d) Stores Consumed and Repairs to Machinery

Stores consumed and repairs & maintenance costs increased by 29.6% to Rs. 894million as compared to Rs.690 million in the previous year, mainly due to the increasedscale of operations

e) Power and Fuel

Power & Fuel cost increased by 12.8% to Rs. 880 million as compared to Rs. 780million in the previous year.Mainly due to increased level of production in all majordivisions.

f) Other Manufacturing Expenses:

Other Manufacturing Cost increased by 31.1% to Rs. 970 million as compared to Rs. 740million in the previous year, mainly due to the increased level of production in all majordivisions.

g) Payments and Provisions to Employees

Employee costs increased by 45.1% to Rs. 1503 million as compared to Rs.1036 million inthe previous year. The increase is mainly due to higher employee compensation expenses,commission to directors and new employment. During the year 894 new associates joined theCompany. Employee Cost as % of Net Sales is increased to 4.6 % in current year, as against3.8% in previous year.

h) Selling & Distribution Expenses

The Selling & Distribution Expenses increased by 17.6% to Rs. 2,053 million ascompared to Rs. 1,745 million in the previous year efficiently in line with the revenuegrowth S&D Expenses as % of Net Sales are 6.3% in current year as against 6.5% inprevious year reflecting better cost management & higher sales.

i) Interest & Finance Charges

The net interest charges increased by 20.3% to Rs. 2,107 million as compared to Rs.1,751 million in the previous year, mainly due to long term loans raised for growth capex,increase in working capital utilization for growth and increase in interest rate. Theoverall finance cost is 7.0% of net sales as same as previous year.

J) Fixed Assets

Gross block increased by Rs. 3,521 million during the year, mainly due to expansion& modernization plan implemented across all divisions. In current year we haveincreased installed capacities in plastic processing to 508,700 MT as compared to 421,995MT in previous year, in Food processing to 159,789 MT as compared to 127,789 in previousyear, substantial increase of 5 million plantlets in Tissue Culture and 24.2 million wattsin Solar Photo Voltaic.New Capex has been financed out of long term loans and internalaccruals during the current year.

k) Investments

The increase of Rs. 68 million in investments is mainly on account of capital/loaninfused in the WoS based in Mauritius and Netherlands/Holland.

l) Inventories

The increase in inventory by Rs. 3,087 million during the current year compared toprevious year is mainly on account of increased in Finished Good Inventory by 2411million, raw material increased by 375 million and material in transit increased by Rs.148 million.

m) Sundry Debtors

The increase in net debtors were 66.9% at Rs. 14,818 million compared to Rs. 8,876million in the previous year mainly due to higher MIS sales and substantially higher thannormal subsidy receivable from government. n) Loans and Advances Rs. in Million

Loans & Advances increased by Rs. 1,488 million to Rs. 5,224 million in currentyear from Rs. 3,736 million in previous years.

o) Current Liabilities & Provisions

Current Liabilities increased by Rs. 5,211 million to Rs.12,933 million in current yearfrom Rs. 7,722 million in previous year mainly due to increase.

p) Secured & Unsecured Loan

The Secured Term Loan have gone down as normal repayments have been made during theyear. Due to increase in working capital requirements the Secured Working Capital has goneup substaintially at Rs. 9226 million. Similarly Unsecured Loans have gone up moderatelydue to increase in defferred credit from suppliers of equipment.

q) Shareholders Funds

^ Refer Note No. (2), (3) & (13b) of Notes to Accounts Schedule 22 (Part-B)

r) Appropriation

An amount of Rs.300 million has been transferred to the General Reserve during theyear. An amount of Rs.23 million is transferred to Capital Redemption Reserve in view ofRedemption of preference shares during the year.

s) Dividend

The Board has proposed to pay dividend on 4.00% Redeemable Preference Shares at fixedrates, while it is proposed to pay dividend on Equity Shares @ Rs.1 per share (50%) to alleligible Shareholders, subject to approval of Shareholders at the ensuing AGM. Thedividend cash-outgo (including dividend tax) would be Rs.450 million as against Rs.417million in the previous year. The dividend payout (including current year dividend onPreference Shares) as % of Net Profit works out to 15% as compared to 15% in previousyear.

Note: The Management cautions that some of statements above are directional andforward looking and do not represent correctness of the underlying projections as they aredependent on various factors some of which may be outside control of management.