Jain Irrigation plunges post rating downgrade

India Ratings and Research has downgraded Jain Irrigation’s long-term issuer rating to 'IND BBB' from 'IND A-' and has placed it on a ‘Rating Watch Negative’(RWN). Reacting to this development, the stock of the company plunged by 28.10 per cent.

This downgrade in the rating is due to the company’s liquidity situation deteriorated in FY19 due to a delay in realisation of receivables from its micro-irrigation systems (MIS) segment, said the India Rating in a report posted on its website. It shows the risk in delay for the company’s deleveraging plans and a potential increase in its working capital which can further result in worsening of its liquidity position.

Jain Irrigation Systems Limited (JISL), is a Jalgaon-based multinational organisation which manufactures, supports and sells diversified products which include drip and sprinkler irrigation systems and components. The company has around Rs. 3.9 billion of long-term debt due in FY20. According to the company's management, major state elections and general elections have been the cause for delay in the receipt of the receivable from the MIS segment and the company’s position has started to ease as it expects to repay the debt through internal accruals. The management also intends to restructure JISL so as to reduce debt and increase the company’s liquidity.

Reacting to this development on Wednesday, the company’s stock fell by 28.10 per cent and was Rs. 19.70. The 52-week high was at Rs. 98.30 and 52-week low was at Rs. 18.30.