Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

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High Yield Experts

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

Debt Capital Markets

Jain Irrigation Systems / Debt Capital Markets

We view Jain as “High Risk” on the LARA scale, mainly due to high leverage and the challenging industry. We like the company’s diversified and integrated operations, and the dominant positions in its various segments. While Jain has pricing power (its MIS products are more expensive than peers), the business depends greatly on government subsidies, which are declining. In addition, the subsidies have also resulted in poor working capital management in the past. This has been due to the long time (12-18 months) taken by authorities to process the paperwork before paying the company. We note Jain’s questionable capital allocation discipline (with a string of acquisitions) and management’s excessive optimism, which at times is not in line with eventual business performance. OCF has been weak owing to heavy interest costs, leaving limited FCF for deleveraging. We believe that the key risk comes from the regulatory environment, in particular subsidies for farmers. Our credit bias is “Stable” as Jain’s dominant market positions, coupled with relationships with established major retail customers, will likely result in a stable performance. That said, we do not expect leverage to improve as quickly as the rating agencies foresee. We view the group as “Weak” on the LAGA scale, given: [1] that the Jains dominate the Board, with only one ED who is not a member of the family; [2] the poor disclosure of information; [3] overly optimistic management; [4] the previous default; and [5] various related-party transactions. We see fair value at 8-8.5%

We view Jain as “High Risk” on the LARA scale, mainly due to high leverage and the challenging industry. We like the company’s diversified and integrated operations, and the dominant positions in its various segments. While Jain has pricing power (its MIS products are more expensive than peers), the business depends greatly on government subsidies, which are declining. In addition, the subsidies have also resulted in poor working capital management in the past. This has been due to the long time (12-18 months) taken by authorities to process the paperwork before paying the company. We note Jain’s questionable capital allocation discipline (with a string of acquisitions) and management’s excessive optimism, which at times is not in line with eventual business performance. OCF has been weak owing to heavy interest costs, leaving limited FCF for deleveraging. We believe that the key risk comes from the regulatory environment, in particular subsidies for farmers.  Our credit bias is “Stable” as Jain’s dominant market positions, coupled with relationships with established major retail customers, will likely result in a stable performance. That said, we do not expect leverage to improve as quickly as the rating agencies foresee.  We view the group as “Weak” on the LAGA scale, given: [1] that the Jains dominate the Board, with only one ED who is not a member of the family; [2] the poor disclosure of information; [3] overly optimistic management; [4] the previous default; and [5] various related-party transactions.  We see fair value at 8-8.5% 

Jain Irrigation - New Issue Assessment - Lucror Analytics