IFC pumps up water focus in India with $45M for Jain Irrigation

Jalgaon, India-based Jain Irrigation Systems (BSE:JISLJAL) said it expects to raise $15 million in equity and $30 million in debt from previous investor International Finance Corp., a division of the World Bank Group.

Jain, the country's largest provider of micro-irrigation systems, pioneered drip irrigation for small farmers in India. The company has been involved in water distribution and water conservation in India for three decades, selling irrigation systems, pipes, food processing and agri products.

The new financing is expected to fund micro-irrigation and pipes projects. Irrigation makes up about 40 percent of the company's revenues and is expected to be a significant business moving forward. The company says that only 2.5 million hectares of agricultural land in India have drip or sprinkler irrigation out of a total 50 million hectares.

Growing urban populations in India have made existing capacities of water treatment, waste water treatment and recycling inadequate. The country has introduced more stringent pollution control, which is rendering many existing technologies obsolete.

The financing is subject to regulatory approval and shareholder approval at a March 26 meeting. The $30 million loan carries an eight-year term. The equity investment would give IFC 2 million shares of Jain on a preferential basis of Rs 350 to Rs 375 ($6.79 to $7.27) each, but the exact price is to be determined.

The $15 million equity investment would give IFC a 2.69 percent stake in Jain.

Jain's customers include water utility boards, municipal corporations, contractors as well as farmers across India. Its customers have increased their water efficiency by as much as 95 percent, according to IFC.

"IFC and Jain Irrigation share common development goals in water conservation and rural development. IFC, as a shareholder, can play a pro-active role in water and agri-infrastructure sectors business for the company all over the world," the companies said in a news release. 

The funding comes on top of another $30 million loan from IFC to Jain within the past two years (see IFC sees big market for H2O). And last month, IFC invested $15 million in a project finance round for Irvine, Calif.-based WaterHealth International to install water purification and disinfection systems for 600 communities across India (see IFC invests $15M in WaterHealth for filtration in rural India).

The global water market is estimated at $450 billion for purification, desalination and conservation. Spending on infrastructure in emerging markets is expected to reach approximately $180 billion over the next 20 to 25 years, according to the IFC, which has established a $100 million fund, called IFC Infraventures, to provide risk capital for early stage development of infrastructure projects in the poorest countries.

In February 2008, Jain signed an MOU to work with Mekorot, the national water company of Israel, on water projects in India, including desalination, water resource management, water supply, municipal water management and/or wastewater treatment and reclamation projects (see Israel's Mekorot to develop water infrastructure in India).

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