Dec. 14 (Bloomberg) -- Jain Irrigation Systems Ltd., the world’s second-biggest irrigation-equipment maker, plans to build a plant in Africa as demand for drip water products increases in the continent.
“We see huge opportunities in Africa for micro irrigation systems,” Deepak Mundra, executive vice president for finance at the Indian company, said in an e-mail interview without elaborating. The micro irrigation business grew at a compounded annual growth rate of 61 percent during the last five years, he said. Micro irrigation saves water by allowing it to drip slowly to the roots of plants.
Global water scarcity may drive demand for the company’s products. By 2050 more than two billion people will face severe water scarcity and another five billion people may see moderate shortages, according to the International Water Management Institute. Global food production will have to double by 2050 to feed a growing population, according to Rabobank Group.
“Africa is a large market for them in terms of opportunity and India will still remain their important focus area,” said Sangeetha Saranathan, a Mumbai-based analyst with India Infoline Ltd., who rates the stock “buy.”
Shares of Janus Capital Group Inc.-backed Jain Irrigation, have risen 28 percent this year, more than double the 13 percent gain in the Bombay Stock Exchange’s benchmark Sensitive Index. The shares rose 0.5 percent to 224.1 rupees at 9:22 a.m. in Mumbai.
The company, which ranks behind Israel’s Netafim Ltd. in micro irrigation equipment, plans to start making wind power systems that will also generate electricity from solar cells in Maharashtra state. The Jalgaon, India-based company is studying the commercial viability of making solar-powered water pumps, Mundra said.
Jain Irrigation, which has 13 manufacturing units outside India, has orders valued at 10 billion rupees ($222 million), Mundra said. Capital expenditure of 3.5 billion rupees for the year ending March 31 is being met by a combination of the company’s own funds and “low cost long-term foreign currency borrowings,” he said.
Janus Capital funds own 6.4 percent of Jain Irrigation, according to data compiled by Bloomberg.
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