India Ratings & Research (Ind-Ra) has affirmed Jain Irrigation Systems (JISL) long-term issuer rating at 'BBB-'. The outlook is stable.

The affirmation reflects Ind-Ra's expectation of a significant improvement in JISL’s fund flow from operations (FFO) adjusted net leverage in FY15 (year end March), aided by higher overall FFO and a marginally lower adjusted debt.

The growth in FFO would be aided by an increase in EBIDTA and a reduction in other current assets (namely VAT, security deposits, advances etc.). This would help the company register adjusted FFO net leverage (adjusted net debt/FFO) closer to 5x in FY15. The leverage increased to 5.7x in FY14 (FY13: 5.4x) due to higher adjusted net debt levels because of MTM losses to the tune of Rs 1.9 billion. The company expects deleveraging post factoring investments commitments in its subsidiaries.

The ratings also reflect JISL's constant efforts to improve its gross receivables position, largely attributed to a change in the business model. Overall gross micro-irrigation systems (MIS) receivables declined to 211 days in 2QFY15 from 279 days in 2QFY14 and 257 days in FY14 from 329 days in FY13. This helped the company post positive operating cash flow of Rs 1.7 billion in FY14.

Shares of the company declined Rs 1.8, or 2.7%, to settle at Rs 64.80. The total volume of shares traded was 371,617 at the BSE (Tuesday).