Q2 24/25

Nov 14, 2024

Summary

Q2 income grew 5%, but margins contracted as high-cost paddy and provisions weighed on earnings. Domestic branded growth and improving export prospects support management’s margin recovery and growth outlook, while inventory and export timing remain key uncertainties.

Ladies and gentlemen, good day and welcome to the KRBL Limited Q2 FY 2025 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference, please signal an operator by pressing star and then zero on your touch-tone telephones. Please note that this conference call is being recorded. I now hand the conference over to Mr. Ashish Jain, Chief Financial Officer of KRBL Limited. Thank you, and over to you, Mr. Ashish. Thank you, and thank you to all the participants for joining us. Welcome to the Quarter 2 FY 2025 earnings conference call for analysts and investors of KRBL Limited. Today we have Mr. Anilkumar Mittal, Chairman and Managing Director, Mr. Anup Kumar Gupta, Joint Managing Director, and Mr. Ayush Gupta, Head of Domestic Division, as key speakers on the call. To kick off the call, Mr. Mittal will provide updates on the industry, our overall strategy, and the exports business. Following that, Ayush will delve into the domestic business. Finally, I will present the financial overview of the company for the second quarter and half year ending September 30, 2024. Once the management has concluded their opening remarks, we will open the floor for an interactive Q&A session. Please note that some of the statements made during the call may contain forward-looking information, and actual results may differ from these statements. For more details, you can refer to KRBL's investor presentation, which is available on the Stock Exchange websites and our company's websites. Now I would like to invite Anilji to share his views. Good afternoon, everyone. Wish you all everyone a belated happy and prosperous Deepavali. Thank you for joining us today for KRBL Limited's Q2 quarterly investor call. I am pleased to provide an overview of our recent performance and share insights into our future outlook. Let's begin the review of the global rice market landscape. The USDA's latest forecast for the 2024-2025 marketing year projects global rice production at 530 million metric tons, making an increase from last year. Global rice consumption is also expected to rise to 528 million metric tons. This year, global rice production will exceed consumption, reversing the deficit observed in 2022 and 2022-2023. Turning to India's outlook, production for 2024-2025 marketing year is estimated to reach a record 142 million metric tons, up from 138 million metric tons last year. Basmati rice production is also anticipated to hit an all-time high, with 16 million tons of paddy harvested across the GI region across all varieties, reflecting an estimated 10% increase over the previous year. The above production estimates are reflected on the prices. We are witnessing the paddy prices to be lower by 15% over last year. Almost 15% of the crop has already arrived. If we take the total basket of Basmati rice, out of which the arrival alone of 1509 variety is estimated to be around 85%. The crop is healthy, and the arrivals are going to remain up to December end. KRBL is already there in the market, and we are buying at a good pace as we decided during the beginning of the season. To be more precise, the price of 1509 remained at INR 28,000-INR 29,000, whereas 1121 is between INR 40,000-INR 42,000, 1718 is between INR 37,000-INR 38,000, and 1401 is between INR 33,000-INR 34,000. Normally, there are six varieties popular in Basmati family, Vidisha is traditional, 1121, 1718, 1509, 1401, and Pusa Basmati 1. We are witnessing arrivals of pest-resistant varieties such as Pusa 1885, alternate of 1121, 1847, alternate of 1509, 1886, alternate of 1401, and 1637, alternate of Pusa 1. The crop size of these pest-resistant varieties is expected to be in good quantities, but exact numbers will be established after the season is over. Now focusing on India's rice export. India is expected to retain its position as world largest rice exporter in 2025, with export projected between 18-20 million tons, including Basmati rice. This growth is supported by a robust harvest, ample stock, and the government open policy stance for all non-Basmati rice exports. Except for 100% broken rice, which remains restricted. India's Basmati rice export in the first half of 2025 reached 2.7 million metric tons, an 18% increase from 2.3 million metric ton in the same period last year, despite a high comparative base from the record 5.2 million metric ton exported in FY 2024. In September, the government removed the minimum export price of US$9.50 per metric ton on Basmati export, which is expected to further drive export volumes. Given current paddy prices, we anticipate Basmati prices in export markets to be highly competitive, further enhancing export potential. Now moving to KRBL performance in export segment. Our export revenue reached ₹252 crore in Q2 2025 compared to ₹235 crore in Q2 2024, a growth of 7%. Whereas the total revenue of KRBL stood at ₹1,270 crore, with domestic revenue at ₹1,018 crore, witnessing a growth of 5% in Q2 FY 2025. The company reported an EBITDA of ₹150 crore and a PAT of ₹101 crore. The above export turnover is subdued due to the lower export to Europe of brown rice. Pakistan was more competitive, and they had no problem whatsoever on pesticide residues. This year we expect good business from Europe, which will start from December onwards. We have already made some bulk shipments via Dubai, for which the revenue will be reflected in Q3, Q4. In case of Iran, the imports were banned from 20th July up to 20th November. The licenses to import rice will be available in the month of December. As far as Saudi is concerned, I have gone myself to Dammam and Riyadh to evaluate the opening of our own office. It is a little bit time-consuming, but we expect that by March end, we should be able to complete all formalities. Since India Gate is still a very strong brand name in Saudi, we have appointed two wholesale distributors to ensure that the visibility of the brand is maintained and shipments have already started commencing. Looking ahead of FY 2025, we remain confident in our ability to accelerate growth in our export business while sustaining our positive momentum in the domestic market. If anyone has any further questions, I would be happy to answer them during the Q&A session. I here now pass on to Ayush for domestic update. Thank you once again. Thank you. Ladies and gentlemen, I am honored to address you today and share the outstanding achievements of KRBL Limited in the India market for the second quarter of the fiscal year 2024/2025. Our continued success in India reflects our unwavering commitment to a long-term growth strategy focused on sustainable expansion and excellence in execution. In quarter 2 FY 2025, our India market recorded revenue of INR 984 crores, a growth of approximately 5% compared to quarter 2 FY 2024. Our H1 FY 2025 revenue stands at INR 1,909 crores, reflecting a strong 7% growth over H1 FY 2024. In a generally slowing FMCG market with urban growth volumes of around 2.5% in H1, we delivered an impressive 10% volume growth in the branded Basmati segment, supported by solid performance across both consumer and bulk pack segments. This success is further evidenced by a growing market share across multiple channels. Our flagship brand, India Gate, now reaches over 1.1 crore households, reaffirming our market leadership. In general trade, we have secured a 38% market share, marking an increase of 435 basis points over last year, thanks to our strategic focus on expanding distribution and deepening brand loyalty. In modern trade, despite a slowdown due to the rise of quick commerce, we hold a strong position with a 36.2% market share, an increase of 428 basis points year-over-year. Our e-commerce investments, the fastest-growing channel, have also yielded exceptional results with our market share rising to 40%, a gain of 133 basis points compared to last year. This growth validates our digital strategy and commitment to meeting evolving consumer expectations. Looking ahead, we are confident that our strategic initiatives will continue driving sustainable growth and reinforcing our leadership in the India market. To propel our India business to new heights, I am pleased to introduce our four-pillar growth strategy designed to build on the foundations laid by our earlier three-pronged approach. The first pillar, democratizing our distribution network, addresses the rapid changes in India's channel dynamics. We see three emerging trends. First, Basmati growth will accelerate in Tier 1 and Tier 2 towns, where we aim to enhance our distribution quality. Second, in metros, where we already have an approximately 85% weighted distribution, we will focus on increasing range availability and strengthening market execution to boost share amongst existing handlers. Third, with the advent of quick commerce transforming shopping habits, convenience has become paramount. We are committed to increasing our visibility and fostering strong brand preference in this channel. The second pillar, remodeling our supply chain, is a response to the shifting channel landscape. We are moving closer to the market to improve service levels and efficiency. In general trade, this involves expanding our distribution network with C&Fs and super stockists to reach a count of 1,000-plus dealers and distributors, a target that will make supply chain capabilities essential. Additionally, transitioning to an FOR model will enhance governance of our go-to-market strategy. In organized trade, these steps will improve not only service quality, but also cost efficiency, enabling us to reinvest in brand preference and visibility. Our third growth pillar is investing in the brand. Celebrating 25 years in India Gate has become the world's number one basmati rice brand, with industry-leading brand equity and top-of-mind recall. We remain deeply committed to investing in India Gate, strengthening the brand's identity, and consistently maintaining our category-defining share of voice at 67%-plus. Finally, our fourth pillar, foraying into new products and categories, reflects our ambition to diversify and enhance our offerings for Indian consumers. We are already exploring adjacent categories, and the successful launch of India Gate Classic Biryani Masala in modern trade and e-commerce has shown the potential for expansion. Encouraged by the positive response, we will now introduce this product in general trade in top metros. As we advance, these four pillars will guide our efforts to reach more consumers, expand our presence, and remain agile and responsive to India's dynamic market. Each initiative reflects our commitment to delivering the highest quality products, deepening our consumer relationships, and ensuring that KRBL remains synonymous with trust, quality, and innovation. In closing, I would like to express my gratitude to our entire KRBL team, whose dedication and hard work make these achievements possible, and to our consumers, partners, and shareholders for their continued trust and support. Together, we are shaping a bright future for KRBL in India, and I'm excited for the journey ahead. Thank you. I will now hand it over to Mr. Ashish Jain for further remarks. Thank you, Mr. Ayush Gupta. I'll walk you through the performance highlights for the quarter and first half ended September 30, 2024. Unless otherwise stated, all figures are consolidated for KRBL Limited. For the quarter, total income for the quarter was at INR 1,306 crores, a 5% increase over the same quarter last. Including power, rose 5% year-on-year to INR 984 crores, driven by a 10% growth in branded basmati volume and stable realizations. In exports, revenue increased by 7% to INR 252 crores, with growth fueled both by volume and pricing gains. The outlook for exports has been covered in Anilkumar Mittal's earlier comments. Coming to the margins, our gross margin for the quarter was at 23.7%, impacted by a 7% year-on-year increase in basmati input costs as paddy prices were higher in the last season, while average sales realization in the period rose by 3%. The comparative base in Q2 FY 2024, which is the corresponding quarter last year, also benefited from a one-time provision reversal. EBITDA margin for the quarter stood at 12.1% compared to 18.2% corresponding quarter last year, primarily reflecting the impact on gross margin, as well as higher employee costs, provision for doubtful debt, and other expenses. Increase in employee cost is primarily driven by additions to our team that are a part of a long-term plan to strengthen our capabilities to deliver on growth initiatives. Finance cost remains stable at INR 0.83 crores, and PAT was at INR 103 crores or 7.9% of total income, compared to INR 153 crores or 12.3% in the corresponding quarter last year. This reflects the trend, basis factors outlined above. Coming to the half-year performance, total income for first half of FY 2025 was INR 2,527 crores, reflecting a 6% decline from H1 2024. Domestic revenue saw 7% growth in H1 2025, while exports declined by 36%, primarily due to a reduction in bulk sales. Bulk sales in the current H1 are at INR 104 crores, while in the corresponding period last year, they were at INR 450 crores. Notably, however, branded export in H1 increased by 43% as compared to the same period last year. Gross profit margins stood at 23%, with EBITDA and PAT margin at 12% and 7.5% respectively, reflecting the impact of higher input costs I had mentioned earlier, proportionate employee costs, slight increase in trade on sales and provision adjustments that I've already mentioned. Coming to balance sheet, as of September 30th, 2024, total inventory stood at INR 3,013 crores, comprising INR 215 crores of paddy and INR 2,647 crores of rice. This reflects a strategic inventory position to meet anticipated demand. In terms of volume, we carried inventory around 60,000 tonnes of paddy and 376,000 tonnes of rice, compared to 114,000 tonnes of paddy and 332,000 tonnes of rice last year. Our cash and bank balance, including all investments but excluding equity shares, was at INR 1,283 crores compared to INR 1,268 crores a year earlier. With this, I conclude my remarks and will now hand over to the moderator for the Q&A session. Please note that as the ED matter is sub judice, we won't be able to address queries on that issue, though we share an update on these matters in our notes to results every quarter. Over to the moderator. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may enter star followed by one on their touchtone telephones. If you wish to remove yourself from the question queue, you may enter star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the queue assembles. The first question is from the line of Amit Agarwal from Reway Investments. Please go ahead. Good morning, sir. My first question is regarding Saudi Arabia market. Sir, you mentioned that two wholesale distributors have been appointed. Can you throw some more light on that? How soon we can think of shipping our first shipment? Is it regarding retail market or are these distributors related to HORECA segment? It is related to retail and HORECA, but in general trade. When I say retail, it is not modern retail, but it is to the general trade. How soon should we expect the first shipment to Saudi Arabia? The first shipment went to It has gone. The shipments started in the close quarters Q2 also. Okay. Now I think the road for the Saudi Arabia market, is this okay to assume that? No, let us see, the actual momentum will come when we will open our own office. It will take time, because we have to take government position in India, then we have to apply to the Saudi government. I think so it will take another three, four months time till the time we are ready to open the office. But at least we have started shipping to Saudi Arabia. Because last two quarters it was zero export to Saudi Arabia, if I am not wrong, right? Yeah, you are right. The shipments to Saudi Arabia have commenced, but this is, as Anilkumar Mittal mentioned, through the wholesaler route. But they have commenced. That is a private label, that means. Is it our own brand? No, it is not private label. I will explain. We are shipping India Gate, which is our own brand, but as a channel, I think these shipments are currently being routed through wholesalers based in Saudi. That is the route. The other channels that we traditionally will use are distributors for retail and HORECA. That is work in progress, but through the wholesale channel, the shipments have started. My next question is regarding energy sector. Sir, for last two years, this energy sector turnover as well as the results are stagnant. We initially were thinking that energy sector gives us 18% return on our capital employed, so they should increase every year. Am I wrong to assume there is something wrong in my reading? Because earlier the results were INR 48 crore for September half yearly, two years back. Now it is INR 38 crore. It has reduced by INR 10 crore. Yeah. I will explain. We have about 147 MW. Bulk of this is in power. The overall unit generation is dependent upon wind patterns. What has happened in the current quarter, also in the first quarter, is that wind patterns have not been what they were last year, because of which we have seen lower generation. And what about the price increase every year? Is the price fixed, stagnant, or how does it We operate by selling power to state electricity boards through long-term contracts, where the price is fixed, so there is no provision of year-on-year increase in power tariffs. That means in the long run, the results will be static, similar to this, what is being shown in last two years, right? Yeah. I would say stable, not static. They should continue to be stable. My last question is regarding edible oil. Sir, is that launch of the edible oil in progress or has been delayed? What is the expected month of launch in the domestic market? We are almost ready with all our things with the launch, and we will be launching the product at the end of quarter three or first week of quarter four. How much turnover should we expect in first year, first two years or something like this? Is this a small launch or how big is the market we are expecting to capture? We are looking at a market share of about 3%-5% in the first year, leading up to about 15% by year three. We are expecting a turnover starting with INR 70 crores-INR 75 crores in year one and reaching up to INR 300 crores by year three. That is fantastic. Thank you for all my questions. Good luck to you. Thank you. Participants, a request, please limit your questions to two questions per participant. You may then go ahead and return to the queue. The next question is from the line of Himanshu Pathe from BugleRock PMS. Please go ahead. Yeah, hi. Good afternoon. My question was on inventories and what is our thought process now. We are seeing the price of basmati paddy is lower by 15%, as you stated. Would we like to increase our inventory materially from what we bought last year? Or we think as inventory remains higher than last year, we like to buy less or what is your thought process on that? Can you give some of your thoughts? Yeah. Looking at the market, we are thinking of increasing the quantity. We are buying, the pace is quite high and we are buying, but it depends upon the market. If the market remains the same, we think we will go little higher than last year. Okay. Second thing, Ayush, we also had started focusing on other rice like Sona Masuri and others. What is the progress there? Is it a really scalable business or you think it again is a niche business only for us in future? Yeah, it is scalable. We are increasing by 10% to 15% every quarter. You see, we are doing only specialty rices and that too, wherein the value addition is there. The rice has to be aged minimum one year and one and a half year. So we have now put up a small processing plant in Andhra Pradesh also. We are putting up a plant in Yamunanagar also. We have already put up a plant at Kandla Port also. So from all the three plants we are doing processing of these materials after keeping it for aging for one year. So we are expecting this pace to be continued. What would be the size of business besides basmati, let's say, till to- Size of the business. Last year, we did INR 200 crore revenue in the regional rice business, and we are expecting it to be close to about INR 275 crore and INR 300 crore in this financial year. Okay. We seem very optimistic on European business. Have we decided to have a distributor or we will be doing it on our own or what is the thought process on that market? As far as Europe is concerned, one thing is definitely in favor of India this time is that we have plenty of stocks which are compliant. Last year, we had a major problem, and hence Pakistan took away our market. This year, there is another challenge is that our prices are much lower over Pakistan, and we are expecting a phenomenal business from Europe. The Europeans will come into the market around 15th of December to conclude the businesses. Okay. When we decided about Saudi Arabia, that we will have our own office, how many people would it be required and the marketing and everything will be done by ourselves and even tying up with various retail channel and everything or No, we will be operating it professionally, and it will be fully controlled by us. Staff and everything, we are going to hire them after opening the office. I have gone and seen even the HR people who are number one HR people to get the good people. I think, so those will not. See, initial challenges will always be there, but I do not find it will be. We will overcome all those challenges because we have a 35 years experience of that market. Okay. Thank you, sir, from my side. Thank you. The next question is from the line of Yash Dandewadia from Dhande Equities, please go ahead. Yeah, hi. Hi. I just wanted to understand, am I audible, sir? Yes, we can hear you. Yeah. I just wanted to understand something on the inventory side and the margin side. From what I have understood is that we carried over high cost inventories from last year because the prices of basmati were much higher last financial year, right? Hence our margins are down. But as we move into the next financial year, maybe post two to three quarters that the high cost inventory is sort of sold out, can we look at the margins going back to sort of the 14%-15% levels? Whatever I said, does it make sense to you? Does it work that way? Because I do know that you do increase distributor discounts when the prices sort of become very competitive as they are now. You see, we are carrying high cost inventory, so margins will be under pressure for another two quarters. That's fine. That is maximum. Another two quarters, we will be operating under 15% only, but first quarter of next financial, we should come to the same glory of 15% plus. Yeah. I'm talking about the domestic business. I'll leave the export business aside for now. Can you tell me what will the margins look like in the And also the MRP does not change, right? Regardless of the pricing of basmati rice in the sort of wholesale and distributor level or the process level where you are buying it and processing it. Do the MRPs change regarding the pricing or the MRPs remain the same? Like versus last year and this year, the prices of basmati are much higher last year. Did the MRP change? Varun, to answer your question, see what has happened in the last financial year, we have seen consistent decline in pricing of commodity over the six months. Starting from quarter four end up to September end, we saw a consistent decline in prices of the commodity. So what we did in quarter three starting, we revised our MRPs and we started our pricing afresh in terms of rebalancing, because we were giving a lot of schemes in the market. MRPs have now been revised, and given the commodity position now, we only see an upward trend going forward. So MRPs again and pricing will keep on rising month-over-month, quarter-over-quarter as we feel comfortable. Margins, we are working on very healthy margins now, quarter three onwards, and we see ourselves resuming back to the 15% plus gross EBITDA margins by quarter one end. Yeah. So that we are talking about the domestic business, right? Can you clarify that? We rise back up as markets will allow. Understood. But the 15% number that you just shared, is just for the domestic business, because I am asking purely on the basis of domestic business right now. We do not really do a segmentation of a domestic versus an export in terms of EBITDA, but at a joint level, we are certain that a 15% plus EBITDA will be delivered in quarter 1. That 15% EBITDA level that you just said, is it keeping in mind that the export and the domestic sales mix stays at the same level? Is my question. I would say if export remains at this level that is currently going on, we will achieve 15%+ EBITDA. If exports increase, we will be in a much higher and a better position. Exactly. That was the answer I was looking for. Also, one more question on the land bank side. Are we going to see any sort of land bank monetization going forward to strengthen the balance sheet or anything on that front? Because I do know that we have a lot of land bank. Yeah, we have a lot of land bank, but we don't want to sell anything. It is all in use, so we use all the land in storing our paddy and all and we have got about 5 million sq ft of warehouses, and the open land it uses for storage of paddy. We are buying more land rather than selling. There's no question. Wow, okay. Also, on the whole Sorry to interrupt, but could you return to the question queue? Yeah, I'll do that. Thank you. Participants, please limit your questions to two questions per participant. The next question is from the line of Rishabh Bothra from Anand Rathi Shares. Please go ahead. Hello, sir. Good afternoon. Am I audible? Yeah. Good afternoon, Rishabh. Yeah. Sir, just two, three things. Can you split our revenue in terms of retail network, online and the quick commerce and institutional? Can you please repeat that question again? I wanted to understand the revenue mix with respect to our retail network, institutional clients like HORECA, quick commerce, and online. Online. Do we have our own online website? Quick commerce, online, actually, they are involved in very different categories. Right. What we can kind of give you is that our consumer pack business, almost 30% saliency comes from the modern trade and e-commerce business, and 70% comes from the general trade business, the consumer pack business. The bulk pack business is mainly from general trade. Okay, got it. Sir, I understand we are almost 100-plus-year-old entity, Sri Ram Bihari Lahiri is what I understand. I covered the stock from 2006 to 2010. As I started looking at again, what would be the basmati rice market in India and non-basmati rice market in India? Plus, I guess we are the top players in the listed space. What is our ranking in unlisted space in basmati? So two questions. One is our ranking in listed and unlisted space, and another is what is the market size of basmati rice and non-basmati rice in India? You see, basmati rice, according to our estimate, is about 2.8 million tons. Okay. This includes the sale of broken rice also. Out of 2.8 million tons, the branded segment is only- About 7 million 4.7, 4.75 million tons. Okay. Out of 0.75 million tons, 40% share is held by KRBL Limited. If you talk of the loose rice, which is about 2 million tons there is no data who is the king, and it is a very open and loose market. You do not know who is the king there. Non-basmati is an ocean. It is an 80 million ton market. You do not know. I am in a market of which I am competing because I am in a specialty rice, aged rice, which is above INR 70, INR 80, INR 200 kilogram. Which is about 5 million tons. I am in an ocean of 5 million instead of 100 million. Okay. See, because what I sense is the market, everyone, wallets and pocket sizes, they can spend and migrate from non-basmati to basmati. When I look at companies, there are a handful of companies in the listed space, and the growth rate is not that encouraging which it should have been. I mean, why can't we grow at a faster pace? I understand that aging of rice is required, but a lot of people are investing in a lot of companies, and I don't think there could be any shortage of funds for us to avail, either from the debt market or from the equity market. That is what I wanted to understand. In terms of growth path, how can we scale up the growth? I'll just confirm what you're asking. I think your question is that, with rising incomes, people would generally want to upgrade to basmati or switch to basmati. Correct. If that is the case why isn't the growth higher? Is that your question? Correct, sir. See, actually, Rishabh, what we have seen in the India market, regional rice is a food preference. It is not easy to convert a regional rice consumer to a basmati rice consumer. Down south, basmati rice means biryani. Only when they want to consume biryani, they use basmati rice. For their everyday rice requirement, they use their Sona Masuri, Ponni, and other varieties that are grown there. As such, India has more than 8,000 to 10,000 varieties of rice, and every region would love to consume the rice that is grown in that region. Basmati, yes, the crown jewel in terms of the overall rice fraternity, but it holds a very special position in terms of special dishes. North and west, basmati is used for everyday consumption, but north and west, the consumption is of broken basmati rice, not of full grain. South and east, basmati is consumed mostly in the full grain, but again, it is used for special dishes and festive occasions. Rice in India is, I would say, a staple, and regional rice holds its own position. So it is really not a question of income and affordability. It is a preference of taste. People who prefer regional rice continue to eat regional rice. However, as a brand, India Gate, we are leading from the front. We are communicating with our consumers, and we are persuading them to switch to basmati rice in certain markets. Our south campaign, regional campaign, is actually a step in that direction, where we are telling consumers to cook lemon rice, tamarind rice, eat sambar rice with basmati, which could elevate their dishes. But that is a long-term effort, something that ITC has also done in the past five, seven, 10 years with atta in south market. So we are now coming up with those efforts where we feel saturation has come with our high market shares, especially in the south market. Thank you, sir. Thank you for your detailed explanation. But what I understand, I am always trying to look at companies where they can multiply their growth. There are companies which have gone bust in the rice space. There are new entrants who are on the unlisted space. Adani Wilmar, I think all major retailers are packing products. My only sense is, in the last 10 years, our revenues have doubled, whereas Arya Agro gone bust. So who has taken the market share of Arya Agro? LT Foods have grown at a faster pace than us. So my only worry is why we are not able to grow. In commodity, it happens that every two, three years, people start building up capacities. Our capacity at Dhuri has remained at 150 tons or lower, near about that range. I wanted to get a sense, what are we doing directionally that we are not reaching that scale? Also, is there a strategy in distribution, pushing the dealers or distributors in a different manner wherein growth can come at a faster pace? The explanation was complete bang on in terms of different geographies, but if you could just highlight certain key points. Actually, we are revolving on this question time and again for last three, four quarters. First of all, let me clarify that we have the largest manufacturing capacity. The number of players in last five years have just doubled. If there were, let us say, 40 players about 20 years back, there are more than 150 players or 200 players at the moment playing in basmati rice. Bulk business has definitely increased. As far as branded business is concerned, we are concentrating on that business because the margins are better, EBITDA is better. We don't want to go onto the business which have 4%, 3%, 2%. There is still plenty of business which is being concluded under private label at 3%, 4%, or maximum you can say 5%. That's also not a very good business. We call it a dirty business. We don't want to enter that type of businesses, where mixing are there, blends are there. We are into neat and clean business. As far as basmati is concerned, definitely we have to take acceleration on export, I do agree. But as far as domestic is concerned, it is a phenomenal growth. I don't think so the growth what KRBL is doing, anybody can even dream for that. Thank you, sir. Thank you. Three years, I would say we would have almost doubled our turnover in the India market. Our market share positions have increased from 32% up to 38%, 39% in the last month, actually. So I think there is some bit of misunderstanding in how we are doing in the India market. There is a weak competition in the category. Thank you, sir. Thank you. We will study more on the coming. Thank you. Ladies and gentlemen, please limit your questions to two questions per participant. The next question is from the line of Naitik from NV Alpha Fund. Please go ahead. Hi, sir. Can you please give us the realizations in both export and domestic markets? Yeah. In the domestic market, the branded basmati realization was around INR 77,000 per tonne, while in export it was around INR 1,45,000. Okay. My second question, sir, is on the, what kind of investments would we require in the Saudi Arabia office that we are going to set up and invest at? It is too early. Let first the permission comes. We are working. It is very recently, about a month back only I went there. We are working on each and every aspect of it. Investment would not be that big a problem to us. But the most important is the permission. Right, sir. Got it. On the realization front, sir, what was the realization same quarter last year? I want to see the movement in realizations, domestic and export both. Last year, same quarter. Yeah. In domestic, it is flattish over last year. Right. On the export side, we have seen an increase of about 10% over the same quarter last year. Got it. But sir, we have seen volume growth of 10%, but the domestic total revenues increased by only 5%. We are saying the realizations are flat, so it is not adding up. Yeah, I think, see, when we report domestic revenue, it comprises branded as well as the unbranded side. I see. On the unbranded side, this time we are seeing smaller revenue, which is why the aggregate is at 5%. Right. One more question. Right, sir. My next question is, the kind of gross margin decline that we are seeing is higher than some of our listed peers. I just wanted to understand that a little better. What is leading to the higher decline in gross margin? Yeah, I will explain that. See, if you look at H1 of last year, our gross margin was at 29%. This included around 1.7% benefit of a one-off reversal that we had done. That will get you to about 27.3%. From 27.3%, we have reported 24%, which is about 3.3%. This is largely because of the facts that I had mentioned, which is we have seen a 7% increase in paddy cost, actually in H1, we have seen an 8% increase in paddy cost while the realization is only 2%. These are the two main reasons. Right. My last question, you also mentioned that the amount of provisions taken has increased. If you could give that amount, how much it has increased, and why is that increased? Yeah. The provision is increased, just out of prudence, we provided for some receivables. That's the only increase. The total provision that we created on that account in H1 is about INR 17 crores. Seventy? Sorry, I didn't get the number. Seventy? INR 17 crores as against INR 11 crores in H1 last year. Got it, sir. That is it from me, sir. Thank you. Okay. Thank you. The next question is from the line of Anuj from Emcee Investment. Please go ahead. Yeah, thank you for this. Sir, based on APC inventory on off Q2 FY 2025, both paddy and rice, it is very similar to last year. Just maybe a 10 million ton difference. Based on current prices, what is the sensitivity to how much inventory we can build given the lower prices? Any range, or how do you basically determine inventory level? Are you saying that our current inventory level is very similar to that last year? Based on what is going on in the market, how much more can we build? No. Last year we had a very heavy inventory, but we will be buying something plus than last year. Okay. All right. In exports, are we now certain that we will have to go through our own setup, or is it still contingent if we get some distributors in the next three, six months? No, we are trying both because many a times we have been deceived by distributor, but we are trying both. Because I have been to Saudi and I find a good potential, so I am not going to leave that option with KRBL. We will definitely have that option of opening an office. But simultaneously, we are watching for good distributors as well because we have time of three to four months. Okay. This applies to HORECA as well? We will go through our own setup in HORECA, or HORECA is clearly marked for distributors, sir? No, definitely HORECA. Let me tell you, the Saudi market is 45% general trade, 25% HORECA, and 25% modern retail. The segment is like this. Okay. If we have our own setup in Saudi, let's suppose, if that is for retail, HORECA, we will keep searching for distributors or we will pass it through our own channel also? See, it all depends upon the results. We cannot enter in everything in one go. We are going to wait and watch. We will see how much capability or how much resources we have to get the market slowly. It will not be overnight that we are going to capture the whole market. We will start with modern trade and a little bit of general trade and slowly as the results will be in our favor, we are going to take control of the total business. Okay, got it. Again, one more point on this. You said it is a matter of approvals. These are procedural in nature or there is more to it in terms of permission for Saudi setup? Everyone has to go through it and it is just a matter of time, or it could be that some get and some don’t get? Anuj, authorities do review it thoroughly, so it is not just a matter of procedure. They review it thoroughly and then approve or otherwise. All right. These would be the Saudi authorities? Both. More in India, less in Saudi, but both authorities review it. Okay. My last question again on export. You talked about some professionalization. Are you expecting some strengthening of management bandwidth in India as well for the export market, or it will be just that particular setup which will see professionalization? No, that professionalization we are discussing in Saudi Arabia here. Whatever setup we have, I think so it is more than sufficient to regulate that business. We are going to control from here. Rather now we travel once in about six months or five months, then we will be traveling every month to look into the whole process and the results. All right. Yeah. Thank you so much for the answers. Thank you. Participants, please limit your questions to two. The next question is from the line of Mohammed Patel from Care Portfolio Managers. Please go ahead. Yeah, hi. I have one question. How is the trend of exports for the month of October and November? That number we do not have at the moment. We are doing good. We are doing good, but numbers are not with us. Much better than the first half? Yeah, much better than the previous quarter. Yeah, definitely much better then and you will now find every quarter having better numbers. Okay. Thank you. Thank you. The next question is from the line of Rohan Patel from Turtle Capital. Please go ahead. Hello. Thanks for the opportunity. My question is regarding that, as you mentioned that we have brought two wholesalers in Saudi Arabia market for retail. Considering that this distribution will take some time as you are also setting up your office, with the current two wholesalers, how much business we can generate till the time you appoint a distributor for, say, general trade and modern trade? If you can help us understand. Let me tell you, Ramadan is coming in March and January, February, March is going to be a lead season. It is difficult to predict that how much quantity they are going to lift or they are going to order because we are into branded business. It is not a private label, it is all India Gate brand Basmati rice. I expect good orders will come. We expect good orders will come. Okay. The real numbers. I do not want to give numbers, which if we sit sometime in February for the third quarter and you say, "The numbers are not as per the expectations." Giving numbers at this stage will not be appropriate for me. Okay. I get that point. Considering that our tone was a little bit pessimistic in previous quarters when something like topic came regarding Saudi Arabia. Now the actions that you are taking, can we say the worst is behind and now things are progressing and it will carry on from over here into much more positive and better territory for us? Yeah. If we have our own office, everything being cleared by the government of India and Saudi government, I expect in my five days visit this time, we see that it should not be any problem in getting our glory back, what we used to have seven, eight years back, six years back. Okay. And other thing regarding Europe, like you had said you made some bulk exports to Europe via Dubai. As per annual report, you mentioned that Europe is somewhere around 11% of exports, which somewhere comes to INR 145 crore-INR 150 crore. Now considering that pesticide residue issue is behind us, how much can you scale up? I am not asking for a specific number, but I am asking that going year on, what are your plans? How bigger you want to take it to? If you can provide any qualitative insight for us. Let me tell you, I do not know if I have done some mistake. The business routed through Dubai is for Iran, it is not for Europe, number one. Europe will start from 15th December and we expect, see, it is not a branded market for us as far as brown bulk export to Europe is concerned. But we have very good close contact with the rice millers in various parts of Europe. We expect we should do minimum of about 50,000 business, minimum. I should not accelerate 50,000 of bulk business other than we are doing good business in our own brand white rice business, which is also growing. But the numbers are not big. That is why I never discussed with you. But brown basmati business is definitely big number and we expect the sales to conclude around 50,000 tons. Okay. You made a correction that bulk export was to Iran. Considering that Iran was more of an on and off market for us due to political issues, how is the Iran and Iraq market right now? Are the bulk export that you make, can it be more stable and can we expect that to be more of a quarterly event for us now? No, it could be like this one quarter is zero but other quarter is just double than the previous quarter. It is not a consistent business that every month we are exporting. Even then, let me tell you rather than zero exports to Iran via Dubai, it will be a good number this year. Okay. Thank you for answering my question. That was from my side and best of luck for future. Thank you. The next question is from the line of Aditya Yadav from Transient Capital. Please go ahead. Yeah. Hi. Thanks for the opportunity. Am I audible? Yes, sir. Sir, you are audible. Sir, till two years back also we used to be around INR 1,500 crore-INR 1,600 crore kind of turnover used to have in the export markets. We have discussed in detail how Saudi has been a troublesome area for us regarding the distributors and everything. We have had troubles nailing a proper distributor for past seven, eight quarters. The entire delta, if we had to get back to the original levels of let us say INR 1,500 kind of INR 1,700 kind of crores of sales, the entire delta will come from Saudi or how does that work? Let us suppose, I mean, Saudi situation normalizes in, say a year from now, can we expect further growth like how the domestic sales have been growing well? See, as far as consistency in business is concerned, Saudi is definitely a very good market and it can give us a very good revenue as we used to get about seven, eight years back, no doubt about it. This year alone, when I say this year it means, not the financial year alone. It could be starting from the second quarter up to the second quarter of 2026. We are expecting a good turnover from Saudi Arabia. Expecting definitely good turnover. Let me tell you- My question- Saudi Arabia, Iran is also a good market. Europe is also a good market. These two markets- Definitely were good markets. All the markets together reaching to a INR 1,500 crore or a INR 2,000 crore is not a INR 1,500 crore why to exceed to. INR 1,500 crore should not be difficult but we are quite positive this year. Let me tell you, looking to the prices in India, looking to the quality and compliant material available in India, we are confident that KRBL will be able to do good business in export as well. Mm-hmm. Sir, my next question is a two-part question. As we've struggled in the export market, our number one competitor also has done very well and other people have also done well. It's been a long while. I remember the remarks you made previously that you feel very confident that in Saudi also India Gate is a very strong brand and you should be able to recoup the sales once you have the supply chain part figured out. Don't you feel that it's been too long now and then definitely you'll have some struggles where just to gain back the market share it may take a bit longer or the branding exercises and everything. It might be a bit of struggle. It might not be an easy walk to just regain the lost glory because it's been a very long while. That's my question. In my opening remark, I've already mentioned why we had made to wholesale distributor just to confirm that our brand is not out of the shelf. The presence of the brand in the shelves. That is one of the reasons we made these two wholesalers. See, one thing was good that the wholesaler was also amazed when they imported the stock, it never took much time for them to liquidate the stocks. We have got now fresh orders in more than 3,000 tons from Saudi, which we have to export up by end of December. Mm-hmm. Okay, nice. Sir, if I could squeeze in one question more. Yeah, go ahead please. Sir, I mean the company overall is on a strong financial footing Basmati definitely has its own cycles where the raw material price and your paddy procurement price and everything, it varies according to the season and the supply and everything. But overall what we saw in the last five, seven years, the management of the company over the cycles has been very nice. The margin compression, even when we were carrying high price inventory, was not so much. Whereas this year it has been a little bit on the higher side. Any comments on that? Whereas previously we have managed very well through the cycles of maintaining our quantities and everything, and maintaining the margins through the cycles. Yeah. You see, we are carrying high-value stocks. We were never under pressure. This year there was a little bit of pressure because of a little bit of export pressure. The old stocks were there because we could not liquidate because of exports. The delay in liquidation took place. That is all. But this delay will go up to March 31 of this year. I mean, the financial year. Next financial year, the stocks will get liquidated and everything will be right. The thing we should buy more this year and next year we are expecting the crop. Basmati is a cycle. If one year the prices are less, the next year prices are more. Exactly. This last 20 years we are seeing. This year our stock inventory should be higher than last year. Our inventory position in next September 2025 should be the highest ever. Sir, currently- I will add one thing here. Yeah, sure, sir. If you look into our communications, everywhere we mentioned that we have a 2-year aged rice. When you have to have a 2-year aging rice, it means you have to keep rice for two seasons. It means we are still having rice, which is part 2022 and part 2023 also. If you go in the market and you say, "I want to pay INR 200 a kilo, give me 2-year-old rice," there is nobody who can offer you except KRBL. So we are having such brands which get us a very good premium. That is number one. Number two, as Anoopji rightly said, because of our estimation of wrong export quantities, little bit quantities have been left over, but we had to keep those quantities for the aging purpose. If let us say tomorrow a demand comes up 5,000-10,000 tons of 1-year-old rice, then it is difficult for us to supply or make shipment accordingly. So that risk we have always taken and that risk has always paid us also. Mm-hmm. All right, sir. Thank you, and that is all from my side. If there is anything further, I will get in touch offline. Thank you. Thank you. Thank you. We take that as the last question. Thank you very much, members of the management team. Ladies and gentlemen, on behalf of KRBL Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines.