Q4 23/24

May 24, 2024

Summary

FY24 domestic revenue rose 18% to INR 3,936 crore, offsetting export weakness; overall revenue grew 0.4% and PAT was INR 596 crore. Export recovery hinges on key-market and distribution issues, while domestic volume growth and new product launches underpin the FY25 outlook.

Ladies and gentlemen, good day and welcome to KRBL Limited Q4 and FY 2024 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 assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference 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. Thank you, and thank you to all participants for joining us. Welcome to the Q4 and FY 2024 earnings conference call for analysts and investors of KRBL Limited. Today, we have Mr. Anil Kumar Mittal, Chairman and Managing Director, Mr. Anoop Kumar Gupta, Joint Managing Director, and Mr. Ayush Gupta, Head of the Domestic Division, as key speakers on the call. To kick off the call, Mr. Mittal will provide updates on the business, industry, and our overall strategy. Following that, Ayush will delve into the perspectives of our domestic business. Finally, I will present the financial overview of the company for fourth quarter and fiscal year 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 website and our company's website. Now, I would like to invite Anilji to share his views. The floor is yours, sir. Good afternoon, everyone. I am pleased to welcome you to our quarterly investors call for KRBL Limited. Today, I want to share with you some insights into our company's performance and the outlook for the future. Firstly, let's examine the global rice landscape. According to the latest forecast by the USDA, global rice production in the marketing year 2023-2024 is expected to reach around 517.3 million metric tons, showcasing a slight increase from the preceding year. However, it's crucial to note that rice consumption has also seen a rise, reaching 521.6 million metric tons in the same period. This uptick in consumption has resulted in a deficit surpassing production in the previous marketing year, thereby impacting global rice prices. Looking ahead, the projections for the upcoming year are optimistic. Global rice production is forecasted to surge by 10.3 million tons, reaching a new record of 527.6 million metric tons. This increase is primarily attributed to significant growth in key producing countries like India and China, which collectively contribute more than half of the global rice production. Additionally, major producers such as Indonesia, Burma, Pakistan, and Bangladesh are also expected to witness larger crops. On the consumption front, USDA anticipates a further increase in global rice consumption for the year 2024-2025, reaching a record high of 526.4 million metric tons. Notably, India is projected to lead this surge, with consumption hitting a record high of 120 million tons, driven by government initiatives and public distribution programs. However, China, the largest rice-consuming country, is expected to experience a decline in consumption for the third consecutive year due to reduced utilization of rice as a substitute for coarse grains in feed. Now, let's shift our focus to rice exports. India is positive to maintain its position as the largest rice exporter in 2025, with its exports projected at 18 million tons, up 1.5 million tons from the previous year. This significant growth is fueled by a larger crop and ample stocks. However, it's essential to keep an eye on the policy stance adopted by the Government of India, as it could influence export dynamics. Moving on to India's rice outlook. The marketing year 2023-2024, India's rice production is estimated at 135 million metric tons, slightly lower than the previous year figures of 135.8 million metric tons. However, I'm sure many of you are curious about the outlook for Basmati production in the upcoming year. While specific figures are not available at this time, expectations are cautiously optimistic considering the historical significance and global demand for this premium variety of rice. Turning now our attention to Basmati export. India witnessed a remarkable year in terms of Basmati rice exports. From April 2023 to February 2024, Basmati exports surged to 4.67 million metric tons, marking a notable increase of 22% compared to the previous period. However, the story was different for non-Basmati export, which were affected by the Government of India's trade policy, resulting in a decrease of 16 million metric tons to 10 million metric tons. During the same time frame. The recent Red Sea crisis has undoubtedly raised concerns globally. The crisis has disturbed one of the world's busiest maritime trade routes, impacting the flow of goods between Europe, Asia, and Africa. As shipping routes are rerouting to avoid conflict areas or increased security measures are implemented, shipping costs have risen and transit times have increased considerably, impacting the logistics part of the business. Despite challenges, the demand for both Basmati and non-Basmati rice remains strong, and it reflected in high prices. In the period from April 2023 to February 2024, the average export realization for Basmati rice was 10% higher than the previous year, while non-Basmati rice saw a 17% increase. However, it's worth noting that export realization has been declining month on month since third quarter of 2024. The main reason that can be attributed to this decline in realization are the geopolitical concerns in the Middle East region. The recent clash between Israel and Gaza eroded regional stability and raised economic uncertainty, deterring confidence within the business community and thereby hampering business growth. Further, the payment situation from key markets such as Iran is still not streamlined, and there is still tightness of funds, leading to constricted business volumes, which has negatively impacted local prices in the Indian market. I will now update you about KRBL export performance. KRBL export revenues stood at INR 292 crore in Q4 2024 and INR 1,345 crore for the entire financial year 2023-2024. As previously communicated, our export performance has been impacted by various factors. The government restrictive policy decision regarding export of rice impacted all our non-Basmati export to the tune of about INR 300 crore. Geopolitical concern and heightened tension in the Middle East region has substantially delayed the payment cycle from markets such as Iran and Iraq, which contributes to nearly 40% of the total Basmati export from India. We are very conservative in our approach when working with these markets and do not intend to take on unnecessary payments and transaction risks which might lead to compliance issues at a later date. Hence, presenting fewer opportunities for us in the bulk rice segments, having an impact of INR 600 crore to our export revenue. Restructuring of our distribution network in some major markets has led to a temporary decline in our export numbers, which we believe will be reclaimed in the next one or two quarters. We are already seeing an increasing trend in shipments and repeat orders in these markets and hope to reach our expected volume soon, which will additionally add INR 600 to INR 700 crore to our top line. If all above factors are in line, we automatically see a jump of INR 1,400 to INR 1,600 crore in our export revenue. Nevertheless, in order to reduce our dependence on few markets, we are aggressively working on creating and developing our presence in newer markets in order to diversify from our geographic concentration. Nevertheless, we have secured bulk orders for approximately between INR 200 to INR 250 crore, which we anticipate shipping over the current and the new quarter. Despite challenges in our export segments, KRBL overall revenue reached INR 5,482 crore, mainly driven by robust performance of our domestic business. We witnessed an impressive 18% increase in domestic revenue during FY 2024. Our company reported an EBITDA of INR 899 crore with a PAT of almost INR 600 crore. Looking ahead to FY 2025, we are confident in our ability to accelerate our export business while maintaining our growth trajectory in the domestic market. Thank you. Thank you, sir. I will now hand over to Ayush for his comments. Ladies and gentlemen, it is an honor to address you today and share the outstanding performance of KRBL Limited in our domestic market for the fourth consecutive quarter of FY 2023-2024. In Q4 FY 2024, our India market sales once again surpassed the INR 1,000 crore revenues threshold, achieving INR 1,009 crores and marking an impressive 8% year-over-year growth. This consistent quarterly performance has propelled us to a significant milestone, with annual domestic revenue almost touching the INR 4,000 crore mark, reflecting an 18% year-over-year growth. Our success is a testament to meticulous strategic planning and diligent execution. Our market share metrics speak volumes. In the general trade business, we expanded our market share to an unprecedented 36.9% in Q4 FY 2024, a gain of 440 basis points over the same period last year. We concluded the year with a 35% volume market share, marking a substantial 300 basis points increase. Additionally, in modern trade, we achieved a commendable market share of 55.4% in Q4 FY 2024, and 41.7% on an annual basis. In the e-commerce business, we almost doubled our business to report a 400 basis points market share increase to 39%. While these output metrics are impressive, they are the direct results of our unwavering commitment to input measures. The India market is driven by robust operational metrics, and we believe that sustained progress on this front will ensure long-term sustainable growth. Our strategy to densify distribution has been phenomenally successful. We added over 150 new distributors and expanded our retail footprint by more than 44,000 outlets than the exit quarter of the past fiscal year. This achievement required not only upgrading and upskilling our workforce, but also enhancing our analytical capabilities to make high-yielding decisions. Our commitment to excellence extends to our supply chain capabilities. By setting up a robust C&F infrastructure, KRBL has improved its supply chain efficiency, ensuring quicker and more reliable delivery of products to various market segments. This strategic move not only bolstered our ability to meet customer demands promptly, but also helped the penetration of new markets, thus expanding our overall distribution network. The enhanced logistical support provided by the C&F expansion has been instrumental in strengthening KRBL's market presence and operational efficiency. Our second strategy to increase branded Basmati penetration has brought one million new households under our branded umbrella this fiscal year alone. The overall branded Basmati category welcomed two million new households. India Gate reached an impressive 11 million households in India, further strengthening our position as the world's number one branded Basmati rice player. Our marketing campaign commanded a dominant 60% plus share of voice in the category, and a regional approach to marketing communication strengthened our brand, showed by a 200 basis points increase in brand equity and a 1,000 basis points increase in trial ratio for the brand. Our third strategy of diversifying our product portfolio has made notable progress. We launched two new categories last year, and our entry into the regional rice category was met with positive reception, generating a remarkable revenue of INR 212 crores, an 89% increase over the past year. We exceeded our target of this segment contributing 5% to our overall India revenue in FY 2024. Furthermore, our new launch, India Gate Classic Biryani Masala, has seen tremendous success. Adding innovation to our legacy brand, India Gate, this high margin category holds great promise, and we believe that this category will scale up significantly on modern trade and e-commerce platforms. Within the first 3 months of launch, we have been able to garner 10% plus market share within the biryani masala category in modern trade, which consists of established legacy masala brands. As the India business achieves unprecedented growth, our focus extends beyond expansion to evolution. We are committed to building functional capabilities, advancing technological competencies, and upgrading our talent pool. In conclusion, KRBL Limited stands at the threshold of a new era of growth and innovation. Our achievements over the past year are a testament to our collective effort, strategic foresight, and unwavering commitment to excellence. We are poised to further strengthen our market position and drive sustainable growth. Our vision for the future is clear: to be a leader in the industry through relentless innovation, operational excellence, and a deep understanding of our consumers' evolving needs. We will continue to invest in our people, technology, and processes to ensure that we still are at the forefront of the market. Thank you for your continued support and confidence in KRBL Limited. Together, we will achieve new heights and create a lasting impact on the industry. The future is bright and we are ready to seize the opportunities that lie ahead. Thank you. I'll now hand over to Ashish for his comments on the financial statement. Thank you, Ayush. I will now take you through the performance for the quarter and the year ended March 31, 2024. All figures mentioned by me would refer to the consolidated finances of KRBL Limited. Total revenue from operations for the quarter stood at INR 1,318 crores, marking growth of 3% over the corresponding previous quarter. Total income increased by 0.3%, lower than the increase in total revenue from operations, primarily because of lower other income as the corresponding quarter last year had an income tax refund of around INR 40 crores. Domestic revenue, excluding power, increased by 8% over the corresponding quarter last year to INR 1,009 crores. Year-on-year, Basmati sales in the India market increased by 6%, driven largely by volume growth. On the export side, revenue declined by 12% over the corresponding quarter to INR 292 crores because of lower non-basmati sales, which were at INR 3 crores during the quarter, as against INR 90 crores in the corresponding quarter last year. This decline in non-basmati sales is largely on account of ongoing policy restrictions. Basmati sales on the export side actually increased by 8% during the quarter. Gross margin in the quarter was at 25.7%, as against 26.6% in the same quarter last year, and was affected largely by higher basmati unit cost. EBITDA margin for the quarter was at 14.1%, same as that in the corresponding quarter. Finance cost for the quarter was at INR 14.3 crores as against INR 7.8 crores on account of higher inventory led working capital borrowing. PAT for the quarter was at INR 114 crores or 8.6% in margin terms as against INR 118 crores or 8.9% in the corresponding quarter on account of the factors that I mentioned. I will now share an analysis of Q4 versus Q3. Revenue from operations in Q4 was at INR 1,318 crores, like I mentioned, as against INR 1,438 crores in the preceding quarter. This is on account of domestic sales, which were lower by around INR 135 crores vis-a-vis the preceding quarter, while export sales were actually higher by INR 14 crores. Domestic basmati volume sales were lower as compared to Q3, as Q3 is the festive season, while export sales actually saw an increase in realization in Q4. Q4 gross margin is higher on account of higher export realization and higher revenue from byproducts as well as power. While average basmati costs remained at Q3 levels in Q4. EBITDA margin remained at Q3 levels, primarily on account of higher proportionate employee costs. Now I will discuss 2024 performance. Total income for the period stood at around INR 5,482 crores, marking a growth of 0.4% against FY 2023. Revenue from operations was at INR 5,385 crores, marking a similar growth over FY 2023. Gross profit margin of the company was at 27%, lower on account of lower export sales and increase in paddy and rice cost during the year. EBITDA margin was at 16.4% on account of above factors, but benefited from lower export freight on sales. PAT of the company was at INR 596 crores, low on account of above factors besides higher finance cost. Now, just to share the segment by sales performance for the full year. Domestic basmati sales volume for FY 2024 grew by 10% and realization by 6%. This, coupled with almost doubling of non-basmati sales, resulted in an 18% year-on-year growth in domestic revenue to INR 3,936 crores. On the export side, in FY 2024, basmati sales volume declined by 20% because of lower branded sales. Basmati realization increased by around 5%-9% for both branded and bulk segments individually, but overall basmati realization was flat on account of higher share of bulk in overall export revenue. This, coupled with policy restrictions mentioned by Anilji on the non-basmati side, resulted in an export revenue of INR 1,345 crores. Moving on to balance sheet highlights. Total inventory as of March 31, 2024, was at INR 4,451 crores, comprising INR 1,334 crores of paddy as against INR 1,616 crores in March 2023, and INR 2,955 crores of rice as against INR 2,396 crores in March 2023. In volume terms, paddy stock were at approximately 306,000 tons and rice at 444,000 tons. These numbers were 407,000 tons and 404,000 tons respectively in March 2023. Total bank debt as of March 31, 2024, was at INR 460 crores as against INR 138 crores as on March 31, 2023. With that, I come to an end of my prepared remarks. I will now like to hand over to the moderator for opening the Q&A session. I would just like to mention that the ED matter is sub judice, so we will not be in a position to respond to queries on this matter. So over to the moderator now. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to restrict to two questions at a time and only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Himanshu Upadhyay from BugleRock PMS. Please go ahead. Yeah. Hi. Good afternoon. My first question was, have you been doing CapEx for the non-basmati side also or domestic brand? Where are we in that CapEx cycle, and how much of revenue contribution of that has been there in FY 2024 and thoughts on FY 2025, and some focus areas for us? Yeah, Himanshu. So I think in terms of our CapEx cycle with respect to our planned expansion in Karnataka and in MP, the land has been acquired. Various formalities, post acquisition of land are going on, and the construction work has commenced. So that is going as per plans. I think in terms of overall non-basmati revenue, you should mention. So on the branded side, we did about INR 212 crores in last financial year. How many varieties would be there? Or this would be one or two varieties only there, this INR 212 crores? No, this INR 212 crores comprises of about five to six different varieties of regional rice, comprising from PAN India. There are certain varieties which sell in the east region, some varieties in the south region, some are contributed from the north and west. As we spoke earlier also, our regional rice strategy is to focus on the premium varieties in regional rice, which have the potential to give us healthy gross margins. We have chosen those varieties within the India Gate brand, and we are growing them alongside. I see we have started with five or six varieties. Would we like to continue with these five, six varieties, or you think that over a period of time, we will like to focus on two or three, which we think can be maximum potential? How do you select those five, six varieties? Because some of your thoughts and which are those six varieties where you are focused on currently? See, we started with five, six varieties. We might want to add more varieties as we deep dive into a particular market and get more market intel. It might be a situation that we resort back to a couple of varieties as our focus varieties in terms of growth. Down south, Wada Kolam and Sona Masoori raw whole is giving us great results. Our focus there and growth there is much greater than the probably other varieties that we have started focusing on. It is going to be a journey. There might be new varieties added as the market demands and expects, and there would be certain varieties that we curtail down because maybe the consumer trends are not favoring or product quality or gross margins are not as per our strategic alignments. Okay. What are the top three priorities for this year on domestic side? Can you give them? I am not talking about financial numbers, revenue or profitability, but in terms of goals you have set to achieve on the other aspects or operational aspects of the business besides financial. I think broadly, the three-pronged strategies that we mentioned in the past year will continue. There would be refinements on that front, but densifying distribution reach is definitely an agenda going forward. As basmati rice currently is sold only in 7 lakh outlets, and we see other staples category selling in more than 15 lakhs, and certain of the categories upwards 30 lakh outlets. Our objective is to expand basmati penetration or branded basmati penetration to that extent. So a lot of our effort may it be from marketing, may it be from distribution, is to expand the overall industry and the category and not just ourselves. Being the leader, we believe that if we are able to do an expansion for the category, we will benefit the most. So that is definitely an area of focus. Alongside we are augmenting our product portfolio. Regional rice growth remains as a focus, but we are also evaluating and going to be venturing out into newer categories apart from rice. Ready-to-cook biryani masala, as I mentioned, has given us a bright spot, and we will focus on more of these and launches which relate to the brand India Gate and add to the innovation agenda to that. Other than ready-to-cook masalas, we are evaluating other food products or categories, and we will be doing some launches and announcements soon as we have something firmed up. Okay. On export side, we said that we want to diversify from Middle East. Okay. But can you give what would be our strategy, and are we focusing on large markets or even small markets we are fine go for export business? We look at the opportunities wherever there are opportunities, whether it is small or big markets. We don't want to lose any of the opportunity which is in front of us. But prior to going in diversification or finding new market, we want to stabilize ourselves in the market where we were already doing very well. In the last two, three years, our business has distorted because of certain reasons which we would like to work out first and then look at the newer markets. Can we- Mr. Pandya. Okay. I'd like you to join back the queue, please, as we have other participants waiting. Okay. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, please restrict your questions to two at a time. You may join back the queue for follow-up questions. We will take our next question from the line of Chetan Doshi from Tulsi Capital. Please go ahead. Good afternoon. As you showed the roadmap for Indian markets, there is nothing about the export market. You do not speak at all in the investors presentation, nor in this presentation also made by all the three gentlemen. So we would like to know, because in the last three years, the sales is getting stagnated around INR 4,500 crores or say around INR 5,000 crores. Last three years, I have been attending your con call, wherein it was told that in next three years, we want to become an INR 8,000 crore company. And when the market is lucrative, when prices are at all-time high, you are not able to penetrate the export market the way it should be as a market leader. So can you just highlight something on this? Your question is correct, that in last two, three years, we have not been able to perform in the export market. And the main reason is that first of all, that region is disturbed because they were big market for Iran and Iraq for us, and due to payment problems and many other problems, and we do not have any arrangement in Dubai to regulate that business. And we do not want to enter into any such type of business where we come into problem. So we are not concentrating too much on that till the payment problems are resolved. Yes, I do agree there is one market which used to give us a top line of about INR 600 crore to INR 700 crore. That has been disturbed in our top line pertaining to Saudi Arabia, and we are desperately trying to recapture that market. At present, all I can say is we are trying, not more than that, but God willing, in second quarter of the present fiscal year, we will be able to overcome this problem. Yeah. Let's hope so. But a lot of attention needs to be given to this subject because, see, it is affecting your bottom line in a big way. Absolutely correct. I do agree. As being an investor and we being the executor on your behalf, we are trying our utmost. It is for me and my company to ensure that my investors are happy, and we are able to give the desired results. Can you expect by September, you have things in line? Definitely. We are also planning that by September quarter, we will definitely be able to do something much, much better than what we have done in 2023/2024. Good luck. Thank you. Thank you. We will take our next question from the line of Mahesh Atal from Atal Investment. Please go ahead. Anandji, I request if I can talk in Hindi, please. Okay, no problem here. You can talk in Hindi. Sir, one question. Sir, can you please tell us what is happening related to Saudi Arabia? Because that is one thing, because Iraq, Iran already closed. I understand there are some payment issues that we can see. We can also see that the money of other people is stuck, which you had said in the last con call. But the business of Saudi Arabia, which we used to do INR 800 crore, INR 1,000 crore, has now become absolutely zero. What is happening there, how far have we reached? Because whatever the previous distributor did, he did it. It has been one year for him too, sir. So what are we doing there now, sir? In Saudi Arabia, India Gate was, I can say not only, but was the major brand which was from foreign national. Otherwise, most of the brands which are in Saudi Arabia are local, which we call private label. Now, 80% market is captured by those seven, eight locals there who have created their own brands, and they are 15-year brands like India Gate only. Now what happened was that the person who originally had my brand, with whom I worked for 25 years, what debacle happened with him, in which product did he get stuck, did he do overtrading? God knows. But we have been there for 20 years, up to 2015. From 1988 up to 2015, we were doing a phenomenal job, and we were so proud of that market because every year the increment was coming around 8%, 10%, 10%. We thought that by 2025, what we are doing INR 800 crore will become INR 1,200 crore, INR 1,500 crore. But okay, that debacle happened. After that debacle, we started searching for a new distributor. We never wanted to find a distributor that today we appoint him, and in one or two years, he faces some problem. So in searching, after looking at the financial strength, we decided on a distributor. And they say it was bad luck. I will say it was bad luck that within six months of working with him, he neither performed nor did anything. We tried a lot. We still said, "Okay, for next year, we will appoint you again. You ruined last year. You make it good in 2023, 2024." He neither did well in 2023 nor in 2024. Rather, he filed a case against us. अब वह case भी, indirectly यहाँ, हम वह case जीत गए, और हमने उसका agreement cancel कर दिया court order की वजह से। अब वह arbitration में चला गया है। Arbitration की बजाय हमारी इच्छा थी, unnecessary arbitration में INR 10-15 करोड़ खर्च हो जाएगा, वकीलों का time खर्च होगा। हमने कहा चलो उनसे settlement कर लेते हैं, कोई हो जाए। पर उनकी नीयत settlement की नहीं है तो arbitration के लिए हम तैयार हो गए हैं। जब तक वह arbitration हो रहा है, Saudi का market जो है, वह बदनामी फैलाना चालू कर देते हैं। Saudi में एक दूसरे से very well related तो हैं ही और जिनके अपने brand हैं, उनको हम distributor बना नहीं सकते। तो एक बहुत बड़ा challenge आया हुआ है Saudi Arabia में। Okay sir, मैं समझ गया आपकी बात। Sir ऐसे नहीं हो सकता कि हम direct penetrate करें, क्योंकि हमारे competition का अपना एक channel होता है, मतलब बाकी countries में। तो क्या हम अपना channel build नहीं कर सकते वहां पर? As such for last three months within our board, within our professionals, [Foreign language] with different parties that if in the next 2-3 months if nothing happens, then we will start our own channel in Saudi Arabia. See, if it could have been Dubai, it was very easy for me to open our own office because there it feels as good as you are in India. But in Saudi Arabia, even today, language, you need an accountant, you need a person, you have to interact with the salesman. The professional you keep, his English is not that good that you can communicate. Those are challenges which we will overcome. If it is new, then definitely by September we will open our own office in Saudi. Sir, just advice. मुझे लगता है आपको अपना channel build up करना चाहिए, क्योंकि वह बदनामी जो हो गई है, I think that will be always there. तो मुझे लगता है अपना channel better perform कर पाएगा। Anyway sir, all the best sir, आप उस पर थोड़ा सा काम कीजिए। I will see. आप जो बोल रहे हो वह देखते हैं sir। All the best. Thank you. Thank you. We will take our next question from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead. Sir, we used to be the largest Basmati rice company till FY 2020. Then the second-largest player overtook us in 2021 by revenue, and last year they even overtook us in EBITDA. Now sir, our network is 50% more than them. Sir, so with 50% more network, we are generating less EBITDA than them, losing market share. Sir, if we listen to the management commentary, [Foreign language] that there is any problem. It seems that it is self-congratulatory. Everything is going well. We are gaining market share in India. In low margin market and high margin market we are losing market share. Sir, we understand you have a problem in Saudi. So sir, why can't we divert the Saudi export to the rest of the world? Because sir otherwise, what is the point in having so much of inventory? As such, [Foreign language] inventory [Foreign language] [Foreign language], let me tell you my 40 year experience is that Basmati prices have always remained higher than what normally they have during the start of the season. [Foreign language] on those basis [Foreign language] [Foreign language] looking to our financial strength, we buy and we know whatever we have purchased, we try to liquidate it by end of the season or because we have to keep one year, two year aged stock. [Foreign language] those type of levels we will take the stock. That's number one. [Foreign language] [Foreign language] diversification [Foreign language] [Foreign language], [Foreign language] easy diversification [Foreign language] [Foreign language] do you think being KRBL and being the leader in Basmati generic segment, [Foreign language] [Foreign language] [Foreign language] [Foreign language], [Foreign language] [Foreign language] [Foreign language]. But our problem is payment. Our problems are so much that it is not that easy that you develop a new market of the same volume, same capability. [Foreign language], Basmati [Foreign language] two markets will always remain number one, Iran and Saudi Arabia. Now Saudi Arabia started importing around 900 to 1 million tons. Iran is 1.2, 1.3 million tons, partly they export directly, partly through Dubai. Now 2.2 million tons is practically 45% of our total export. [Foreign language] [Foreign language] markets [Foreign language] [Foreign language] avoid [Foreign language] [Foreign language]. We have to finally catch hold of this market. [Foreign language] 500 tons, 400 tons [Foreign language] market [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] 1 lakh ton [Foreign language] [Foreign language] [Foreign language], [Foreign language] [Foreign language] investor [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] finalization [Foreign language] [Foreign language] [Foreign language] we will open an office in Saudi. [Foreign language] [Foreign language] [Foreign language] [Foreign language] [Foreign language] decide [Foreign language] [Foreign language] [Foreign language] [Foreign language] let us open an office in Saudi. We cannot even afford, let us tell you, if we have to remain the leader. We have to be present in Iran and in Saudi. These are the two major markets. Sir, our exports basically have reduced from around INR 2,100 crore four years back in FY 2020 to INR 1,350 crore last year. Whereas sir, if we see then India's Basmati export revenue has increased by 35% over the past four years and 22% last year. Whereas our Basmati revenues have fallen by 35% in the past four years. The question again arises- You kindly calculate one thing. INR 600 crore-INR 700 crore is due to bulk exports to Iran and Iraq. You are talking of the numbers now. INR 700 crore is roughly to Saudi Arabia. Now INR 1,400 crore, if you add INR 1,400 crore, it will come to the level what you are talking. I have already told all the investors these are the two main markets. Sir, see, total basmati export was INR 48,400 crore from India last year. Now even if you remove INR 1,400 crore from this, INR 47,000 crore market is still left. I am not able to understand since basmati is a commodity and our aged rice is a special commodity, why cannot we divert it? It is not as though Saudi Arabia is 80% of the export market. It is something like 15%, 17%. Even if we lost market share in Saudi, why could we not diversify the export to the rest of the world? Ketan, this is Ashish Jain. See, Ketan, the numbers quoted by you are correct. I think what Anilji has already responded to your question and then to your comment. I think your point has been noted in terms of the effort that are being made in terms of restoring export to be accelerated. He has gone back on side that if the indirect distribution, we are not able to align a partner, then by September, as far as Saudi is concerned, we will set up our own operation. Do you have any other comment or question other than that? Sir, yes, sir. My question is that why are we carrying- Request to join back the queue, please. Sure. As we have other participants waiting. Sure, please. Thank you. We will take our next question from the line of Amit Agarwal, an individual investor. Please go ahead. Sir, hello, good afternoon. My first question is regarding rice bran oil. Last seven, eight years back, we were talking about to launch this product in the country. Where are we in this particular product at this stage? My second question is that your presentation shows that in last 10 years, we have doubled our turnover. I just want to know how much is because of volume and how much is because of- Mr. Agarwal, I am sorry, your voice is muffled. Can you use your handset mode, please? I am using handset mode only. Okay, it is muffled. Okay, go ahead with your question, please. My second question is regarding in your presentation, you are showing that your turnover has doubled in last 10 years. How much is this because of volume increase and how much is this because of price increase? Yeah. Amit, if I heard you right, your first question was on the timing of the rice bran oil launch. Is that correct? Yes. Ayush, can you respond to that? Yeah. On the rice bran oil project, we have made significant progress, and we are planning a launch in quarter 2 of this financial year. However, it is not going to be a rice bran oil launch specifically. It is going to be a healthy edible oil launch. And we are looking at a very high gross margin profile as a product within the oil category. On the realization or on the gross front, I think- I think, Amit, what you are asking for is that over the last 10 years, what has been the increase in value versus volume, right? Yes. I do not have 10 years old data with me right now, but I will get back to you separately. Okay. Regarding this oil market, how much turnover are you expecting from this new product launch? We have made some projections and calculations, and by year 3 of launch, we are expecting about INR 200 crore to INR 250 crore revenue. Sir, are you setting up the plant in Punjab or which of the factories having this plant? Yes, we are going to be setting up a plant in Punjab. Okay, thank you. Thank you. We will take our next question from the line of Ketan R. Cheta, a retail investor. Please go ahead. Hi. Thank you for the opportunity. I am coming back to the exports market topic. I understand that Iran, Iraq, Saudi are big markets and we cannot ignore them. I would like to understand what is your view about the markets of U.S., Europe, Australia, and all these markets, because I understand that these markets also could be bigger. I know we do not want to just focus on the top three markets that you mentioned. At the same time, how are we progressing on the other markets where they may be big in potential, but right now, the revenue from these markets is very less for us. Let me tell you, if we leave these three major markets, then the exports to the rest of the world is 50%, which includes Far East, Middle East, and your Pacific side, East Africa, West Africa, U.S.A., and Europe. This is the total segment. We are doing extremely fine in Australia. We are also doing extremely fine in the whole of Middle East, except Saudi Arabia. America, we are not able to increase what should be the increment, but we are doing exports there. The major share is of our competitors, which are having a good share in America. Otherwise, leaving America, as far as white rice is concerned, we are really doing fine in Europe, in East Africa, West Africa, in Middle East, and in Far East also. Okay. Just again, in terms of U.K., is U.K. a big market for us? U.K. is a. When you say, see, still to the Europe, including U.K., most of the Basmati exported is brown rice still. I think so after FTA, the white rice expansion would be phenomenal. As on date, the white rice, what we do to Europe is four container, five container in each, every country, and we are doing fantastically. Let me tell you one thing, that my nephew Akshay is looking after the European side of the business, and he is really doing hard. Recently, he was in Europe and he has made certain very good contacts. I think so, that is why we are desperate. We are also ourselves worried what should we do? We are trying to establish new markets and expand in our market where our requirement is less or small. Okay. Last question from my side. I understood from your comments that the last distributor that we had in Saudi, we had appointed him for maybe a year or so, and the engagement was not for a longer period. Correct me if I am wrong. Linked to that is, what I want to ask is now, whatever the new distributor that we are evaluating or looking to appoint, again, our engagement would be for a shorter period to start with? This is my question. See, normally all my distributors are for a minimum period of one year and maximum for two years. Otherwise, throughout the world, we revise the agreement every after two years. So that engagement was also for two years, but he couldn't perform. The first year, he never performed. We gave him the opportunity to perform the next year. Next year also, he didn't perform, and therefore, we had to cancel his agreement. We went ahead with other people, but they are not able also to perform. Sure. Okay. I wish you all the best. Thank you for answering my questions. Thank you. We will take the next question from the line of Nisarg Vakharia from NV Alpha Fund Management LLP. Please go ahead. Yeah, sir. Two questions. The first is that you just recently mentioned that the distributor was not able to perform. Can you help us understand what does that mean? Because over the last four, five years, as you said that the local private label brands have sort of taken shelf space versus you. So who are they sourcing Basmati rice from, and where are they sourcing rice from? And how easy is it to displace the local brands and again come back into the shelf space? You are talking of the distributor which we have discontinued? Yes, sir. I think I've repeated it six, seven times. When you say he's not able to perform, let us say we conclude that in a year minimum, you have to sell 60,000 tons a year, and he's not able to do 20,000 tons. So we call it that he's not able to perform as per the agreement, as per the terms and conditions. One year he doesn't perform, we can visualize that he was new guy or new person. We tried second year also. Okay, you reduce the quantity from 68 to 48 or 50. Next year, he couldn't do more than 10,000 tons. So these are the reasons of non-performance, or what can be the reason, the quantity then the value. Sir, that I understood, but I sort of asked you a deeper question, that when you lose shelf space, somebody else has replaced you, right? Yeah. How easy is it to displace those guys back and then get shelf space again? Because four years is a reasonably long time to lose market share, is my point. You are absolutely correct. This time around, either we are going to do ourselves, or we appoint some very strong distributor. For the shelf placement, we will have to pay more either to the retailer or we have to do more labor, more efforts. Let me tell you, till date, everybody is asking to different vendors, "Where is India Gate? Where is India Gate?" But as you rightly said, those shelf spaces have been occupied by our competitor, and we will have to face a hard time to recapture that. Okay. In context to that, sir, the private label brands that exist versus India Gate in Saudi Arabia and these markets- Yes. they are sourcing Basmati rice from which country, Pakistan or India? It is still India. India is 85%, 15% is Pakistan, but 90/10 in Saudi Arabia. Got it. Okay. Second question, sir, for domestic. You have done a very good job. If you see your volume growth from 2014 to 2019, the CAGR from 2020 to 2024 is almost double of that, which is quite nice. After COVID, I am saying specifically, and we have done almost 15% CAGR. This data I have, so I have seen this data. Can you please help us understand what has led to the dramatic increase in volumes in domestic operations post-COVID, and can this run rate continue? Because I think out of the 15% CAGR growth, 6% is price growth. What was the last one? Two points. One is that No, I understand. The last one that how much of it is volume. Okay. Thank you for that question. I think post-COVID, broadly, a couple of things happened. One is definitely the HoReCa business resumed back. The tailwind on the HoReCa business was normalization of GST across India. Earlier, there was a GST charge only on branded products, while unbranded products were exempted of GST. That created a lot of baggage on branded products to compete in the market. After 2019, when the GST regime got normalized, I think a big push was received by us, especially because we were in the quality branded space in the HoReCa business. And obviously, HoReCa overall has seen a very, I would say, stupendous growth in terms of outdoor eating, in terms of travels, and in terms of spending otherwise. So HoReCa business has grown for us considerably over the past five years. Another tailwind that we've seen in the India market is consumption patterns increasing. So, I kind of mentioned in my earlier speeches as well, that India used to be purely a metro phenomenon when it came to basmati rice consumption. Almost 60%-65% of basmati rice was consumed only in the metro cities. Over the past five to seven years, this trend has changed. Now, about 60%-65% of consumption of Basmati rice, branded Basmati rice, happens in the tier 1 and tier 2 cities. That tells you about the expansion of Basmati rice consumption within the India market. We've kind of ridden that wave of growth. We've also outperformed the category growth in a lot of ways that is showcased through our gain in market share. Just last year, we gained about 300 basis points market share to finish the year at 35% in general trade. We've done distribution expansions. We've entered new retail outlets. We've done a lot of work on the household penetration in terms of effective communication and marketing strategies. It's a mixture of a lot of things across the spectrum. Even supply chain capabilities have been enhanced over the past couple of years to be able to fulfill to these evolving consumer needs. Just in context to this, see, the addressable opportunity from unbranded to branded is infinite, right? We can't even put those numbers on paper. When you say 35% market share, what does it mean? That's part of the packaged branded segment. Packaged brand. Okay. Can we not have 10%-12% volume growth, considering that now we have Blinkit, Swiggy, at least in the urban cities? I don't think many people go and buy rice from the general provision store loose. Everybody orders on these platforms. Can the volume growth not be higher than what we are doing today? I think that's our aspiration. We are planning at least a 15%-18% volume growth on consumer packs and about 8%-10% volume growth on bulk packs year-over-year. 15%-18% in consumer pack is on the back of e-commerce and modern trade, which are growing even higher. But modern trade and e-commerce still, as a percentage of sales, is about 20%-25%. 70%, 75% is contributed by general trade. That's the reality of Indian retail ecosystem. I think it's quite a good tailwind and a good story for us unfolding going forward as well. Thank you for patiently answering my questions. One small question, if I can squeeze in. Just wanted to understand if we open our office in Saudi Arabia. See, there are two forms of distribution networks. One is India, where you have to go to every general provision store and crack that. Or you have U.S., where the distribution network is very consolidated, so you can easily achieve scale. So Saudi Arabia falls in which bracket? No, as far as Saudi is concerned, it's like America only. Got it, sir. Every business is run in a professional manner, and everywhere the 90% consumption is of Indian rice, and there is no question whether it is HoReCa or whether it is- Got it. modern trade or anywhere. It is totally professional way of doing business. Got it, sir. Sir, with that said before dawn, thank you so much for answering our questions, and all the best. Thank you. We will take our next question from the line of Anuj Sharma from M3 Investment. Please go ahead. Yeah. Thank you for this opportunity. Just one quick question related to the previous one. What is the economics of setting up our own channel in Saudi? Still we have not worked out. We are on a watch of a good distributor only at present. But if we are not able to get any good distributor in next 3 months, then we will make a visit and see how we can establish our own office, then we will try to establish our own office. Okay. But if, let us suppose we come down to plan B, I am just trying to understand what are the negatives or downside of setting up our own channel. Is it the breakeven or is it the possibility of success or failure? See, I think from an economics standpoint, it will definitely be a much better deal because we will be surpassing all the middlemen margins and working directly. However, there will definitely be a question of credit exposure in the market that we will be exposed to. But I think broadly the question that needs to be answered is the capabilities front. Having your own distribution in a foreign market requires a lot of network, requires a lot of local knowhow and capabilities. Being a manufacturer, being a brand company, I think that's not what our core capability lies, which is setting up our own distribution network. Having said that, if the need arises and if that's what we want to do, we will put all our energies towards developing that capability. So there is more at risk on the softer side of things rather than the economics. Economics definitely would favor the decision, but I think it's more about the capabilities that need to be there to be able to enter the market. Sure. That's helpful. Thank you so much. Thank you. We'll take our next question from the line of Yash Dantewadia from Dante Equity. Please go ahead. Hi. Can you just shed some light on the distribution dynamics in domestic versus foreign exports? Basically, cash and carry percentage, if there is any, how much is it, in the Indian distribution versus the export distribution? I do not know anything about exports. I do not know anything about your domestic business in terms of the payment terms. Can you just shed some light on that? Because like the previous participant said, even if you penetrate the Saudi market by yourself, you will have a hard time collecting payments and understanding the credit dynamic there. How is that different right now? See, in the domestic market, while there is a significant credit requirement in the market from the retailers, having a strong brand for India Gate, our credit exposure to our distributors is very limited. Distributors mostly pay us on advance payments and avail the cash discounts that we offer them. Hence, our credit exposure in the domestic markets are quite limited. When it comes to channel disposition, 75%-80% of the business is contributed by the general trade, while 20%-25% business is contributed by the modern trade and e-commerce platforms. We have distributors across cities and states in India, and that number is closing about to 750 distributors now. In the export markets, it is quite a diversified portfolio, depending on the market requirements. There are certain markets like America, which will be more dependent on organized retail and ethnic markets. Every market has a very nuanced distribution network depending on the product. Basmati rice is also a niche product and an ethnic product. Depending on the spread of the market, depending on the penetration of the product in that market, the distribution network varies. However, our strategy currently is that for every country, we have one authorized distributor who sources various segments of the market. In certain countries, we have also had a separate distributor for consumer packs, and we have a separate distributor for HoReCa. Right. In Saudi, with your previous distributor, did he pay cash or credit? What was the payment terms? Let me tell you, as far as Basmati is concerned, the Government of India came out with a notification that Basmati can be exported either against CAD or against a letter of credit, or under ECGC guarantee payment. These are the three modes. There is no question of giving any credit in case of Basmati as far as Government of India notification is concerned. No, but if you go and set up your own domestic office in those countries, then that guarantee won't be valid, right? Is that understanding, right? No, that will be still valid. We will come out from that problem. But the question is, in every country, whether it is Europe, U.S.A., Middle East, Far East, African continent, the same principle which is in India lies over there also. There are payment problem with the retailer, with the HoReCa. So you have to be intelligent enough to give limited credit and to whom to be given that credit, as far as local business is concerned. Last question regarding the margin. For example, in your domestic market, in the last 3 years, how much have you grown in e-commerce? Question number 1. And within that question, how does your margins differ? Now, if you go through a distributor and e-commerce, if you're selling directly, can you just explain if your margins are going to go up if the e-commerce penetration goes up? Are your margins going to go higher or no? And if yes, by how much? And how much you're expecting e-commerce to grow in India? Because I see a lot of BigBasket, JioMart, et cetera. And obviously, that penetration is going to grow a lot in the next 3 years, 5 years. So are your margins going to be supported by that growth? And how much are you expecting that portion to grow? These are the 2 questions. All right. I think in the past 3 years, I would say the e-commerce business has quadrupled for us. We were at about a INR 50 crore revenue, and we just closed at INR 200 crore revenue on e-commerce. We also had forecast this year of upwards of 30%, 35% in terms of growth rate on this front. E-commerce business, because of the penetration, that digitization is happening across India, and because of the convenience from a quick commerce perspective, I think this channel is seeing a lot of penetration and acceptance from the consumers. We are very positive on the e-commerce front. In terms of margins, definitely it's a direct serve channel from our end to the retailers. However, there are a lot of costs of doing business with such retailers because it's a consumer-facing business. There is a need of a lot of promotions, there is a need of a lot of advertising on the platforms, and there is a heavy investment on that front. If I compare it to general trade, I would say it will be just slightly better in terms of overall cost of doing business. We are maintaining healthy margins as we are doing in general trade when working with e-commerce. Also, you said U.S. market share. Can you just share that number again, please? Actually, it was distorted. My line was distorted. U.S. market share, KRBL versus your competitor. I don't have U.S. market. No, I don't think U.S. market share. U.S. market share. U.S. market share. U.S. market share, I think we have 7% of the total share of the U.S. market. 6% Has it grown in the last three years or has it gone down? No, it is the same. It is almost the same. Neither it is increasing nor it is going down. Okay. Thank you so much. Thank you. We take that as the last question for today. Thank you very much, members of the management team. Ladies and gentlemen, on behalf of KRBL Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.