Q4 22/23

May 31, 2023

Summary

FY 2023 delivered record total income of ₹5,456 crore and EBITDA of ₹1,031 crore, with strong domestic growth. Q4 margins weakened on higher input costs, product mix and a diverted non-Basmati shipment; plant expansion and broader distribution underpin growth plans.

Ladies and gentlemen, good day, and welcome to KRBL Limited Q4 and FY 2023 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 and 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. Hand over to you, Mr. Jain. Thank you, Michelle. Thank you everyone on the call for joining us. Welcome to the Q4 and FY 2023 earnings conference call for analysts and investors of KRBL Limited. Today we have Mr. Anoop Kumar Gupta, Managing Director, and Ayush Gupta, Head of Domestic Division. Mr. Anil Mittal, who usually joins us on the call, is not available today, so his comments will be read by Mr. Anoop Kumar Gupta. To kick off the call, Mr. Gupta will share the business industry and overall strategy. Following that, Ayush will delve into the perspectives of our domestic business. Finally, I will present a financial overview of the company for the fourth quarter and fiscal year 2023. 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 StockEdge website and our company's website. Now I would like to invite Anoop-ji to share his views, and the floor is yours. Dear investors, good afternoon. In my prepared remarks, I will be giving you an overview of the global rice scenario, and then focus on the Indian rice industry, and then further focus on the Basmati rice industry in India. Thereafter, I will discuss about the KRBL specific developments and updates. The world rice production in the marketing year 2022-2023 is now forecasted at 512.6 million tonnes, which is 2.4% below the 2021 all-time peak of 525.1 million tonnes. This shortfall of 12.5 million tonnes in global production is mainly due to lower production in China, Pakistan, Sri Lanka, and Nigeria. The global rice trade, which had touched a high of 56 million tonnes in the year 2021-2022, has come down to 53.6 million tonnes this year due to restrictive measures of countries such as India, who have banned the export of 100% non-Basmati broken rice and implemented an export duty of 50% on non-Basmati white rice. Such measures have restricted exports to African countries and China, who are the major importers of broken rice from India. Shifting focus on the Indian rice industry, India is expected to record rice production of 130.8 million metric tonne in marketing year 2022-2023, which includes 2022 kharif crop and 2023 rabi crop. The Basmati production for marketing year 2022-2023 is around 9.5 million tonne, around 12% higher than last year. Despite the overall increase in rice production in India in both Basmati and non-Basmati segment, we have seen a general price increase this year during the crop cycle, which indicates growing demand for both Basmati rice and non-Basmati rice from India. India's Basmati export has grown 16% in volume term and 46% in value term over FY 2022. Volume growth mainly come from Saudi Arabia, UAE, Yemen, Oman, Qatar, U.S., U.K., and Jordan. Whereas due to India's total rice exports grew by 6% to record volumes of 22.34 million tonne and 24% in value term to INR 89,689 crores, accounting for nearly 42% of the global rice trade. The main reasons for the increase in Basmati rice prices were expectation of lower crop on account of unseasonal rains, limited carryover stocks. Stocks were liquidated because of high prices. Historically high export and domestic demand. Historically high prices in Pakistan, perhaps because of sin tax. Reduction in freight rates. Rupee depreciation. High wheat prices. The international ocean freight have come down to one-fifth of the level that was seen two years back. The main reason has been simple availability of empty containers and vessels due to normalization in movement of goods across the world. Further, the delays and holdups at the various ports around the world due to lockdown measures have considerably eased up, leading to faster turnaround time for the vessel, and hence an increase in supply of equipment. Many shipping lines have added huge number of containers to their inventory and added new vessels to their fleet. Talking about the future outlook of rice industry for the year 2024, as per the latest USDA estimate, global rice production is expected to be around 520 million metric ton in crop marketing year 2023/2024. Global rice consumption is expected to reach 523 million metric tons in 2023/2024 from 521 million metric tons in 2022/2023. As per the latest USDA estimates, India's rice production on marketing year 2023/2024 may touch 133 million metric tons, while India's Basmati rice production may touch 10 million metric tons. The Basmati production is expected to be higher in terms of acreage, as Basmati prices have been very bright consecutively for past two years, and farmers have been very happy with the prices they have been getting for their produce. But the main factor which has the highest impact on the production of rice is the weather. While IMD has forecasted a normal monsoon, Skymet estimates a below average monsoon owing to El Niño. Although all these estimates are very preliminary and they are subject to change as we come closer to the sowing period. India faced El Niño in 2014 and 2018, and in both the years, the staple grain production was unaffected. Hence, we feel that the impact of El Niño will be weak. Now the KRBL financial performance. KRBL recorded highest ever annual consolidated performance. Total revenue is of INR 5,456 crore. EBITDA is INR 1,031 crore. PAT is INR 701 crore. Our exports revenue of INR 331 crore in Q4 2023 against INR 280 crore in Q4 2022. FY 2023 export of INR 1,931 crore as against INR 1,461 crore in FY 2022. Key export destinations include INR 532 crore from UAE, which includes INR 375 crore unbranded, INR 414 crore from Saudi Arabia, INR 242 crore from China, INR 117 crore from Australia and other countries also. There is update on expansion. The Gujarat plant is expected to go live by June 2023, that is the next 15, 20 days. In Karnataka, the land acquisition has been completed and the civil work has already been started. In Madhya Pradesh, the land is identified, the token money has been given and due diligence is going on in process. With this, I give to Ayush Gupta domestic remarks. Thank you and good afternoon. I will now share an update on the performance of the India businesses. India business clocked INR 932 crore in revenue in Q4 financial year 2023, which is a 38% increase in value year-over-year. With this, the India full year revenue grew at 26% in value to close at INR 3,335 crore. The year marked a new high for KRBL with our portfolio crossing a household penetration of 1 crore households landmark with 11.5% increase against the packaged Basmati penetration growth rate of only 2.5%. This year also has been recognized as the world's number one Basmati rice brand, which further reinforces our global leadership position in the category. Further, maintaining its market leadership position in India across channels, KRBL clocks a volume share of 32.5% in traditional trade in every quarter, while modern trade registered a higher value market share of 58% in the quarter. During the quarter, KRBL has expanded its numeric distribution by 35 basis points on sequential basis to 45.7%, with availability in 2.3 lakh outlets. We have also been driving our Unity brand as a value for money offering, which today stands at INR 750 crore plus in the KRBL portfolio with a 60% growth over last year. The GST rationalization measure implemented from mid of the financial year has given the HoReCa business strong tailwinds with a healthy 28% volume growth in the full year. I will now touch upon some of the key focus areas for our growth journey ahead. In our earlier investor calls, I had outlined our source of growth as loose Basmati rice, which contributes close to 65% of the total in-home consumption of Basmati in India. This presents a huge headroom for growth of KRBL in the domestic business. Being a category captain, we are unlocking this growth opportunity through strategic interventions. Consumer communication is one of the critical levers to drive this habit change. In this financial year, we have pivoted our communication and media strategy around this. Started in quarter 3, our new advertising campaign, Basmati Rice Se No Compromise, featuring the popular Bollywood actor, Pankaj Tripathi, has gone live with huge impact and partnerships on lead programs like MasterChef, Bigg Boss, and Indian Idol. Secondly, continued distribution expansion up to 50,000 plus population towns is going to be a critical driver for sustainable business growth. We are working in a focused manner to expand retail footprint through manpower investments, implementing FMCG best practices to enhance secondary coverage and to have better controls on the market. The next important lever of growth is innovation and premiumization. One of the most important interventions from our stable this year has been the launch of a diabetic-friendly low GI rice. India being the diabetic capital of the world with 77 million diabetics, we believe that this product offering, we are solving for a very important unmet need of the Indian rice consumer. This has huge potential to scale up in the coming few years. In line with our premiumization agenda, we are also in a very focused manner looking to scale up our flagship variant, India Gate Classic, and building higher penetration at the retail and household front, especially on special occasions. Lastly, a key growth lever is the intervention of addressing our total addressable market from INR 15,000 crores to INR 35,000 crores with our foray into regional rices. Anchored under our master brand, India Gate, Sona Masoori, Gobindobhog, and Kolam rice have been launched in the market and are garnering good response. We have already crossed the milestone mark of INR 100 crores in the financial year 2023 in the regional rice category. One other important tailwind expected to come for our business is the introduction of the new Basmati standards by FSSAI, with effect first August 2023. Over the years, due to mass commercialization, there is a significant amount of adulterated Basmati available in the trade, making the prime objective of this regulation to safeguard the integrity of the grain and maintain authenticity of flavor and taste. This regulation will have a number of positive impacts within the Basmati business scenario. First, increased literacy within the trade and subsequently consumer on Basmati quality. Second, eradication of player indulging in unfair business with Basmati adulteration practices, leading to consolidation of market share amongst top branded players. Third, an accelerated shift from loose and unregulated Basmati to packaged and regulated Basmati. We see this as a watershed moment for the industry and expect this to be a significant growth driver in the coming years. With this, I come to the end of my remarks, and I will now hand it over to Ashish, who will take us through the financial performance. Thanks, Ayush. I will now take you through performance for the quarter and year end in March 31, 2023. All figures mentioned by me would be for the consolidated financials of KRBL. Total income for the quarter stood at INR 1,323 crores, marking a growth of 33% over the corresponding quarter last year. Revenue from operations grew by 30% while other income in the quarter increased by more than five times on account of interest on income tax refund. Domestic revenue, as Ayush mentioned, increased by 38% over the corresponding quarter last year to INR 932 crores. Year-on-year Basmati sales increased by 43%, driven by 18% growth in volume and 22% growth in Basmati realization. On the export side, revenue increased by 18% over the corresponding quarter to INR 331 crores. Branded Basmati sales increased by 11%, though overall Basmati sales were flattish in value terms, owing to no bulk Basmati sales during the quarter. Total Basmati sales volume declined by 14% on a year-on-year basis. That was offset by 19% increase in realization. The decline, like I mentioned, in volume was also because there were no bulk Basmati sales during the quarter. Total value of goods dispatched during the year but their revenue is yet to be recognized pending receipt of payment at the end of the quarter was at INR 441 crores. This is the number as of March 31, 2023, as against INR 216 crores as of March 2022. A significant portion of this is expected to be recognized as revenue in quarter 1 2024. Gross margin in the quarter was at 26.5% and was affected by a couple of factors. One of them is higher Basmati unit costs, and higher share of bulk non-Basmati sale in exports. So bulk non-Basmati sale was at 11% of rice sales in quarter 4 as against 7% of rice sales in the same quarter last year. Finally, in non-Basmati sales, there was a contract which was canceled by the customer and goods had to be diverted to another country and therefore resulted in lower realization. So these three factors, which is higher unit Basmati cost as compared to same quarter last year, higher share of bulk non-Basmati sale in exports, and lower realization on a bulk non-Basmati sale resulted in the gross margin. EBITDA margin for the quarter was at 14% as against 17% in the corresponding quarter. The margin is lower primarily on account of trend in gross margin and a INR 10 crore additional expense on the non-Basmati deal which I just mentioned. Finance cost for the quarter was at INR 7.8 crores as against INR 3.9 crores on account of higher inventory-led working capital volume and higher interest rates. PBT for the quarter was at INR 118 crores or 6.9% PBT margin as against INR 109 crores or 11% in the corresponding quarter. The number is lower on account of the factors that I mentioned, and also because the effective tax rate in the quarter is higher as there was an MTM-related loss set off, which is not eligible in the taxable income. In short, our taxable income was higher than the reported PBT, which resulted in higher tax. I will now share an analysis of quarter 4 versus the preceding quarter. Quarter four 2023 versus quarter three 2023. Revenue from operations in quarter four was at INR 1,280 crores as against INR 1,536 crores. The lower revenue is on account of domestic sales, which were lower vis-a-vis the preceding quarter by INR 64 crores and export sales which were lower by INR 194 crores. Domestic Basmati volume in quarter four was lower as compared to Q3, as Q3 is festive season, while export volume in Q4 was also lower because no bulk Basmati export was done in quarter four. Quarter four gross margin is lower than that in quarter three on account of higher share of low-margin Basmati sales as compared to the preceding quarter, higher share of non-Basmati sales, which was at 11% of total rice sales in quarter four as against 3% in quarter three. 2.3% higher average Basmati COGS as compared to quarter three. EBITDA margin was also affected by these factors besides INR 10 crore additional cost on the non-Basmati deal that I mentioned. Overall, adjusting for these factors, the trend in branded Basmati sales remains strong, as Anup and Ayush have mentioned. Now I will discuss FY 2023 performance. Total income for the periods to that record INR 5,456 crores, marking a growth of 28% against FY 2022. Revenue from operations was at INR 5,363 crores, a growth of 27%. Gross profit of the company increased by 40% and EBITDA by 46% and PBT by 53% respectively. Domestic Basmati sales volume, as Ayush had mentioned, grew by 6%, while realization improved by 26%. On the export side, in FY 2023, Basmati sales volume remained marginally lower by 2% because of lower bulk exports, although the realization improved by 38%. In FY 2023, overall Basmati sales volume for the company improved by 4%, while realization improved by 29%. Moving on to the balance sheet highlights. Total inventory as of March 31st, 2023 was at INR 4,186 crores, comprising INR 1,615 crores of paddy as against INR 869 crores of paddy in March 2022, and INR 2,396 crores of rice as against INR 1,800 crores of rice inventory in March 2022. In volume terms, paddy stocks were approximately 407,000 tons and rice at approximately 404,000 tons. These numbers were 256,000 tons and 382,000 tons respectively in March 2022. Inventory is higher primarily to meet the higher expected demand. Total bank debt as of March 31st, 2023 was at INR 138 crores as against INR 6 crores as on March 31st, 2022 due to higher inventory. Just as an update on the outcome of the board meeting with respect to distribution of surplus to shareholders, the board discussed various options to repatriate surplus funds, and I have sought professional opinion in this respect, post which final decision will be taken. This is expected to be completed in the next four to six weeks. With that, I come to an end of my prepared remarks. I will now hand over to the moderator for opening the Q&A session. I would just like to mention that the ED matter is pending, so we will not be in a position to respond to queries on that matter. Over to the moderator now. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the questions are assembled. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We have the first question from the line of Himanshu Upadhyay from O3 PMS. Please go- Hello? Hello? Yes, we can hear you. Yeah. My first question was, what we hear from various consumer companies is that consumer demand is low and upgrading is not happening, especially at the middle class and lower middle class level. We have a very large inventory at this point of time. In such a scenario, can you give some of your thoughts that the weakness what we have is majorly in domestic market or exports market? Are we able to get our gross margins in absolute value terms per unit increasing for basmati rice even in Q4 in the domestic market? Because non-basmati is also a bigger proportion of our revenue and exports, it is difficult to really understand how successful we are on the branded side to transfer the pricing. Himanshu, thank you for the question. See, on the consumer front, the pressures and inflationary pressures that you are talking about. For basmati rice, I think these behaviors are quite muted because majority of basmati rice consumptions are happening in metros and Tier 1 towns of the country. Rural and Tier 2 towns are a very small portion of the overall basmati rice contribution. So on the overall trade, the impact of this is quite minimal for the branded player firstly, and then also for basmati rice as a category. Secondly, on the stock front, stock positions that we carry, that is for both export and domestic. I would say quite equally. So it is not that we have over-leveraged on stock position for any particular. I would like to add here that we are holding stock at a very comfortable position. I meant the valuation. When you talk of the margins, even the stock valuation, what we are holding is very comfortable. So margins are not under pressure. Okay. Secondly, again, the question was on HoReCa distributor in Saudi Arabia. Last call we stated that you should be able to confirm the distribution of the agreement there. Are we done with it? How did that market perform for us with the new distributor? Are we back to what we were doing in the earlier years or there is still some gap to fill in Saudi Arabia market? HoReCa is still not done, but the present distributor is not back to the same. We are expecting that it will be done in next one or 2 quarters. Just to add to what Anup said, I think if you look at our value sales to Saudi, they are roughly 2X the number that we had in FY 2022. I think the distributor is performing on expected lines, but we expect the next year to be better. Okay. Thanks for that. One more thing, this is on slide 6. That we had said that the margins were under pressure because of some contract which was canceled. Was it such a big contract? It was on nearly more than INR 1,000 crores of revenue for nearly INR 300 crores of revenue. Or the margin got impacted, you are saying? No. I will explain. That was one of the factors. I think you are referring to the reason why the margin is lower in quarter 4 as compared to the same quarter last year. Yeah. Yeah. I think, like I had mentioned in my speech, a couple of things happened. If you look at year-on-year basis, when we look at our average COGS for Basmati, on a year-on-year basis for the quarter, the Basmati costs increased by 24% while the realization increased for Basmati by 17%. To that extent, the cost increase has been higher. I think this is also partly because the product mix of goods sold in Q4 comprised a higher share of lower margin SKUs. That is what is affecting the margin. Second, on the non-Basmati deal that we had explained. You are right, it was not a large contract. Understood. Yeah, it was roughly the revenue size. The original revenue size was at INR 100 crore. However, the deal got canceled and the goods had to be diverted to another country, which resulted in a lower realization. Second, there were some additional expenses related to moving the goods from one country to the other and then storing them till the sale happened. While not a large contract, but this is an additional cost that we incurred in the quarter, which is why this is what is reflected in the margin. Okay. I will join you. One small thing. This Quinoa we are still doing, or we have stopped that completely? We do not see any mention now. Quinoa is still available in the market. It is available and it is doing good. It is growing year over year as per our- Okay. Thank you. I'll join back in the queue. Thank you. The next question is from the line of Siddhant from Edelweiss. Please go ahead. Yes, ma'am. I think my whole question regarding the dividend was answered. The reason why you have not declared it right now in 4-6 weeks' equation? Yes, as just explained. This time the board looked at various options that are available to repatriate surplus funds. We discussed various options, but the board wanted a professional opinion to be taken. We are in the process of taking that. We'll come back and present it to the board, and we are hoping that this entire exercise will be concluded in the next 4-6 weeks. Okay. In short, we are just evaluating various options, which is why it was not declared this quarter. Okay. Deciding between a buyback and dividend, essentially. All options are on the table. Okay. My second question is relatively a follow-up. Debt question used to be around 1 into 1. Over the last five years, we lowered it to 1 into a lower ratio. But now because we have essentially no debt, no working capital, barely any working capital loans. Our ROEs are getting suppressed. Is there any sort of financial gearing or something that the company is looking at or are we staying away from that? No. You are right. As we speak today, there is very minimal reliance on debt. In fact, where we are today, we have no debt on the company's balance sheet. I think the question really is on what is the company's plan to utilize these funds. I think a couple of things that we need to keep in mind. One is we are in the process of setting up three new plants, which will then require a certain inventory for which funding will be required. Second is that we constantly look at acquisitions. While there is nothing in the finalization stage, there is some amount of funding that will be needed as well. Whatever is remaining after that, I think that is what the board is looking at in terms of what is the best way to return it to the shareholders. Okay, perfect. Thank you. Thank you. The next question is from the line of Amit Aggarwal from Leeway Investments. Please go ahead. Good afternoon. My question is on Broken Rice in this financial year. Sorry. How is the government ban affecting our business of Broken Rice? Sorry, Amit, we cannot hear you clearly. Mr. Agrawal, I would request you to kindly use your handset if possible, please. Okay. Broken Rice in China. What is the amount that has been exported in this financial year? The government ban, how is it affecting business of Broken Rice? Amit, we don't generally share country-specific revenue numbers. Total INR 242 crores was the revenue from China. Yeah, but I think Anup had mentioned that total revenue from China was about INR 240 crores in the year. Broken Rice was exported to China only or some other country also? Primarily to China. My second question is regarding the realization of the Basmati rice in the domestic market. First, I have noticed more realization has been happening in the past few years. If you compare the retail tax pricing of a Basmati rice, the change has been 9%-10%. So how this realization is 70%? I think the question is that the change in Classic price year-over-year is 9%. Correct. But we have seen that the realization has gone by 70%. So how is that happening? Himanshu, see, Basmati Classic is a very small portion of our overall sales volume and portfolio mix. So while Basmati Classic pricing freeze would have only been 9%-10%, there are other products in the portfolio which have increased in high double digits, maybe 20%, 25%. So the net average realization is 17% on the overall domestic business. Certain product category would have moved accordingly, to consumer behavior and other factors. Is there any more scope of increasing the prices further or I think this is stable at this point? Being a consumer-oriented retail product, we try to maintain prices as stable as possible. But looking at the commodity markets, we will keep evaluating our realizations accordingly. The last question regarding RTP funds, sir. We have received INR 160 crores towards RTP. Have you got the fund back or is it still pending with the government? No, for those particular years and that case, we've received all the funds back from the government. So there is no refund that will need to be recovered? On that particular matter, yes. There may be other refunds pending to other financial years, but on that matter, we received all the refunds. Okay. Thank you. Thank you. The next question is from the line of Soman Chaudhary from Jeetay Securities Private Limited. Please go ahead. Good afternoon, sir, and thank you for the opportunity. Sir, this quarter, we saw a significant decline in export revenue from the last couple of quarters that we have seen. One would have thought that one should have got the benefit of Ramadan also. Is there any particular reason why this has happened and what is the outlook on this going forward? Yeah. As I explained in my speech, as of March 31, we had about INR 430 crores of exports that were dispatched, but the revenue is pending recognition. If you look at the same period last quarter, this number was around INR 220 crores. As you are aware, we recognize revenue only once the payments are received. This additional revenue, most of this INR 430 crores will be recognized in quarter 1. If you look at export sales across quarter 4 and quarter 1, you would find that the trend is being maintained. I think it's a timing difference that has happened in case of exports. Are we looking at a different increase over last year? Say, if we look at the year as a whole, are we looking at a significant improvement in volumes and revenue in terms of exports then this year? See, if you look at quarter 1, you would recall that our exports in quarter 3 were at roughly above INR 500 crores. We are hoping that in quarter 1, which is the current quarter, we will come back to that level. Just one small thing on the realizations. If we compare like to like, both the realizations are seen slightly higher in Q4 vis-a-vis Q3 in exports. Just for Basmati if we can say. No, very similar. There was no significant increase vis-a-vis Q3. Okay. Domestic also? Yes. Okay. Okay, fine. That is it from my side. Thank you. Thank you. The next question is from the line of Kush Shankar from KR PMS. Please go ahead. Hi. My question was on exports. Exports, as we have seen, exports have been a pain point since the last few years and have been quite uncertain. Even in this quarter, you mentioned that some of the pack would be transferred to Q1, but then if INR 200 crores which should have come in Q4 gets transferred to Q1, that means Q1 is already lower. What is our current run rate? Can you give us an idea of clear, sustainable growth or run rate for export say for the next one or two years? Yeah. I will just give a short-term view and then a slightly longer-term view. See, as you know, part of our exports also include bulk exports. That tends to be lumpy. You may have quarters in which there is significant bulk export, then you may have a quarter like Q4 where it doesn't happen. First, on a quarter-on-quarter basis, that's primarily the reason why you will see export revenue moving. From a longer-term perspective, when we look at both elements of export, one is both branded as well as bulk, I think we see the outlook as bright. Because as Anup here also mentioned, I think we continue to see strong Basmati demand from countries both for the packaged as well as non-Basmati space. Right. Okay. What would be the mix of bulk in exports? Can you share that? Yeah. On an annual basis, we do about INR 800-900 crores of bulk exports. Out of the current year revenue of, let's say, roughly INR 5,200 crores, about INR 800-900 crores is bulk. Okay. Perfect. Earlier I think Saudi, before the business went down, our run rate was INR 1,000 crores plus, I think. Anil-ji had mentioned that in a year or two, we hope to reach that figure. Are you confident from current INR 400 plus something crores that number? Yeah. I'll just give a little bit of overview. I had mentioned that if you look at our Saudi sales in FY 2023, they were towards that of FY 2022. However, you are right, I think we are yet to come back to the earlier revenue mark, and I think our estimate is that in FY 2024 we should get there. It's in the right direction, but still not where it was earlier. Our earlier figure was INR 1,000 crores plus or approximately? Okay. Thank you. The reason for other income being quite high? Yeah. So Q4 other income includes an interest on income tax refund to about 44 crores. That is why the number is high. Okay. This is the second quarter where we have seen a very strong domestic performance, considering all the points highlighted. Are you confident that this has become a base now and we should, in spite of all the weakness in demand, et cetera, this has become the base now and we should, say, scale up quite significantly even from current higher levels? Yeah. Definitely. I think domestic business, as I mentioned in my remarks also, has been seeing good tailwinds both in the bulk pack segment as well as the consumer pack segment. Our communication strategies, our distribution strategies are all working well. Brand penetrations are doing good, consumer demand is well. So what we have achieved in last two quarters is now become the base for us, and we will be looking forward to build on it quarter on quarter. Great. Thank you. That is helpful. Thank you. The next question is from the line of Varun Bang from Bryanston Investments. Please go ahead. Shub from Unquantified Angel. First question is on modern trade. This is the fastest growing channel for us. How is the profitability and pricing in the modern trade relative to traditional trade? Do we see any challenges in maintaining profitability in this channel given the dominance and purchasing power this segment has? Frankly, Varun. Thank you, Varun, for the question. Our modern trade and e-commerce channel actually for us is more profitable if you compare the overall P&L account because expenses are quite less compared to general trade. In general trade, we will have a lot of manpower and other expenses to cater to that wide spectrum of retailers. But in modern trade, because of the consolidation of supply chain and other effects, our costs tends to be lower. Also, modern trade and e-commerce, this category of staples, is, I would say, a crowd puller or a footfall driver, really. So these channels also invest heavily on these particular categories. The cost of doing business to sum it up is lower compared to general trade. Okay. You have talked about densifying distribution reach. Can you quantify how many distributors and retail touchpoints you have added during the year? You said we have reached 3.31 lakh outlets in traditional trade. Basis of accessibility, affordability, and the kind of stores that we target, roughly how many number of outlets can we can teach and sell branded basmati rice in India? Yeah. This year we've expanded our distribution network quite aggressively and to a number of 40%, to reach a 750 plus distributor mark, dealers and distributors. So we have now 750 plus distributors and dealers in the India market. And on the outlet front, the current penetration of packaged Basmati Rice in India is about 7 lakh outlets. And as a brand, we are available in about 3.3 lakh outlets. So our objective right now is to obviously, reach to a 60% to 65% mark of retail penetration. But eventually our objective would also be to push the 7 lakh number of the category to a million number in the next few years. Okay. And typically what I've seen is, in rice, typically there is a fixed per kg trade charge. Is it a similar way you price your packaged Basmati Rice or is it a fixed percentage that you mark up? If you can just comment on how we price consumer packs and bulk packs, that would be helpful. You're talking about modern trade or you're talking about general outlet? Overall in general. Our pricing for consumer packs in the basmati segment is quite MRP driven, I would say. Based on consumer affordability at various price points, we have got products right from India Gate Classic to India Gate Mogra too. That spectrum of products cater to all types of consumer demands, needs, and price points. That becomes the basis of our product offering. This compared to the blends and commodity prices which keep on stimulating this forward. Generally, we keep 20% margin for the retailer. Yeah. On the MRP, the retailer gets about a 20% margin on our products. That is also a norm that we follow. Okay. What is the fixed percentage markup what you look at? Yeah. Varun Bang, I think, just to add to what Ayush Gupta is saying, in the rice market for basmati, there is a clear ladder in terms of various price points. India Gate as a brand is present on all the price points. This has a very wide range. You can have a retail price of INR 200 at kg for India Gate Classic and then going down to INR 40 or INR 60. From a pricing point of view, one is we make sure that we are available on all these price points, make sure that retailer gets a 20% margin. I think finally, your question is that what is the impact of commodity prices in this? So see, any staple brand is never immune from the commodity price, but we try to maintain the price as much as possible so that there is stability for the consumer. No, that's not my question. My question is, do we look at a fixed rate that we charge on per kg basis or is it a percentage per kg that we look at? Percentage, not fixed. Percentage. Okay. That is what I wanted to understand. Thank you. Thank you. The next question is from the line of Anuj Sharma from MJ Investments. Please go ahead. Yeah. Thank you for this opportunity. This is going back to this question on margin. What I observed is, since we have been whole year, quarter 3 and quarter 4, I think, has been on an uptick, and if you look at certain factors, how does it work that in quarter 3 you could have a high margin and the cost suddenly becomes high in quarter 4? How does the calculation work there? Could you explain the model? Yeah. I think the answer really lies in two things. One is that the profile of our sales in quarter 4. See, if you look at the sales of higher margin SKUs, in volume terms, that was at 71% in quarter 3, while in volume terms it was at 54% in quarter 4. So that will have its own consequent impact on the gross profit margin. Second factor, which I explained was that there are additions. We had lower than usual realization on a non-basmati deal because the goods had to be moved to another country and sold there. So that is the second factor affecting gross profit margin. The third is that from an other. You would see that there are additional other expenses. This is also coming from the non-basmati category also. So these three things together is what has really affected margin. These factors were not present in quarter 3, number one. Number two, the overall volume of sales, including exports, was much higher in quarter 3. So these two things need to be looked at together. Okay. But just on the inventory, we follow first in, first out model. Yeah. Actually, I would just like to give a different perspective on your question as well. Between our Quarter 3 and Quarter 4, there is a part of sale that is what we call an aged rice or raw aged rice sale. Obviously that inventory is what we carried from the year previous to that. And our inventory cost would be quite stagnant on that. But there is a big portion of sales that happens in Quarter 3 and Quarter 4, which is new crop, which is the parboiled rice and the steam rice. For those, because it is new crop, and as you know, the crop season this year, the prices were quite high. So our input cost on the raw material was quite high. So that would be an effect between Quarter 3 and Quarter 4 that you would see would be an impact on the margins. Okay. So one last question. What is the visibility you have or it is a very volatile, you have an 8% margin margin. What is the visibility you have? Let us suppose you foresee that this is a low margin quarter. Do you stop that? You only plan that you still have a specific margin? But it is an uncertain scenario as to how it will play out next quarter. How much certainty you have in this margin trade? Yeah. I think, see, one is that just from a business principle point of view, we really do not engage in any trade or any product sale which gives less than 15%-16% margin, right? So directionally, all business is planned with that benchmark as the minimum margin. Now, you are right. From a quarter and quarter, there may be variance. One of these factors that causes variance is the quantum of bulk sales, especially export sale where we have limited predictability in terms of when that revenue will get recognized. However, overall, what we aim for is that during the year, we maintain the margin in the 17%-18% trajectory. Okay. One last. In terms of pricing trends, could you just highlight how is the pricing and what is the outlook on pricing going forward? This is the finished or pricing on raw material. We are expecting the new season in the months of October, November. Now the pricing are quite stagnant, and in the new season, we think the prices will come down definitely. Okay. Despite that, we would want to have one of the best inventory at this rate. This is the aged rice. I have told many times that aged rice is a different thing than the new rice. Aged rice has its own premium. Sure. I am saying the increment in inventory. I understand aged rice, but we have built up inventory, and if we are expecting a price reduction That will all be aged rice. It will have a premium. There is no problem. Okay. Thank you. Thank you. A reminder to all participants, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Dibkar Gadgiya from Ambit Capital Private Limited. Please go ahead. Thank you for the opportunity, and my congratulations to the management for this set of numbers. Sir, I have some very broad questions in terms of the overall volume. I mean, how it is placed in terms of the India volumes and the export volumes, and how do we look at the margin when one wants to model it? Do you track margins on a quarterly basis? If yes, what is the benchmark margin that you look at? Yeah. The EBITDA margin range that we look at is a minimum of 17%-18%. That is what we are hoping to achieve through the year. Now, like I explained in the previous answer, quarter to quarter, this may vary because there is a lumpiness in the nature of bulk exports. However, over the year, you can expect a 17%-18% margin to be maintained. Right. Would the margin for the export business be higher than domestic? Somewhat. However, the reason is that the realization tends to be higher, but then the product mix is also different. Right. Okay. Typically, it may be around 5% higher than the domestic business. Understood. What would be the realization for domestic and exports broadly? You are talking about Quarter 4? I mean, even an overall picture for FY 2023 would be fine by me. Yes. If we look at overall Basmati realization in the domestic market, that was at around INR 74,000 per ton. This is Basmati branded for the full financial year FY 2023. The same number for Basmati branded in export was INR 130,000 per ton. Generally, the realization is. This is through branded. Yes. Both numbers are for branded. Sorry. Got it. If we may ask lastly, what would be the overall scheme in terms of the volumes for India and exports? In terms of a volume sale? Yes. Same volume. Domestic Basmati branded sale last financial year was at about 370,000 tons, and Basmati branded export sale was at around 80,000 tons. Got it. We are not into any kind of. Is the traded or private label volume very high, or we prefer to focus more on branding? Yeah, given that number, that out of roughly INR 5,400 crore revenue, bulk export is to the tune of about INR 800 crore-INR 900 crore. Got it. Thank you. Thank you. The next question is from the line of Hariom Patwari from GSM Wealth Advisors. Please go ahead. Hello. Am I audible now? Yes. Yes, we can hear you. Good afternoon, everyone. Thanks for taking up my question. My question is, what is the split of business between Basmati and non-Basmati in volume terms? Yeah. If we look at the domestic branded business, like I mentioned, domestic branded Basmati volume was at 370,000 tons. The non-Basmati branded was at about 21,000 tons. 370 Basmati branded in domestic, 21,000 tons non-Basmati branded. In exports, Basmati branded was at 88,000 tons while non-Basmati branded was small, at about 5,000 tons. Okay. Any further questions? No, that is it from my side. Thank you for answering the question. Ladies and gentlemen, this would be the last question for today. This is on the line of Praveen from Yes Securities. Please go ahead. First of all, congratulations on good results. Mr. Ashish has said about something about some MTM. I just want to understand what kind of MTM he was just referring, and he has just informed that there is a profit control system of interest from tax. What kind of risk is this? The MTM loss that I was referring to is that, as you know, we mark to market our investments. On that investment portfolio, there was a notional loss of INR 3 crores. The PBT that we reported was after adjusting for that loss. However, in taxable income, that setoff is not available. Our taxable income was higher than the reported PBT, which is what resulted in our tax outgo. When you take that tax outgo as a percentage of PBT, it appears to be higher than the previous quarter. That is what I was trying to explain. The other income number you are referring to includes interest on income tax refund. We have made disclosures on this case, but broadly, there were delayed refunds from income tax authorities on which we were entitled to interest, which was received, and it is recognized as other income. How much. The inventory is also working on it, or it is at a normal level. No. We report inventory as lower of cost or NRV, which is net realizable value. Okay. Is there any loss you are sitting in the inventory or it is on- No. On the contrary, as Anup had mentioned, the market prices are higher than our average industry cost. So no loss at all. Got it. Any further questions, Mr. Praveen? No. Thank you. Thank you. Ladies and gentlemen, as that was the last question for today, thank you very much, members of the management team. On behalf of KRBL Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.