Q2 22/23

Nov 14, 2022

Summary

Q2 revenue from operations grew 25.2% and export sales rose 105% YoY, while gross and EBITDA margins improved. Management planned 35% higher paddy procurement and expected H2 to reflect H1 performance; Q2 EBITDA margin also benefited from inventory gains.

Looking at the prevailing price during April-August 2022, the current crop prices are still lower by 12%-15%, depending upon the varieties. Presently, the demand is subdued and buyers from Middle East, Far East, Europe, and U.S.A. are watching the market and are expected to start buying around first week of middle of December. In the first week or during middle of December. This buying trend has no concurrence to KRBL, since we market mostly one to two-year branded aged rice and the orders for which are received regularly on a monthly basis. We believe that prices will remain stable for at least one month till the time the correct assessment of the damage in the late monsoon is clear. Moreover, the mapping figures are also not correct. Hence, the trade up till now is in dilemma as to which way the paddy prices will move in next 45 days. The rice prices are directly correlated with the paddy prices. Hence, we at KRBL are going to purchase good quantities at the prevailing prices. There were rumors that basmati prices will take a jump due to floods reported in Sindh area of Pakistan. No doubt, the basmati and non-basmati crop in Sindh area got badly damaged to the tune of 70%, but the production of basmati rice in Sindh area is very minimal compared to Punjab region of Pakistan, which is witnessing a good harvest. Moreover, Sindh area grows a duplicate basmati rice, which is used for mixing with their traditional varieties. Therefore, the effect of Pakistan flood on pricing will have no effect on international prices of basmati rice. There is just irritant in exports, where the ocean freight rates and the availability of containers. Both the issues have been resolved. The freight rates have come down to one-third, and they will further come down by another 10%-15% compared with their peak about nine to 12 months back. Still the freight rates for U.S.A. and Australia have not come down compared with other destinations, which are also expected to reduce in the coming months. The availability of container are in abundance and supplies are going to further increase since China is manufacturing around 50,000 container per day against orders from various shipping lines from all over. KRBL is going to have enormous advantage with the imposition of GST on unbranded prepackaged rice. This has brought parity between private label and established brands. With the imposition of 5% GST, the demand for KRBL brands have improved significantly, which we will witness in the third quarter. The details will be shared by Ayush, who heads the domestic department. KRBL has shown a robust performance in the second quarter of FY 2023. The total revenue of the company grew by 26.5% Y-o-Y and 8.12% quarter-over-quarter. Whereas the export business grew by 106.05% Y-o-Y and 21.6% quarter-over-quarter. Besides, EBITDA margins improved 22.79% compared to 19.27% last year. PAT was at 15.91% compared to 12.89% last year, giving an EPS of 9.05 rupees. The company is growing in export market, which has made a remarkable progress in Saudi Arabia with the new distributor. The sales and post-sales that pertaining to modern trade is really showing a good progress and we are happy with the performance. We have really captured back our lost market share, and it seems that the customer was waiting for the India Gate products to come back in the market. We have still to finalize the HORECA segment for which our efforts are ongoing, and we expect that during quarter four we will be able to finalize it. I have tried to convey most of the events, and if something is left, it could be discussed during the question and answer session. Thank you once again. Thanks. Shall we begin with the question and answer session now? We have got two notes here, so I will request Ayush to give his comments. Okay. Thank you. Thank you, sir, and good afternoon, ladies and gentlemen. I am delighted to share that the domestic business recorded yet again a strong quarter performance, with revenue growing by 18% Y-o-Y. We have delivered best ever H1 performance wherein revenue increased by 36%. Growth has been equally contributed by the general trade and modern trade e-com channels. It is notable that within the general trade channels, multi-pack segment has led the growth. The decision to charge 5% GST on prepackaged food nullifies the advantage local players had over foreign brands. We have been looking forward to this for the last 5 years. This decision will formalize the sector and lead to healthy competition. I will now share a progress update on our three-pronged strategy that I have been talking about in my previous calls. On the distribution front, we are strategically expanding our direct distributor network to town class 1, town class 2, and rural markets of India. We have effectively appointed 167 new distributors in this financial year so far, and we are on track with our target to expand our distribution reach to 250 new towns by the end of this financial year. Our numeric distribution percentages have already increased by 370 basis points in quarter 2, but we will be seeing the true results of this in the subsequent quarters. In the past year, our secondary sales coverage stood at 31%, which means the percentage of distributor sales being captured by our field sales team. In the first half of this financial year, we have been able to expand our secondary coverage to 38%, a growth of 700 basis points. This is in line with the strategy to drive the category through robust active retailing. Increase in secondary sales coverage has resulted in higher throughput at retail outlets, improved relationships with trade, and better frequency of the brand. We will continue to drive this feature and are targeting to reach 60% secondary sales coverage by FY 2025. On the third strategy on augmenting product portfolio, while the non-basmati initiatives remain under the work, I am happy to share the Unity brand has grown by over 40% in this financial year and is on track to reach the INR 1,000 crore mark by the end of FY 2025. We have developed a strong pipeline of new product introductions, which span across the value-added rice segment as well as the health segment. You will see us launching few of these products in the next 2 quarters. As the competitive scenario in our category becomes more dynamic, we are strategically taking on the role of category captaincy. As a category captain, our approach will be to focus on the long-term evolution of the category. We are continuously deepening our understanding of the shopper behavior and reviewing the category for valuable insights. For the first time, we are taking a regional approach to marketing. Here, we have divided the country into 3 market types based basmati penetration, KRBL market share, and other quantitative factors. Firstly, there are states where the focus is to drive consumption from unbranded segments to packaged segments. Secondly, there are states where we need to drive category penetration and frequency of consumption. Thirdly, states where we have to take disruptive market share gains. We have devised a specific marketing mix for each of these market types, and you will see communication emerging from this approach launched in the market in the next few weeks. The category captaincy mindset will ensure that we are not just fighting the short-term market share battles, but investing appropriately in building this category for the long-term gains. During times of inflation in the FMCG industry, we see consumers downgrading or downsizing. In rice, we typically witness a downgrade into unbranded loose rice segments during such times. To navigate this challenge, we have beefed up our assortment with a clear price laddering strategy to address this, so that the consumer has an offering within our portfolio, even during inflationary scenarios. While the basmati penetration in India is at 42%, the packaged penetration hovers around 20%. We are constantly reminded of the immense headroom for growth in the segment of this business. With that, 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. Thank you, Ayush. I will now take you through the performance for the quarter ended September 30th, 2022. All figures mentioned by me would refer to the consolidated financials of KRBL Limited. Total income for the quarter stood at INR 1,340 crores, marking a growth of 96.5% over the corresponding quarter last year. Gross profit of the company increased by almost 50%, and EBITDA and PAT increased by almost 50% and 56.4% respectively. The company recorded several highest-ever metrics. For example, the company recorded highest total income, highest EBITDA, highest PBT, highest PAT, highest total comprehensive income, and highest quarterly earning per share in the quarter. Revenue from operations grew by 25.2%, led by export sales, which grew by 105% to INR 592 crore. Domestic sales, excluding power, were at INR 696 crores, were lower by 5%, but this is on account of higher bulk rice sale in the corresponding quarter last year. Excluding bulk rice, referring to branded sales, branded sales grew by 18%, as mentioned by Ayush. Basmati rice sales realization increased by 42% over quarter 2 FY 2022. Higher realization was recorded both in domestic and export segments. Gross margin improved to 34.5%, an improvement of 535 basis points over corresponding quarter. This was led by both improvement in sales mix as well as higher realization. EBITDA margin for the quarter was at 22.8%, as against 19.3%, on account of better gross margin, partially offset by following increases over corresponding quarter. Trade expenses increases by INR 28 crores, advertising expenses by INR 11 crores, other selling and distribution expenses by INR 4 crores, and the price increase in some other provisions. Trade expenses increased during the quarter, though the latter is largely recovered from the customers. KRBL's finance cost declined to INR 1.5 crore as against INR 1.7 crores in the corresponding quarter. This is happening as our reliance on borrowing continues to reduce. The company's PBT margin also improved to 21.3%, as against 17.3%, while PAT margin improved to 15.9% as against 12.9%. I will just summarize the H1 performance. For first half of this year, total income was at INR 2,579 crores, marking a growth of 23.4% as against H1 of last year. Gross profit increased by almost 37%, while EBITDA and PAT increased by 33% and 36.3% respectively. Revenue from operations grew by 23.1%, led by both export and domestic sales, with Y-o-Y growth of 36% and 16% respectively. Cash generated from operations before tax is INR 169 crores higher in H1 of current year as against H1 of last year. I will now share some data with respect to inventory. Total inventory as of September 30, 2022, was at INR 2,054 crores, comprising INR 160 crores of paddy, as against INR 177 crores in September 2021. While rice inventory was at INR 1,751 crores, as against INR 1,700 crores at the same period last year. In volume terms, paddy stocks were at approximately 50,000 tons and rice at approximately 313,000 tons. These numbers were slightly higher at 62,000 tons and 365,000 tons respectively in September 2021. Inventory, as you know, is lower primarily due to lower paddy purchase than last time season. The cash position of the company continues to be healthy. The total cash and bank balance, including investments, was at almost INR 1,600 crores, up 74% over the same period last year. With that, I come to the 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 as the ED matter is sub judice, we will not be in a position to respond to queries on this matter. So over to the moderator now. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question at this time may press star and one on their touchtone phones. If you wish to remove yourself from the question queue, you may enter star then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Ritesh Chheda from Lucky Investment. Please go ahead. A few questions. In the half year's 20%-plus top-line growth that we see, what will be the volume growth in this? Overall volume. You are talking about half year? Yeah, half year, because both quarter 2 and half year is about 25% and 23% top-line growth. Half-year rice volume growth is at around 6%. Okay. What explains the improvement in margins that we see in the first half now? I think the improvement in margin is explained by two factors. One is there is improvement in product mix, which is higher share of higher realization SKUs, and also the general increase in rice prices that we've seen over the last, I would say now, three quarters. Okay. Looking at the current scenario, do we see the H1 performance sustaining in H2? Yeah, definitely. Our third quarter and fourth quarter is going to reflect H1 performance. My last question is, sir, I see the export business in the first half at about, let's say, INR 1,077 crore. There looks a lot improvement versus the last year's number, because last year full year number was about INR 1,500 crore-INR 1,600 crore, my guess. What is the progress on the Saudi and the Iran business in order for us to better understand this export business of INR 1,077 crore that I see in the first half? As I explained you in my opening remarks, Saudi, we are doing very well. Actually, people were waiting for India Gate to be marketed, for which they have been waiting for more than two years. It was not available in the market. It seems that the consumer was waiting and the demand is quite good. Orders are quite good. Saudi is a very big reflection in our export data also. That's number one. Iraq, we are not able to get a good distributor, but we have exported a small quantity. It's a negligible quantity. We expect that we will get a good distributor. Actually, problem in both the countries, Saudi and Iraq, is that there are- My question was Saudi and Iran, not Iraq. I am talking of both. I am talking of Saudi and Iraq only. There is a problem in both countries normally, is that there are local big traders, multinational traders, which have captured those local markets, and they are the local resident of those countries. They are like Japan. They are into multifaceted businesses in construction, automobiles, as well as in agriculture. Under agriculture, they do rice, and in particular, basmati rice. You have to see the competition is very tough when you have to fight with a local person. In those circumstances, in Saudi Arabia, we still call ourselves the leader of that market as far as the product and the pricing is concerned. We have still to capture the quantum business of Saudi Arabia, and that we will be able to capture once we finalize HORECA distributor. That is point number one. In Iraq, the margin of profits are very less. We have met three, four people to appoint our distributorship. Let us see, I hope during this year, though it will be difficult, but I believe during the first quarter, fourth quarter of the year or during January, February, we will be able to finalize the Iraqi business. Let me tell you, when you look at the price of the Iraqi business, the margins of profit are so low that it is making us a little bit disturbed whether we have to work on those margins or not. Okay. Sir, I could understand. The Saudi Arabia and the Iran business, which was, let's say, at the peak, about INR 1,100 crores, and which fell down to INR 300 crores until last year. Now, where are we on those two businesses after what I see exports improving too? Let me correct you. It was only one country, INR 1,100 crore was only Saudi Arabia. Okay. Iraq, we were never active because there were payment problems. There were many problems in Iraq. Not to those extremes like Sudan and Yemen, but there are still problems. Most of the business and money is routed through Dubai, still from Iraq. It is not a direct business. We were not very active since beginning in Iraq. What INR 1,100 crore business you are talking about, it was Saudi Arabia, out of which I suppose this year we will be completing at least INR 550 crore to INR 600 crore. Another INR 500 crore is the HORECA business for which we are trying to finalize a distributor. Okay. In this INR 1,077 crore, we already had INR 250 crore type business in Saudi Arabia in a half year? Should be. I do not have the correct number, but should be. Okay. Thank you very much, and all the best to you, sir. Thank you very much. Our next question is from the line of Anuj Sharma from M3 Investments. Please go ahead. Yeah. Thank you, and congratulations for good results. We have been hearing some positive news about the Pusa new varieties, which is Pusa 1885, Pusa 1886, and Pusa 1847. Can you just highlight the productivity in these and the price, which could be different than the existing varieties? Third is, how much time the export market will take up to accept these varieties? See, these varieties initially came to our labs for giving the outputs and input both to the scientists in Pusa Institute. Two years back, we had given our very positive inputs that these varieties are excellent. There is no problem in cooking. The texture is excellent. Everything was good. Based on that, only last year, some quantities were given as a test. This year only, some quantities were given as a test for test sowing. This year, we will be getting a good quantum of seeds from the market to have a commercial production in big quantities next year. Whatever quantities are coming in the market of these three, four supplement varieties, which are pest-resistant, I think so we are quite happy. Whatever quantities we are getting, there is very less pesticides in that, and they qualify the both Europe, America, and elsewhere, they qualify the results. Prices are the same. There is no hike in prices. The production yield, everything is the same. The beauty is that they have got very less pesticides within them. All right. Just in terms of productivity, given the same acreage of plantations, do you expect an increase in productivity due to these new varieties? No. There is no increment in productivity because the scientists have worked primarily on pesticide-free or pesticide-resistant or quality. All right. My second question is on the procurement strategy. You touched upon it on pricing remain the same, your procurement will be higher. Can you just highlight how do you see the procurement strategy for this year? See, procurement this year, actually, according to the data what we have, the prices are about 12%-15% lower over last year. One thing only we are into dilemma, not we, but the whole trade. Because actually, we had visitors with us, which confirmed that this year the crop size is 15% higher over last year. So we thought when the crop is 15% higher, the prices will remain quite low. But during the rain, some quantities, what we are not able to actually judge how much quantities have been damaged. Our yields have become lesser what we were expecting, and that is why everybody who trades is in dilemma whether still out of 15%, only 5% got damaged, 10% got damaged, how much got damaged. But still people feel the quantities are higher over last year and prices what they have opened, it will remain to the same prices. If the prices remain the same, we are going to buy definitely 20%-25% more over last year. All right. Thank you. My last question is on the regional rice. Based on your experience, you've been working on it for some bit of time. So what is the progress out there and what is the consumer insights you're getting on the regional rice? Thank you. Originally, we had planned for three varieties. One was Gobindobhog, other was Kolam, and third was Sona Masuri. We have already started marketing Sona Masuri and Kolam rice. This calendar year, we will be doing around INR 30-35 crores of these two varieties, which is basically how we are doing a test marketing. Next calendar year, we are expecting a turnover of around INR 60-70 crores. But everything is in progress in Gujarat. Our plant has started. We have started installing plant and machinery, and by March 2023, we think the Gujarat plant will be operational. Gangavathi, Karnataka, we have already purchased land, and it will take by March 2024, it will be complete. By till the time the plants will come, but our marketing will continue. What I told you exactly, when the plants will come, our turnover would be around INR 400-500 crores. But in next two to three years, we will do the private millers or buying rice and marketing in our brand. By the time the plant comes in, we will do our turnover of around INR 100 plus. So we are on track. Just for Gobindobhog, it will take some more time. Otherwise, for both the varieties of Kolam and Sona Masuri, we are on track. All right. Thank you so much. Thank you. Our next question is from the line of Nitin Awasthi from InCred Equities. Please go ahead. Thank you for the opportunity. Continuing on the previous participants has asked all my questions were relating to that itself. Continuing on that, currently we see the rice market at around 100 million metric tons, out of which 17 is approximately basmati. So that is the addressable market that the company was working with till now. So with these three varieties of rice, what will our addressable market expand to? We are not able to hear. Can you lower the speaker? Yeah. Nitin, I think what you are asking is that with the three varieties that Anil ji has mentioned, what is the market size category? Is that your question? Yes. You are talking of the regional rice, yeah. Yes. We are looking at a top line of minimum INR 500 crore. Hello? Okay. These three varieties out of the whole rice basket, how much would it be in India? You see these three varieties, it's a very, very big market, maybe in millions. But I am talking of a very aged and a value-added product, which is being sold to the consumer at around ₹80 to ₹100 a kilo. It is a one year, one and a half year aged rice and marketed in one kilo pack or a five kilo pack. So the market for that is quite limited, and I'm looking to capture to that market around 20% of that market. Understood, sir. You won't be looking at the extensive reach of the whole market as such, you're saying. You convert it from non-branded to branded. Yeah, that's right. Nitin, you're right. Okay. Thank you, sir. Thank you. Our next question is from the line of Amit Doshi from Care PMS. Before we take this question, we would like to request participants to please use only handsets while asking a question. Please go ahead, Amit. Yeah, thank you. Sir, as you mentioned about freight cost reducing by one third compared to the peak. Can you give us a guidance about what it had been sequentially? For example, what was in September quarter and what you are seeing now? September quarter. Other expenses. It's not drastically changed. In September to now, it is not drastically it came down. It started coming down from the month of April only. April was the start of these prices coming down. Let me give you an example. For Saudi Arabia, Dammam, the price of the container was $1,200. By that time, it reduced every month by $100, $100, $2,200. Today we are paying only $800. One time we were paying only $300. Okay. Do you still expect further reduction from this $800? It will come to $300 to $400. Okay. Got it. Sir, you mentioned about this export duty, this 20% on the rice, other than the basmati and the parboiled exemption. Has that been any impact on the price of the basmati rice? See, basmati rice never came into restrictions. It has been open, and government has not touched basmati rice at all. Either it is in the procurement program of the government, it is a totally free trade as far as basmati is concerned. But yes, non-basmati prices are reduced to the level that if you pay the duty, it has come to the same level which was without paying the duty. So rice prices have come down by 20%. No, my question is, was there any indirect impact because of this export duty on our basmati rice prices? No, not at all. It's no connection, no relationship. Okay. Got it. You mentioned that your inventory, you plan to increase at 20%-25% compared to last year and considering the ad that we have of around INR 5,900-INR 6,000 crores. Do you believe we will run into borrowing to reach that inventory level, or we will still go debt-free, which has been for the last two, three years? His question is that since you want to buy 25% more inventory, what will happen to debt? Yeah, you see, we are very comfortable as far as debt is concerned. This year, since the paddy, what Anil ji said, 10%-15% lesser, that is lesser of the closing price. If you look at the opening price of last year, we are higher by 10%-15%. That means my cost of paddy this year, compared to last year, would be higher by 15% to 20%. Number two, I will be buying more quantity by not even 25%, it can go up to 30%-35% more buying. Because our demand in Saudi Arabia has gone up, our demand in domestic markets, and requirement of the branded rice has gone up. So we expect, because whatever paddy we buy today, we have to take in mind the next two years. So looking at our demand, we will be buying 30% to 35% extra. That means 15% prices more, 30% paddy is more. So we will be taking around INR 1,000-INR 1,500 crores from the bank this year. Naturally, our ROCE will become better. Yeah. That was my question. There will be borrowing because of that higher inventory. Naturally. Correct. Sir, any HORECA growth segment, any idea how it did grow in last quarter? Overall, what is the contribution of sales? We got a big benefit out in HORECA due to the abolition of 5% GST on a pack above 25 kg. Now our every pack, which is of HORECA, is 30 kilo, which is out of GST ambit. Number two, we are doing all our 30 kg sales in India Gate or Unity or our registered brands. Previous year, we used to pay 5% GST, and our competitors were not paying any tax because they were not branding under their registered brand. So that was a big benefit, and we are getting this benefit in third quarter. You will see in quarter three, our HORECA sales, especially in the domestic market, will take a jump. I should not say, but it will take a jump of nearly 50% more in quarter three, what I am expecting. Okay. Last, this EBITDA margin of 22%-23% that we have achieved in this quarter, would you believe that we should consider this as one-off and historically, 19%-20% or 18%-20% should be considered? I tell you frankly, our EBITDA in general, in a normal term, is ranging from 16% to 19%. But 22% it has come because of inventory gains. KRBL, you see, we carry too much of old stock, so there is always an inventory gain. So 19% to 23% is the range what KRBL is working. If we have an inventory gain, it can go to 22%, 23%. Otherwise, 19% is always there. Okay. Thank you so much, and wish you all the very best. Thank you. Thank you. Our next question is from the line of Anand Venugopal from VMSPL Capital. Please go ahead. Yeah. Thanks for the opportunity. I have just a question, could you help me understand what is the current state of basmati rice industry, and how are prices of basmati rice moving up, and what is the outlook for basmati rice prices going into 2023? Lastly, what are the demand and supply factors that are leading to this outlook? Let me tell you, whether it is domestic or exports, basmati consumption increasing every year over every year by 6%-7% is a normal way when there is no abnormality. If it is abnormal, it could raise to any level. But 6%-7% is a normal increase every year in export as well as in domestic market. This is what the size. But domestic can definitely grow much bigger because the consumption of basmati rice is just 3% as compared to non-basmati rice. See, we consume around 95 million tons of non-basmati rice, where basmati rice is just 2.5 million tons. That is, you can imagine that there is a big scope of increment as far as basmati is concerned. Now it's a very big question that how is the industry. Industry is fine. New plants are coming, some markets are opening up. Saudi Arabia used to import only 700,000 tons. In 2 years, I don't know what magic has happened. In 2-3 years, they have gone to 1 million tons plus. Similarly, it all depends. Iran is always a big buyer. Day by day, the demand of Iran is increasing. If you let me tell you, Iran doesn't have a payment problem or the sanction problem. Iran can import from India around 1.6-1.7 million also because their own production is depleting day by day because of urbanization and because of the higher cost. Same with Iraq. Iraq used to produce lot of rice in the country, and day by day, their own production is coming, and they are becoming more dependent on basmati rice. Similarly, America used to be a market of 60,000-70,000 tons. In 6 months only, they have imported 100,000 tons. It was a surprising news. 100,000 tons is a very big quantity. The only drawback today or the setback to Indian basmati is the European countries. I believe with the new type of seeds and the new type of experiment which the scientists have done, next year we will be able to enter the market of European Union with the pesticide-free rice. The rice industry is doing good. New plants are coming. Plants are under expansion programs, and industry has made money last year, and it's running very good. Okay. Just with regards to prices, how is it going to go into 2023? What price? It is too early. Let me tell you, tomorrow somebody asks what would be the dollar price after 2 months, nobody can say. We expect price to rise. We do not know whether they will rise or not. But it is a speculation. We don't do speculation in KRBL. Our margins are good. I don't know, Anil wants to give reply to this, okay. Yeah, but he's right. We cannot say, but our expectation is looking at the crop and the demand. The carry forward stock in the industry was practically zero this year. So everyone is taking rice, and we expect the prices to be higher. Okay. Thanks. That's all. I've heard my question. Thanks. Thank you. Ladies and gentlemen, before we take the next question, we would like to remind participants that you may enter star 1 to ask a question. The next question is from the line of Mohit Khanna from Banyan Capital Advisors. Please go ahead. Hello, sir, and congratulations on the good set of numbers there. I have one question, that if the cost of paddy this year, cost of procurement of paddy this year is higher by 15, 50%, how do you decide the sum of business selling price 2 years out after maturing it? Is it something that we have to deal with that type of pricing or is there any pricing mechanism in between? You see, definitely when today I am buying paddy, which is higher by 10% to 15% higher to the opening price of last year. If you look at the closing price, I am still lower by 10% to 15%. So our pricing after 2 years are comfortable. After 2 years, my certain SKUs, even if I do not change my prices, my EBITDA is very good. There is no problem. But looking at the market, we can see after 2 years, even we have to increase 5%, 7% or 10%. But the question is, there is no event where we have to decrease the price, looking at the present scenario. So we are comfortable as far as pricing is concerned because of our brand. It is fully shaded by our brand. Mr. Mittal would tell you, whenever we go to the ministry, we always tell that as you have whiskey and wines, we always compare basmati rice with whiskey and wines. On that front only we have been working, whether it was a GI or whether it was the pricing, because this is the only grain in the world, older it is, better it is. But we found out that about 2 years old rice is not commercially viable because of cost, interest, and so many things are involved. That is why we have kept it at 2 years. Last year only, or even last to last year, we became shortage by few hundred, 500, 600 tons of our 2-year-old product, and we went to the market, and we wanted to pay INR 50 a kilo extra for the people to give us a rice which is two years old, and there was not a single kilo available. That is why older it is, better it is. The biggest thing with KRBL is in India, up till now, I do not know of tomorrow, up till now, there is no rice available except with KRBL, which is two years old. So that is our advantage of pricing. That is our advantage to quality and attributes to basmati rice. I would like to add one thing. In last 30 years of KRBL history, KRBL has never done inventory revaluation. It is always higher than the market price, and that is the reason why we carry an easy price. Thank you, sir. Thank you very much. Our next question is from the line of Amit Doshi from Care PMS. Please go ahead. Yeah. Thank you for allowing. Sir, you mentioned that you plan to procure 30%-35% more quantity. As far as production is concerned, you mentioned either it will be likely to be the same as last year, or it will be 5%-7% higher. How do we believe that we will be able to procure such a higher quantity? Carry on. They are saying- Okay. See, let me tell you, we have now today about 40 years of experience of buying basmati paddy, milling paddy, market sentiments, which way the market will go. No doubt, every year you have to take that assessment whether the prices will go down and remain the same, or what will happen. There are three, four advantages with KRBL. Our carrying cost is lower compared to the industry. That is number one. Number two, because of the cash payment to the farmer and to everybody, we get minimum 3%-4% cheaper paddy from the market compared to many. I would not say the only person, maybe there may be four, five people more, but our payment to the farmer is so excellent that we always get a cheaper paddy. Now, giving these two ideas, thirdly is the brand, the premium on the brands. Giving these three ideas, we cannot afford KRBL, at any cost, to remain without the raw material because after six months or seven months or eight months, when we require our rice to be marketed, if we don't have rice, then we go to the market to buy rice. That is why last year we took an estate paddy prices, we thought it was higher. We couldn't buy the paddy that much, which was required for milling. This year we have decided the price we feel are okay, looking to the inflation, looking to all other costs. We have decided. I was thinking 25%, but I now announce that we are going to buy 35% higher volumes over last year. Okay. Sir, in this Europe market, the new variety, which with less residue of pesticide, what kind of market it could be like? For example, Saudi Arabia is around INR 1,000 crore plus. In future, whatever, three-year, five-year, once this commercialization gets, what could be the size of Europe market, which you believe KRBL can have? Total European market for Indian basmati rice, 400,000 tonnes and above. 98% of this volume is in shape of brown rice because there is no duty in brown rice, and white rice attracts a duty of €160 per tonne, €170 per tonne. That duty doesn't allow Europeans to buy white rice but certain brands, like for India Gate, we are exporting white rice in our packed ones. But they are very small in numbers because that duty is a mismatch for the pricing. It's not matching with the brown rice. One thing good is happening into Europe, the largest buyer out of this 400,000 plus, 150,000 alone is purchased by U.K., and 250,000 tonne are the other markets, which is the European markets. There has been a very big pressure on both the governments to come on a free trade arrangement of the trade. They want their whiskeys and wines to come without duty into India, and India wants its agriculture produce to go without duty over there. But since India is on a bigger loss, they are more interested, and they are finding the mechanism where both countries are on win-win situation. If that happens, let me tell you, that 150,000 tonne market will straightaway come alone to India, and it will be white rice, and it will be packed in India, and it will be like other Middle East countries, it will be going into packed rice. Otherwise, the total market is 400,000 tonne and out of which 250 are to other European countries, 150 is U.K. But this 400,000 tonne, whether it is white rice or whether it is brown rice, it has to be pesticide-compliant rice. Both. Therefore, I think it will take three years. Next year, we will be able to do some quantity, maybe 100,000, 120,000. Then next year it will be 250,000 or 300,000. And third year it will be, I think so, out of 7 million tonnes what we grow, 70% would be pesticide free. What is the today share? Today share in Europe is very little. Today share in Europe. 100,000. Maybe 100,000. There may be maximum 100,000, and out of that, 75% is to U.K. Okay. Great. Thank you so much for answering. Thank you. Okay. Our share of pesticides will be increasing. Thank you very much. Ladies and gentlemen, a reminder, you may enter star one to ask a question. Our next question is from the line of Manish Bhandari from Vallum Capital. Please go ahead. Manish Bhandari. Hi. Good evening, sir. Two questions. One, your observation related to the demand in U.S., which has surprised you, as well as demand in Saudi Arabia. Isn't it there is some inventory hoarding which is happening in any of these countries or the natural consumption has gone up? What I wanted to know from this view on this. Manish, as far as Saudi is concerned, it is not that this year they have imported 1 million. Actually, if you look at the figures for last four, five years, it used to be five years back 600,000 tons. It increased to 700,000 tons. It increased to 780,000 tons. Then it increased to 80. This year it has been 1 million tons. People do say they have a stock. The stocking proposition in Saudi Arabia is not of today. It is for last 20 years. They always stock big quantities with them all the time and eat the rice over there only. It is not for the first year. Maybe 50,000 tons may be due to stocking, but it cannot be 1 million tons on stocking base. It could be 40, 50,000 tons. They might have purchased more rice this year. But I think for this year also, they are going to buy not less than 900 to 1 million tons. Okay. My second question was related to your guidance in Saudi. FY 2024 may be some INR 600 crore plus number for Saudi export of our rice, which may include HORECA or may not include HORECA. No, we are looking at a INR 1,000 crore market by 2024. Which includes the HORECA segment for Saudi. Which includes HORECA, definitely. Which includes HORECA. Okay. My last question is related to this pesticide-free Europe, which may be something what you have to export to Europe. You would do the same thing in India also, pesticide-free? No. Today, whatever we are able to buy pesticide-free, it is totally for exports because domestic market doesn't have those type of recipients and bar to sell rice in India. Okay. Let me tell you will be surprised, Manish, there are. It is in various countries with the comment just on private to government telling them what are the pesticide residues of Japan. If you will look at the pesticide residues of Japan, they are much higher than the norms fixed by the Indian government. There is still, I tell you, this is not the norm they have fixed, it is a non-tariff barrier. This issue is, but we have fight out our scientists who are intelligent and capable. They came out with the solution, and they have come out with certain quality of seed which will remain pesticide-free. Then no pesticides will be required to harvest them or to sow them. Sure. Sir, last maybe one more question related to long back you had a vision of having a portion of turnover in a non-rice and non-basmati. Where are we? Is there any thoughts on that? Yeah, we are working, but we will be on a value-added product where the margins, Abhijit, is more than 40%-50%. We are looking at rice bran oil, which will take some time, but we are looking at it. Thank you. Thank you, everyone. Thanks a lot. Thank you very much. Our next question is from the line of Amit Agarwal from Leadway Investments. Please go ahead. Sir, I have two questions. One is, last year same time you were talking about buying a food company. Sir, after that there has been no discussion on that. The other question is, sir, some e-commerce companies are launching their private labels. Will it affect our market share, especially as BigBasket has their own brand? In future, is this a source of competition for us? Amit, your voice was not very clear. I will just confirm what you are asking. I think your first question was around what is the update on acquisition. Yeah. I think your second question was that the impact of private label launches in India on certain e-commerce. That is on business. Yes, please. BigBasket has their own brand, BB Royal. Let me answer the first question. The second will be answered by Ayush. We are still looking at any food company. We are open to it. You see there are a lot of consultants comes to our office and discuss. We are open to it. If any opportunity comes, cash is already there in the balance sheet. We do not have any issues. But sir, last year you said that you were almost buying food company by December 2021. No, it never happened. It never materialized. We were looking at it. We were hopeful we will get by December, but it never materialized. Okay. The second question is about private labels on e-commerce companies. On the private labels side on the e-commerce side of the business, I believe there aren't many e-commerce players right now doing private labeling, especially in the basmati rice segment, barring BigBasket, which is doing that. But even in BigBasket, we enjoy close to 45% category share. So the private label scope is very limited at the moment, and it is mainly due to their margin expansion strategy. So on private label, they are able to earn or garner a better margin compared to national brands. So from that perspective, they have that in the portfolio. Also more potentially in the regional rice category rather than basmati rice. So in overall e-commerce space, it's a very small play at the moment done by one player from a very strategic perspective, I would say. But in future that can be the biggest thing for brands because e-commerce is taking more and more share modern business like the whole market. E-commerce is a very consumer-focused channel. So consumer demand and brand strength continues to be the most prominent drivers to sale. So private label player does not stand to gain a lot of penetration or market share from an e-commerce perspective because consumers are more brand conscious and less price or less price conscious, I would say. Yeah. Okay, thank you. That's it from my side. Thanks very much. We take that as the last question. I now hand the conference over to the management for closing comments. Thank you. We are thankful to all the investors for their patient hearing, and there were insights for us also to learn from their questions. I hope we will try to further improvise and give them better results for all things to come. I can promise that also. We are trying our level best to make you happy and to show that we are the real rice company with a tradition of doing business. Thank you. 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. You may now disconnect your lines.