Ladies and gentlemen, good day and welcome to Kaveri Seed Company's Q1 FY 2024 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. Joining us today on this call is Mr. Mithun Chand, Executive Director. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For a list of such considerations, please refer to today's presentation. I now hand the conference over to Mr. Mithun Chand. Thank you, and over to you, sir.
Thank you. Good evening, and welcome everyone to our quarter one financial year 2024 earnings conference call. We hope you have had a chance to review the presentation for results, which is also available on our website. I will touch upon the operational and financial performance of the company and then open the floor for Q&A session. Consolidated net profit for the quarter has surpassed the profit delivered during the full year for financial year 2023. This has resulted in 33.6% in consolidated EPS to INR 47.10 per share. The delay in monsoon has impacted volumes and sales of maize during this quarter. We are expecting that there would be an increase in sowing of maize during the Rabi season. Sunflower and mustard exports will start from the second quarter and are expecting maize and vegetable seed exports to grow.
The contribution of new products continues to drive the profitability of the company. Company focuses on growing exports to Bangladesh, Vietnam, Cambodia, Nepal, and Middle East, and exploring opportunities in East Africa and Philippines. Consolidated revenue from operations was at INR 736.1 crore as compared to INR 651.9 crore in quarter one financial year 2023. Revenue grew by 12.68%. EBITDA was at INR 289.79 crore as compared to INR 262.09 crore in quarter one 2023. Increased by 9.96%. EBITDA margin improved to 39.33% from 37.06% in 2023, grown by 227 basis points. Consolidated net profit was at INR 234.62 crore as compared to INR 234.60 crore in Quarter One 2023. Registered growth of 12.68%. Net profit margin improved to 31.44% from 30.68%, registered a growth of 27 basis points. Segment-wise highlights. Corn volumes were stable and revenue increased by 8.98%. Bajra volumes and revenue were stable.
The combination of new products were worth from 51.9% to 67% of the total volumes. Hybrid rice volume is stable but due to commodity prices, revenue increased by 9.71%. Selection rice volumes grew by 11% and revenue increased by 2.13%. Maize volumes and revenues were down as compared to last year due to delay in rain in some parts and we can expect an uptake of maize volumes. The contribution of new products was 28.06% and 50.6% of volumes in maize. Vegetables seed volumes have decreased due to decline in commodity prices and revenues were stable as compared to last year. Vegetable crops like cabbage, tomato, and watermelon have done well during the quarter. We have two seed hubs in Bengal, Odisha, Rajasthan, and Telangana, which feed states with vegetable volumes. Company focuses on growing exports to Bangladesh, Vietnam, Cambodia, Nepal, and Middle East.
Our focus in R&D helps in launching new products for high yielding and stress resistance. I would now open the floor for Q&A session.
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 your touch-tone telephone. If you wish to withdraw from the question queue, you may press star and 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. Participants, you may press star and one to ask a question. The first question is from the line of Anurag Jain, individual investor. Please go ahead.
Good evening, sir. Thank you for the opportunity. My question is on the vegetable seeds business. Kaveri now has more than 150 different vegetable seeds across different categories of vegetables like tomato, cucumber, cauliflower, cabbage, chili, okra, various gourds and brinjal, cowpeas, different melons, pumpkins, etc. In last few years have expanded your coverage of different vegetable seeds, including now also launching green peas and ash gourd. Kaveri has also expanded its sales team for the vegetable seed business and has a separate sales team for the vegetable seeds business, separate from the field of seed sales teams. These sales teams have also expanded into different states of India. Kaveri has expanded its product range, sales teams, and also has an addition geographic expansion. But all these initiatives are not reflecting in the sales numbers in last three years.
Last three years, the Q1 sales for the vegetable seed business has been stagnant, INR 15 crore. In light of the fact that last years have been stagnant for the vegetable seeds business, despite a lot of initiatives on the business side from the company, how did the management see the vegetable seeds business in the next three years?
Good evening. Vegetable is a very good business to be in. We are very bullish on vegetables. As you rightly said that we are spending a lot of money on R&D, on men, and especially at JRF across the territories. As you know, in seed business, it takes time to develop, and we need to test our products and farmer only believes after seeing it. So we are in a trialing stage, and we have even tested many hybrids, and we are finalizing, we are thin mining these hybrids, which are doing well in some parts. So we are researching all those things. But as rightly said, in the last three years, the sales were stagnant in the first quarter. But we have grown when compared to last three years slightly. Last year, we were stable at the same as the overall year level.
We were stable compared to last year. But what we see in the next three years, vegetable business is definitely going to grow at more than 50%, 60% year- on- year. And still we see that we have the potential to go up to close to INR 150 crore to INR 200 crore in the next two to three years. And this is a crop where we have high margins. And now, as we have introduced many varieties across. And vegetable, every 200 km, we have a different requirement of the vegetable. So we are trying to feed to the market different vegetables. And as we are also introducing vegetables from last year. This year it will be some more of vegetables we are introducing.
As overall, we see a very good growth in vegetables, and we are very bullish on that, and all the vegetables are high-risk profit.
Okay, sir. Thank you for the detailed answer. If you permit, I can actually ask one more question.
Yeah.
Sir, last year the company had received a tax demand notice. The company had said earlier that you will contest this demand. Is there any update on this tax demand?
As of now, no. As we stated earlier, we are appealing it. It is still under the stage of appeal. No further progress on that. Whenever it is done, we will intimate it to the exchanges like how we have done in the past. Any update on that.
Okay, sir. Thank you, sir. This is all from my side.
Thank you. Next question is from the line of Himanshu Kedia from Kotak. Please go ahead.
Hi, good afternoon. Am I audible?
Yeah. Go on.
Actually, one thing. Continuing from the previous participant, what are the unique challenges in vegetables to grow at Kaveri Seed Company? When we have been working so hard for the last three years on so many crops or so many other varieties of seeds, why is it taking more time to grow in this? In similar time frame, we have seen other things growing much faster. Any thoughts on that?
No. As I answered in the previous question, our farmers keep on believing. Just not like they don't believe the brands. Even though if you have a brand, it's very easy to sell. But again, it needs to perform better than the other hybrids and then go forward. If you see the entire vegetables, okra, chili, and tomato contributes to a majority of the revenues. Across not only for the company, but across the industry, these three crops contribute more than 50% of the revenue. So if you are looking at these three crops, definitely that will grow. But in the last two to three years, we have some challenges in chili crops and some challenges in okra crops. And that just affected our growth. That is on a long-term basis. Medium to long-term basis, vegetables is a very good crop, and we are very much focused on that.
We have made a different team. We are spending more on R&D. That will definitely have a good result going forward. We are pretty confident that vegetables will contribute a meaningful size in the next two, three to five years.
One more thing. The government raised the prices for cotton seed this year. Does it benefit or what is the situation in the market? Are the prices rising for cotton seed or realization from
We completed last year to this year, even though the revenues were flattish. Even though the volumes were flattish, the revenues grew by 8% or 9%. We were able to realize the prices more in the market when compared to the previous year. That's the reason the margins are also good. The margins have also expanded by 2% to 3% over the last year. That really helps into the margins. This time there was a shortage of cotton seed, and we have realized much better than last year.
Okay, one last question on the seeds. As per the slowdown or what we have seen in the news, is the pricing going to be challenged from this side?
Sorry?
What news? Actually, we have shown it. The revenues
You are not audible. You are not clear.
Am I audible now?
Yes.
I was asking on news. Where we have seen a sequential decrease in maize, 7%. Has this pricing pressure impact maize because everybody is having a lot of inventory, and what is our inventory situation in the market?
I do not think we are down against INR 97 crore or INR 96 crore. We have done INR 87 crore in May. We are just down by 8%-10% in May in terms of revenue. In terms of the volumes, we are down by 25% odd . When we talk about the volumes, we have not participated in the subsidy this year because we are not having inventory, and subsidy is a localized business. We were in government subsidies. We are not participating in that. If you see at the overall level, we are down by 8%-10%, but we are very confident that during the course of the year, we will achieve the May revenues by the end of the year. There was evenly rainfall was also delayed. There were some spillover sales, which get released in the rest of the year.
Okay. Because on slide eight, there is some issue. May, we say INR 87 crore was the revenue. In April 2024, it is written INR 43 crore. The growth it shows minus-
I will just see if that is the case, we will correct it. Last year it was INR 96 crore- INR 97 crore growth. This year we are at INR 87 crore growth.
Okay. Yeah. Thanks. I will join the conversation.
Thank you. Next question is from Mr. Nitin Awasthi from InCred Equities. Please go ahead.
Hello, sir. Thank you for the opportunity. I want to understand how much was the illegal seeds penetration last year, and how much was it this year in cotton specifically? What I am trying to get at is that it is part of what we are hearing in the news is that there has been significant reduction in illegal cotton seeds, and the legal seed markets that have grown significantly. Plus, there was a shortage of seeds in the market. There was enough demand for the cotton seeds. However, our volumes have flagged. I just want to understand, if you can explain what happened to us specifically and the industry. If you see the overall acreages at the India level, the net acreage is stable. It has not grown much.
Even if you see the illegal seeds compared to last year to this year, it was flattish. From last year itself, we have seen decline in that. If you see as a percentage of illegal seeds compared to last year, it is almost the same as last year. This year, most of the companies were not having over-inventory. They were having enough inventory. That is the reason most of the companies have realized more.
You are saying we have not lost any market share?
No, we have not lost any market share.
The news about illegal seeds being lower than last year, as of now, has not played out. Maybe next year it will play out.
Compared to last year, it is almost flattish. Even illegal seeds are almost same compared to last year.
What I am trying to get at is, will it be next year I see this will be a significantly drop, right? Because of the crackdown on illegal.
I see the same amount continuing because it's like 8%-10% of the total market. I don't think it will go further down from there unless and until the new technology is introduced. But this year, the cotton, we need to see because of the delayed rains, delayed sowings and their crops have been impacted. Early variety crops have been impacted. But we need to see the quarter inventories for the next year. Quarter inventory is very tight in the industry for the next year. By seeing this condition, I don't see any reduction in illegal seeds for next year.
Understood, sir. Thank you.
Thank you. Next question is from Mr. Vijay Shah from IIFL Securities. Please go ahead.
Good afternoon, and thanks for taking my question. My first one was on the maize volumes. Last year, what percentage of volumes were towards the subsidy participation? I understand that we had stopped doing this a couple of years back, right?
No, we still participate in the subsidy programs, but based on our availability of seed, we participate. This time we were having lower inventory, so we have not participated in that subsidy program because even the prices are up this year. If you see the maize prices are up, the inventory costs are also up. As we go in subsidy, the realizations are very low. By keeping this in consideration, we are not participating in subsidy. Subsidy was last year, first quarter, we had done sale of close to 1,000 tons.
Okay, got it. So a major part of the decline in volumes is just natural, right? Because subsidy of 1,000 tons is just about 5%-10%.
Yeah, that's the main thing. Another portion, whatever the other decline, the normal market condition, that will definitely come up in the second quarter and the rest of the year because there were some spillover sales from May in the second quarter. As you see, we have seen a delayed monsoon and then continuous rains flow. So that has impacted to some extent. So I don't see any pressure in maize volumes in the normal business, in the normal trade, leaving the subsidy program. We'll be up close when compared to the normal trade by the end of the year.
Assuming about 10% is subsidy, can we assume or can we anticipate that the 10% de-growth in volumes in maize by the end of the year? Or do we expect to catch the rest of the gap?
What I am trying to say that if you take out subsidy, you convert that there is only 8%-10% in terms of volumes.
Okay.
But if you compare 2023-2024 year-end, by year-end, we will be up in overall maize volumes in the normal trade.
Okay.
We will recover that lost revenues in quarter two, three, and four.
Understood. All right. That is it from me. Thank you so much.
Thank you. Next question is from the line of Uday Pratap from Value Research. Please go ahead.
Hi, sir. Congratulations on the great quarter numbers. My first question is on the side of exports. Can you tell me what is the percentage of revenue that you have got from exports this quarter? Last year, our export as a percentage of total revenue was around 2%. This year, since we are also trying to find new opportunities and are going to start exports of mustard and seeds and all, do you think that number can increase to maybe 3% this year, or it would still be around 2% in FY 2024?
We just started doing it this quarter, but majority of that comes in the second and third quarter, some in the fourth quarter as well. This year overall percentage, last year it was 2 odd percent . This year it should be between 3% and 3.5% in terms of revenue. The other thing what we need to see is instead of percentages, we are trying to export to other countries. As we try to expand many countries, we have enough portfolio, so we can easily get good revenues from different countries. So that's an advantage. In the initial period it is very low, but once you penetrate there, it will be very easy to introduce your hybrid and to get good traction in the present selling hybrids. So that will help us.
And this quarter export as a percentage of revenue, is it still?
It is very small. This quarter is. But majority of that will be done in the two, three, and four. Two, three are the major quarters. These are the major revenues. For example, last time we had done 21 out of four. This year it should be between 20 and 25 out of four.
Okay, sir. Thank you. My next question is on the side of vegetables. You already answered in a given provided enough detail for that. The only part I want to clarify with you is, are there any vegetables which are good, which offer good margins, and are there any vegetables which have high margins or have poor demand fluctuation like that in between the different vegetables? In the future, do you have any plans to exit any one of the vegetables like that?
Basically, all the vegetables are very profitable, ranging from 30%-60%. The EBITDA margins are between 30%-60%. There are some varieties where we have lower margin, whereas there is very specific varieties where we try to sell those varieties. But in terms of the hybrids, most of the margins are very attractive. As I said earlier, vegetables, chili, okra, and tomato are the three major crops. If we are able to sell products in these crops, we will have higher revenues and higher margins. But other crops like cauliflower, cabbage, the carrot we import from other companies and sell it because the market is also growing for these crops. We do not do research in that. But we source material and sell it. In terms of we are exploring all options, as vegetable is a year-round business.
We want to be aggressive in vegetable business as the markets are also growing. It is growing more like 15%-20% year-on-year on industry basis. That is a very good space to be in. We have started aggressively last seven, eight years back. I think in the next three to five years, definitely we will see result of that.
Okay. You are treating vegetables like you treated hybrid rice two years ago.
Yeah, but both are different segments because in rice, the range is very minimum, and four or five varieties rule the entire market. Whereas in vegetables, every street and every state, we have a distinct taste. It is a bit difficult to be a uniform product. That is the reason we have many hybrids which we have introduced there. But vegetable is a very good space to be.
My final question is on portfolio. As a portfolio, we are the only company in India where we have very few, very high product range. I mean, high crop range, and in each and every crop, we have a huge product portfolio. That given minimizes our risk on a single crop dependency, and we add value from each crop, whatever it is. For example, we have added mustard now. Mustard as a size it is a very small market when compared to cotton or maize or rice, but it is a highly profitable margin, and we can easily do a revenue of INR 50 crore- INR 100 crore in that. These are the ones which will really add some value. Okay, sir. My final question is on, do you have any update on GM crops?
Last quarter you said that you already made promises with the government that you are waiting for some government approval. Are there any more updates on that?
The process is on. The process is on. Very shortly it will be released. It is taking some procedural time, but definitely both the companies and the government, both are working aggressively on that. We don't see any difficulty in getting approval. I think this year it should be clear.
Thank you, sir. That is fine.
Thank you. Next question is from Sanjeev from Dream Ari Investments. Please go ahead.
Hi. I wanted to know that now that you have declared good results, whether this kind of profit, trending profit, would continue in the future.
Yeah. If you see in the last five, six years, we had a muted growth. There were many challenges. If you go back to 2015, majority of the departments were contributing more than 70%- 80%. Last year it was below 35%. We are adding many crops now. From here on, with the kind of portfolio what we have with the amount what we invest in the last five years. If you see in the last five years, we invested INR 180 crores in research. So in terms of the capacity, in terms of the infrastructure, setting up new plants and everything, we have invested more than INR 250 crores in the last five years in the research part. We have added facilities, we have added new infrastructure, we have strengthened our manpower, strengthened our R&D facilities, strengthened our R&D work in that.
But seeing all the work what we have done in the last five, six years and the kind of hybrid portfolio what we have in different crops, we are pretty confident that the growth will continue for the next three to five years because many difficult things are done. The growth which was muted in the last three, four years, I think it will start this year.
Sir, my next question is regarding the exports. Can you give us a picture of how the exports would look three years down the line? How its size of the business would be?
Actually, this is a very big business. For example, when you talk about maize and rice, these are the two big crops which have got very good potential. For example, if you take Philippines or Vietnam, or if you take Thailand, where maize and rice is the major crop. Even if you take Bangladesh, maize. Pakistan, maize. All these are maize. So we have very good hybrids in maize, and we can easily sell there. Right now, we have done trialing in Vietnam. It was very encouraging. Recently, we approached the government also from Vietnam and the agriculture ministry to introduce our hybrid there. They have done a trial, and we have got very good results there. So these are the trends. In the next three to four years, it is not growing here.
But down the line, five to six years, these are the areas where we have good growth potential, and we can easily do a revenue of INR 200 crore-INR 300 crore in export down the line in five years.
Okay, sir. Thank you very much.
Thank you very much. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Anyone who wishes to ask a question may press star and one on their touch phone telephone. As there are no further questions, I will now return the conference over to Mr. Mithun Chand for closing comments.
Thank you for joining us for the investors call. For any further queries, you can always reach to follow up with our investor relations.
Thank you for joining the call. For any other information, please be in touch with Ramanaidu from HMS PR on 992-020-9623. On behalf of Kaveri Seed Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.