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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the KRBL Limited Q2 and H1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.
Thank you. Welcome to KRBL's Q2 and H1 FY '21 Earnings Conference Call for analysts and investors. Today, we are joined by senior members of the management team, including Mr. Anil Kumar Mittal, Chairman and Managing Director; Mr. Anoop Kumar Gupta, Joint Managing Director; and Mr. Rakesh Mehrotra, Chief Financial Officer. We propose to commence with an update from Mr. Anil Kumar Mittal for his thoughts on the global presence and scenario for the company; Mr. Anoop Kumar Gupta, with his perspectives on the domestic operations; and Mr. Rakesh Mehrotra on the financial performance. After the opening remarks from the management, the forum will be open for an interactive question-and-answer session.A cautionary note, certain statements that may be made on today's call could be forward-looking in nature, and actual results could vary from these statements. A detailed statement in this regard is available in KRBL's Q2 and H1 FY '21 Investor Presentation, which has been shared with you earlier.I would now like to invite Mr. Mittal. Thank you, and over to you, sir.
Mr. Mittal, you may go ahead.
But it has been disconnected every time. Hello? Hello?
Sir, you can go ahead with your opening comments, sir.
Okay. Okay. Good afternoon, everyone, and thank you for joining us on the call today. First and foremost, my heartiest Diwali greetings to you and your family members, and my best receipts for happy, prosperous and more importantly heartiest times ahead -- healthier time ahead.I would first to start by thanking my colleagues at our plants and head office and those who are working on the field across the country and worldwide for their unrelenting dedicated and hard work despite such hard time due to pandemic. It is only because of their continuous efforts over the past few months that we have been able to meet our export and domestic market demands in term of production, supply and availability of our brand across geographies. I thank them all for their earnest efforts and commitments.I would like to share some updates on the export front now. You are aware that we continue to have the leadership share in Middle East and North Africa...[Technical Difficulty]
We seem to have lost the line for Mr. Mittal. Please stay connected, I'll just reconnect him. Participants, please stay connected, while we reconnect Mr. Mittal. Participants, thank you for patiently holding your lines. We have the line for Mr. Mittal reconnected. Over to you, sir.
Yes. Sorry for interruption. The update on export front, you are aware that we continue to have the leadership share in the Middle East and the North Africa region. The severe logistics problem and shipment impediments we had faced since the beginning of the pandemic are almost over. The regular shipments have resumed and sales have reached close to normal. The temporary backlog that we had seen in the initial period of the lockdown is getting cleared. We could ship the carryforward stocks of Q1 during the Q2.Quarter-over-quarter, we have shown 114% increase and rice exports to nearly INR 670 crore in Q2 FY '21. Owing to par excellence quality standards and consistent supply, our brands continue to be well appreciated and command a premium in countries like UAE, Saudi Arabia, Kuwait, Qatar and Oman where we enjoy the top slot of the basmati arena. And these are the more discerning customers in the world and they value good quality and understand the true attributes of basmati rice.During the slowdown period, our sales in these countries have shown positive signs. We all know Iran also is a major destination for Indian basmati rice, amounting to around till 35% share of total Indian basmati exports. There has been a quite positive news from Iran that the government has asked importers to immediately clear the cargo, which has been lying at the ports for the last 8, 9 months. Moreover, the sentiment between Iran and India have come quite positive due to the recent change in the U.S. leadership. It is expected that there would be a relaxation in the American centers against Iran, which would pave way for increased rice exports from Iran and crude imports from Iran.We at KRBL have been doing our entire business with government bodies against LC. And hence, our business with Iran is quite smooth, and payments are being received very well in time. Iran has started showing interest in barter deals too. We are seeing positive signs and are confident that the picture would be more promising in the next quarter -- fourth quarter or next quarter.Our presence is growing in North America region as well with 4 days into club stores, which today accounts for about 65% of the total American market. Whereas we are already leaders in the key trade channels in Canada. Our presence continues to build in the United States as well. The potential is good, and we are positive that in the coming years, this sentiment will emerge bigger with our margin-focused category. In markets like South Africa, Australia and New Zealand and other countries in the Southeast Asia, we are the leaders. Everywhere our brands enjoy a premium status for their distinct quality and taste.In addition to our flagship offering of India Gate Basmati, we are steadily seeding our health food portfolio abroad. Very recently, we have launched rice bran oil and Amaranth into international markets and the initial response has been very good. Further, I would also like to mention we are planning to launch these products in our domestic market as well. If you see our health food segment, it has shown around 40% growth in H1 FY '21 as compared to last year, and we see these trends sustaining bagged by underlying demand, our strong brands and wide reach.In the current times, consumer habits, preference and spend patterns have changed. The consumption at home of package, health and convenience products have increased globally. We have also witnessed this and have seen good traction across our range of offerings. Our focus on leading supply chains coupled with double stringent quality conscious procurement standards will ensure continuous volume growth in the quarters to come. As we maintain our robust balance sheet, our sales performance going forward will be met by good growth on the margin front as well.To be precise, as regard the demand during this quarter from countries such as Iran, Iraq and Saudi Arabia. Iran, as we know, will take a couple of months to get relaxation from the U.S. tensions and results of the same will be seen in Q4. Iraq and Saudi Arabia have already imported big quantities during Q1 and Q2. Saudi Arabia as against their normal imports of 900,000 tonnes to 1 million tonnes has already imported 1.25 million tonnes, which is about 25% in net sales of their normal demand. Same as the position with Iraq. These 3 countries together account for about [Audio Gap] of the total export demand out of the country. Therefore, the third quarter for the total rice industry will remain subdued, but it will be recovered in Q4.Before I conclude, there is a positive development that I wish to share with you. In view of the upcoming harvest season, we needed full and free usage of the warehouses attached by VG. In view of the pandemic the appeal bearing number miscellaneous appeal PMLA 2/2020, wherein the order dated 17th January passed by SBA PMLA by the Appellate Tribunal granting us physical possession of the above said warehouses was challenged and could not be taken up. In order to ensure smooth business activities an efficient movement of stocks, we approach the High Court, requesting them to take a deposit of INR 11.13 crore, equivalent to the value of the attached warehouse in lieu of the free usage of the attached properties during the pandemic of the miscellaneous appeal, without prejudice to our contention in the appeal. The High Court was pleased to allow our request order dated in May and allowed us to freely use the warehouse premises. We stand committed to ensure smooth business operations during pendency of the ex-gratia criminals case against the ED.I would like now to hand over to Mr. Gupta to share his view, and I once thank everybody once again. Over to Mr. Gupta.
Thank you. Thank you, Chairman. Good afternoon. Good afternoon, everybody. Thank you taking time out to join us. Hope all of you are safe and well. I'll spend some time sharing thoughts on the highlights of our domestic operations.Just a question, am I audible, very clear?
Yes, sir.
Yes, sir. Loud and clear.
Our business was also impacted due to pandemic restrictions but being responsible FMCG company we have moved proactively to take all necessary precautions to safeguard the interest of our customer and our employees. We have had a steady start to the first half of the fiscal year witnessing good volume trends.Coming to the recent quarters review our top line in quarter 2 FY '21 grew at a strong 27% year-on-year, strengthened by the growth in demand, especially in our international business. Paddy prices spends have been lower than long-term averages, and part driven down by reduced shipments to Iran. This has given us an advantage to meet our increased target sales in next 2 to 3 years. Through ramped up procurement, we have already the largest and best storage infrastructure in the industry, this combined with our robust balance sheet will help us.I would also like to comment the government's bart taking initiative in the forming space, the Farmers' Produce Trade and Commerce, Promotion and Facilitation Bill 2020 will permit farmers to sell their produce outside the APNC mandi's and removed barriers to interstate trade. Similarly, the Farmers' Empowerment and Protection Agreement of Prices Assurance of Farm Services Bill 2020 will allow farmers to enter into contracts for agribusiness firm for large retailers on pre-agreed price of their produce.We have seen the mandi tax in Punjab reducing by 50%, that is from 4% to 2% in Haryana. It has been lowered by as much as 75%, that is from 4% to 1%. In Uttar Pradesh, KRBL continues to have an added advantage of the export policy issued UP Government that any purchase of paddy against export is exempt for mandi fee for a period of 5 years, that is from November 2017 to November 2022. And to add on this, just 1-day or 2-day back, Chief Minister, Yogi announced that they are reducing the mandi. I mean the notification to follow, but statement of Chief Minister has come on a Twitter, they are going to reduce the mandi by 50%. It is presently 2%, now it will be 1%. So in all the 3 producing states our mandi tax is reduced.We anticipate savings on logistic costs to the tune of 50 to 100 basis points of our revenue. Over and above this, the ease of doing business, alone with rice, financial gains to new heights. We are hopeful and see these reforms positively benefiting our industry in the long term with consistent implementation.Our inventories have steadily involved to meet our brands healthy growth in demand. We finance our inventory at reasonable cost, which considerably reduces our dependence on external finances. This has enabled us to grow in progressive leads in the context of a sustained turnover.Coming to some details on the performance. Overall comments in India was impacted by the near mill sales to HoReCa segment in quarter 1 FY '21. These have recovered quite healthily. Bulk pack sales have posted a very smart recovery, and we project given the upcoming festive season, we will surpass pre-COVID levels with the bulk pack segment.To share our statistics, we were at 47% dip during quarter 1 FY '21 in the bulk pack segment. This stands at 12% dip in quarter 2 FY '21. As lockdown norms further eased with theaters, restaurants, train commuting and outdoor facilities opening up across the country, we are hopeful that the demand scenario will pick up in HoReCa overall.The consumer business remains strong and has, in fact, further strengthened. During quarter 2 FY '21, we witnessed 19% improvement year-on-year in the consumer tax segment. In this quarter, we were able to get a significant traction in our e-commerce business based on our existing strong partnership with the online players. Broadly, the organized retail channel has done well, and we believe that it will keep pushing growth within our consumer pack business.Going forward, we would like to engage ourselves into more value-added products category, including regional premium rice and health foods. The success of our integrated business model is underscored by the growing demand witnessed and the extending reach of our brands across channels. Our superior business model is central to everything we do. It enables us to ensure excellence in execution, strengthen our relationship and improve outcomes. In the coming years, we will continue to fortify our business model to deliver sustained value creation for our stakeholders by delivering on our growth objectives. And with that, I would like to invite Mr. Mehrotra, our CFO, to share his views. Thank you.
Thank you, Anoopji. Good afternoon, ladies and gentlemen. I welcome you to the KRBL's Q2 and H1 FY '21 Conference Call. Trust, all of you are safe and well. Let me provide you a brief overview of the financial performance for the quarter. We delivered a strong quarter and continued to build up in demand categorized by increase in export volumes and healthy growth in across segments in India. During Q2 FY '21, our stand-alone revenue from operations came in at INR 1,133 crore, up by 27% year-on-year. Our EBITDA during the Q2 FY '21 stood at INR 224 crore, up 29% year-on-year, and our company has recorded a consistent EBITDA margin of 19.7%. This was on account of steady gross margins at 30% and sales business mix in favor of the exports with the easing of the shipment since July onwards.PBT for Q1 FY '21 stood at INR 202 crore, up by 38% year-on-year. PBT margin in the period is standing at 18%, owing to cost benefits on inventories and substantially lower finance costs on account of reduced requirement for working capital funding. Our PAT for Q1 '21 came in at INR 150 crore with growth of 32% and PAT margin of 13%. Our objective remains to reinvest our approvals into building inventory. Given the prevailing low paddy prices, we are taking this as an advantage and stocking of the incremental quantities towards our 2 to 3 years of distress. This gets us a unique space to grow volumes at a pace that we are comfortable with in the coming years. We have performed exceedingly well in terms of the cash flow front as well. As on September 30, 2020, our cash generated from operations stood at INR 750 crore, and a part of which was utilized to repay or borrowing. Consequently, we have net debt -- net negative debt of INR 227 crore. With leading brands and effective range of products, leadership in global operations, combined with best-in-class and in management, our return ratios have consistently stood out. Return on capital implied as on 30th September came in at 21.64% on annualized basis, which is higher than the average of the previous few years.Our net worth today stands very strong at INR 3,402 crore. Considering all such factors, our dedicated pursuit of consistent growth and good health of our balance sheet historically and I'm glad to annouce ICRA has made upward revision in the credit rating, where previously it was watched with negative. For long term, it has added stable rating, thereby supporting our strong business process and consistent cash flow.On the whole, the company's financial position in healthy. Over the longer term, we will pursue all our defined in the phases towards being a debt-free company gradually while always maintaining a strong financial discipline. I would like to request the moderator to open the call for question and answer. Thank you.
[Operator Instructions] The first question is from the line of Varun Goenka from Nippon Mutual Fund.
My compliments for a very good H1 despite all the challenges. And I think a very, very good presentation filed with a lot of insights. Thank you so much for that. My question -- I mean, I think Anilji's comments and Anoopji's comments have answered my questions, but only around the finance strategy, I'm a bit unclear because we need working capital only for 6 months. So with such large amount of cash flow is getting generated what is the yield that we get on those cash flows for the balance 6 months?
Yes, Varun, you are right, looking at today's schedule where the interest on the deposits are in the range of 3 -- 2% to 3% or maximum 3.5%, 4%, especially the deposits in mutual funds or banks in the shape of FDRs. But going forward, I don't foresee that we will be depositing the money in the banks, like we have done this year for 2, 3 months. What -- going forward, I'm seeing our inventory will be much, much higher. When I see -- when I say our inventory will be this much higher, that means by March, our all internal finance and even the bank finance will be fully utilized.
Okay? Okay. But Anoopji -- so basically, what I'm trying to get to is, I think we are being a bit over conservative. I think we were right in these -- in the last 2 years. Can you hear me?
Hello. Let me complete. Let me complete.
Sure. Sure.
From a -- from what will happen, from March to August or March to September, we will be in the process of repaying bank finance. And our finances will be in the form of inventory only. Now I'm talking this here, the paddy prices are historically low, and we are going to start in November, December, the regional rice, especially on the front of procurement. So I think going forward, FY '21 and FY '22, a lot of finances -- I mean, whatever surplus today you see in the balance sheet will be utilized in the inventory. Thank you.
The next question is from Ekta Sanghvi from Vallum Capital.
Sir, first of all, congratulations on the excellent performance this quarter. Sir, I just had 2 questions. Firstly, do we -- therefore, I mean, you indicated that our demand from Iran will be -- like the demand from Iran has increased and the results to be seen in the Q4. So could we expect it to be at the same level as FY '20? Or will it be better than that?
As far as Iran is concerned, as I told you, the total system was under cure. Recently, just a week back, only some positive views have started coming and whatever the change of guards has happened in America, the effect will start coming only in February, March, it cannot come immediately. So what time -- what we are -- and that finally, Iran is going to start imports. They have taken their inside decision also which are quite positive. They are trying from others -- that they are also positive. But for the business to regularize as it was before, it will take 3, 4 -- 2 months, 3 months. And a little bit effect will come on the third quarter, but its main effect as normal will come in FY '21, '22.
Quarter 4.
Quarter 4.
Okay. So -- okay. It is fine, sir. And sir, 1 more thing on the -- sir, basically consumer packaging segment, in the Unity brand, specifically, the growth was pretty high in FY '19 as compared to FY '20, so was it -- like did we lose any market share? Or like -- so I know that FY '21 has been better, but like have we gained back that market share? Or if you could just us give some more clarity on the Unity brand?
You see for Unity brand, the consumer tax was placed in the market in the beginning of January -- December '19, January '20. And when we were placing this in retail market and doing promotion, suddenly by March COVID came, and all the plants got affected. So our placement and all the plants, especially in traditional trade, got affected. But now we are very aggressive as far as Unity consumer packs are concerned. When I talk of a consumer pack family, I'm talking we have raised a Unity Biryani, Unity Premium, Unity Super, Unity Tibar, Unity Dubar, Unity Rozana, Unity Mogra, Unity Mini Mogra. Just like India Gate, we have given -- we have taken out a full family for Unity. And I tell you the results are so promising by FY '23, this Unity brand, which is around INR 450 crore today, with INR 450 crore is mainly by pack, institutional pack, will go to INR 1,000 crores in FY -- by FY '23. Thank you.
Okay. Sir, just 1 last question on HoReCa. What -- has the demand -- or how much is the demand as a percentage of normal level now? Have you seen any increasing demand in the HoReCa segment?
As far as KRBL is concerned, in quarter 3, I think we will surpass pre-COVID demand of bulk packs.
The next question is from the line of Ayush Agarwal from Mittal Analytics.
Sir, I have 2 questions. First of all, congratulations on a very good set of numbers. Are we need to understand the supply chain in the e-commerce segment, which has crossed 10% of our overall sales now, do we directly sell-through Amazon, Big Basket and the likes of them? And if yes, do we fetch higher margins with respect to our traditional retail and modern trade channels versus that? And secondly, what are our capital allocation plans, like you said that you will be buying higher inventory. But apart from that, are there any other franchise utilize surplus has that within rating?
Regarding modern trade channel, especially on the e-commerce front, wherein you have named Amazon, Flipkart, I tell you frankly, all the e-commerce are taking deliveries directly from us in their respective DCs, bypassing my distribution channel, clear-cut saving of 4% to 5%. But that saving, we are passing on to e-commerce in the shape, spending money on the banners, spending money on the visibility of the product, on the online channel, spending money with them to give promotions, spending money with them to give some online more visibility, number one. Number two, you said 10%. I tell you, today also, the percentage was 0.1%, 0.2%, which is around 1%, 1.5% today. Even 10% of the total turnover in e-commerce is a dream and that may come after 3 years, 4 years or whatever. And your second question was regarding inventory, I think. What was your second question?
Sir, cash utilization. And you said most of it will be utilized for inventory. But if we have any other plans since you have been getting a lot of cash now?
Yes, cash, I've already answered the question of Varun, it is on the same line. Cash generated will be utilized definitely on inventory only. You see, in any food industry, doing capital, we will be spending some capital in regional business, spending money on the warehouses and processing plants and packing plants. But majority of the money would be spent on inventory because we will be going in for an aging process, wherein even the regional rice will be aged and will have more values in it. Even certain mid-aged rice of regional variety, can be age up to 2 years also to have a good premium on a certain variety. So according to me, 80%, 90% of my surplus inventory will go definitely into aged. Thank you.
Okay. So sir just confirming that, like you said, that we have 4% to 5% direct savings in the e-commerce segment. And once we build that and visibility on savings platforms, can we expect some of it to spill over to our margins in the year going ahead?
Definitely. Definitely, sir. Definitely, the margins will improve on e-commerce, bypassing distributors. And I tell you, e-commerce only take direct deliveries from a big cart, from a big basket of things where the sales happen. If the sales are happening, very less, they will never promote direct delivery.
The next question is from the line of Sarvesh Gupta from Maximal Capital.
Sir, first of all, a bookkeeping question, what was the quantity in exports in domestic in this quarter?
Can you send a mail, I'll share you separately?
Okay. And secondly, sir, on your domestic business. Now if I look at your degrowth versus your competitors' degrowth, it seems that we have fallen by almost 20% in H1 compared to maybe 10% by the competitor. So have we ceded some market share? Or is it because we had a higher market share on the bulk pack which is why we have fallen more in terms of our actual performance compared to our competitors?
You see as far as domestic sales is concerned, we have analyzed the numbers, when you take competitors' clearly you are comparing with healthy foods Daawat. And we have analyzed the numbers and I tell you 1 thing that our share has fallen due to -- mainly due to bulk packs. Our growth on consumer pack and every thing is very good. And as far as value realizations are also concerned, we find the delta of difference, what we -- what was used to be between KRBL and LT in quarter 2, it was quite less. But I tell you the main reason for that, our bulk pack sales are at a very high price compared to Daawat. Our bulk pack sales suppose the average realization today of the company is 54, 53, whatever, and our average realization for bulk sales because it is always a premium category, it is always 65 to 70. It is -- it was always between in the range of 65, 70. And that took a very, very big hit in H1. If you compare our debt free results wherein our bulk pack sale has come to the normal, you will see a growth, you will see a growth in the volume, you will see growth in value realization. As far as consumer pack is concerned, we are satisfied. Our growth pre-COVID -- post-COVID is better than pre-COVID. I hope, I answered your question.
We would make out the difference now. Secondly, now with this Unity brand coming into picture and you posting the INR 1,000 crores out of a top line figure for the next 2, 3 years. So is it that we are finding that within the packaged food category, we are finding more traction in more economy segment. And hence, we are sort of working more towards it, which -- while it can grow our sales faster, can have some sort of a negative impact on the margins?
Not at all. You see what we have stated, the Indian market, many of the consumers are very, very price conscious. And I tell you, internationally, you see many companies. I was reading about Louis Vuitton. Louis Vuitton's 40%, 50% -- 40% -- I think 35% of their top line is Louis Vuitton, 65% are the cheaper variants of purses and everything, wherein there is a bulk sale. Similarly, in India Gate Basmati rice, if you compare with an automobile industry or anything, we are considered as Royce Rolls level. I want to have a level where in C-Class Mercedes or a Mercedes or a BMW going on -- for a very, very cheap. I mean, their main models, premium models are INR 1 crore plus, they are looking at INR 20 lakh, INR 30 lakh models to have a bulk sales. The main reason for Unity is to have to attract the consumer, which we are not able to attract through India Gate, because of our premium pricing. We won't be in a pricing that consumer to also come in. Thank you.
Yes, sir, I understand that the intent behind that strategy. My question is, on India Gate Classic, the value proposition is very clear to the customer that this is the best which is there in the market. Now there are so many brands these days which are vying on e-commerce, on modern trade and then there's so many private labels also. So what is the unique value proposition for a brand like Unity, which will help customers to buy that over so many other options, then he is price conscious.
Number one, the quality -- the price is quite comparable but if you compare the quality, it will be far, far better, far, far better in terms of cooking, in terms of what we are offering. Number two, the bulk pack, which is also today, what Kirana VT is selling. And the share is around 60% of the Indian Basmati market, we want to hit that segment also. We want Kirana VT people to buy our bulk packs for 25 kg. And if they want to sell lose, please do so. You see all our products, India Gate, Unity attracts 5% GST. Then also, we are able to penetrate to the retail level to the consumer route. And to start with, we are giving hefty schemes to the retailers like Kitchen Sajao offer. We are giving just a small offer, like buy 160 kg of Unity any bulk pack, get 1 kettle, electric kettle free. I mean these are -- I'm just giving you an example. We are giving these promotions to the retailers to promote our bulk packs also. Thank you.
Understood, sir. And final question, sir...
[Operator Instructions] We'll move to the next question. The next question is from the line of Resham Jain from DSP Investment.
Yes. Congratulations on a good set of numbers, sir. Sir, I have a question on the paddy, the overall production and the price levels currently versus last year. And also, with a lot of export opportunity being locked on the Iran side, how do you see the demand/supply situation panning out in the market? And the final and the last question is, given that the new procurement prices are at a slightly lower level, do you expect any impact on the final product prices?
Mr. Mittal will answer or?
You can answer it. You are talking about paddy, I can also answer, if you want, I can answer.
Please answer. Our Chairman will answer in more details.
See, let me tell you, in any commodity trade, the cost of the final product is always correlated with the cost of the raw material, you take any agro product. So therefore, the prices this year for the paddy is about 25% low compared to the last year. And besides that, there are 2 more advantages, once the interest rates have come down, and the second is, there is a shortage of money as far as our competitors are concerned, because the bid money has stuck up in Iran, which now within 1 month or 1.5 months, it all will come back to India. So therefore, we feel it's an opportunity for us to buy rice, which will cost us later. And as soon as the Iran opens up or these 2 countries, which I named in my initial presentations, Saudi and Iraq, which accounts for about 67%, 68% of the total India's imports, definitely the price will shoot up. And we are going to get advantage because we are buying rice, the paddy on a regular basis. And I'm quite confident that these prices will not come again. This I'm telling you with my experience of about 50 years into this trade. We have not seen these type of prices at least in the last so many years. So therefore, it is an advantage here for KRBL and it will be advantage here for both in exports, in domestic as well as to our stock level. We are going to buy because we have money, we have surplus money. We have good bank limits, interest rates are very low. We are going to buy at these prices minimum 20%, 25% extra over last year.
Okay. And sir, what is the current procurement prices in the estimated number versus last year?
See last year -- now let me tell you, everything is different. There are primarily at the moment 4 commodities. One is the traditional basmati rice, which has not yet come, it will come by end of November or about 25th of November onward. One is 1509. Last year, it went up to INR 27, INR 28, which is today INR 20, INR 21. Same way, Pusa basmati rice, that has not come down because the crop is lesser this year and demand is quite low. So compared to last year, it is only 10% down. And as far as 1121 is concerned, which is the export of which is more than 60% out of India, the prices are lower by minimum. Last year, it went up to INR 34, INR 33, INR 34 also. This year, it has opened up at INR 26, INR 27. So there is a gap of 30% on all the commodities.
Understood, sir. Understood. Okay. And sir, this 1121 is largely exporting to this Middle Eastern countries or across the globe, including U.S., Europe, South Africa?
Except Europe. Except Europe. Because Europe is buying totally brown rice, their mills are right over there. Out of their total imports of 400,000 tonnes, I think the 25,000 to 30,000 tonnes white rice is going 20,000 tonnes, 380,000 tonne is brown rice and the percentage of broken is too much in 1121 while making the white rice. So the import only -- so their 90% import is Pusa basmati rice. They don't buy any other rice other than Pusa basmati rice, 5% to 7% of traditional basmati rice. Rest of the world imports 1121 because of the broken -- wherever the white price goes, the demand of 1121 is much more than any other rice.
[Operator Instructions] The next question is from the line of Dushyant Mishra from SageOne Investments.
I just wanted to ask how the procurement for pesticide-free rice for Europe because I understand that Europe's problem was that they wanted pesticide-free rice. Is that coming along well? How are things looking on ground for that?
I answer. Anoop, you answer.
You answer, sir. MRL -- he's talking about MRL.
MRL, okay. See, there is no doubt this year the quantities of MRL are much more over the last year or what the previous year. Therefore, we are also concentrating ourselves for buying maximum of our MRL paddy. But the problem is that the difference between the normal paddy and MRL paddy is about INR 2 to INR 3 per kilo, which is on a very high side. Even then, we are buying. I think this is going to streamline because INR 3 on a paddy means INR 5/kilo on a rice, which makes a difference in export price of about $70 to $80. But I believe we are not going to stop it, but we will be better off over last year as far as pesticide-free paddy is concerned.
Okay. Got it. And then second question was any idea when we would stop seeing ED in our shareholding pattern? I mean, I know I'm sure you don't have much, but any sense that we're getting from our interactions with them when they stop appearing in our shareholding list?
You see matter of shareholding pattern where ED is there, it is not related to promoters of Balsharaf, not related to the company, KRBL Limited. It is related 100% to Balsharaf, who is our distributor for Saudi Arabia and we had a long 25, 30 years association with the person. And I told you several times, have informed everybody that we are assisting Balsharaf in their day-to-day legal matters since he's in Saudi Arabia and we are in India. We are just assisting him in legal matters. He is taking the decisions. But as for the results of last 1, 1.5 years, we have won in appellate authority. we have won in high court. We have won in double bench. Even for the second question, what we have won in double bench, we have won in Supreme Court also.Now ED is playing extra smart or we can say, ED is not cooperating at all, and he's putting all pressures on Balsharaf, doing all types of new, new cases. Now 1 case is pending in the appellate authority in the tribunal. And being it's a COVID situation and the lawyers of Balsharaf don't want to argue them at -- on virtual, they want to argue it on a personal note. So they are waiting when the COVID things get clarified.So I hope I have answered your question in a very detailed manner..
The next question is from Ashish Kacholia from Lucky Investment.
And congratulations on a good set of numbers. My question basically, sir, when you say that the prices of the paddy have fallen from INR 34 to INR 27 or INR 28, what is the impact on the inventory that we are holding of the aged rice? Does that also fall in value or the 2 are independent of each other?
Let me answer this question. Ashishji, I've been answering this question from the last 15 years. And people -- our investors are really confused every time that if the new crop prices falls, then what is the exposure of KRBL on the old inventory. I've made it very clear today also, crop 1121 2019, crop 1121 2020, crop 1121 [ 2018 ] is a different commodity. Prices, whether the market goes to any level, are not comparable at all.It is, according to me, if the commodity is different, number one; number two, KRBL, KRBL is marketing all their consumer packs worldwide, not only in domestic, even in international, which has minimum. Certain SKUs are 2 years olds. Certain SKUs are 1, 1.5 years old. And there are certain SKUs, which are minimum 9 to 10 months old. Majority of them. I mean, if you talk of the consumer packs, I would say, 80% of them, except parboiled rice. So -- and we don't have any stock of parboiled rice. We don't have any stock of paddy, which will be converted into parboiled rice.So any variation of valuation of inventory on the basis of the new crop prices is -- thinking of that is also not correct..
And I have 1 more question, sir, which is we have some plans of introducing some additional varieties of other fragrance rices in the domestic market. So how is that particular effort on our part going along?
The season has come. These new regional varieties start coming by end of November or first week of December. We have decided to purchase the quantities because it requires a minimum aging of 1 year. We will purchase the quantities, where -- and store it in our rented warehouses of government or whatever we get. But within that 1 year, we will be adding infrastructure of warehousing, packing, getting staff, all these things, and the time is 1 year, and we will do everything in that 1 year. So that by November 2021, we are able to start it in -- marketing in a very, very rigorous manner..
The next question is from Rohith Potti from Marshmallow Capital.
And congratulations on posting excellent set of results in this quarter. So my question is sort of a follow-up of a previous participant's question on a comparison with Daawat. So just wanted some more clarification there. So I was just looking at purely the quarter 2 numbers. Last year, Daawat quarterly -- the quarter 2 numbers was INR 266 crore only for the India business. I'm talking only about the India business, while KRBL India business for last year quarter 2 was INR 532 crore. So we were double Daawat at that time. While in this quarter, Daawat revenue is around INR 310 crore, they have grown 20%, while we have degrown around 20%. So the difference from being 2x last year, it has come down to 30% this year.So the question is, with the economy, the lockdown ending in 2 -- I mean the 2Q was more normalized than Q1, how come -- why did the difference reduce to this extent? Is it still because of the bulk pack itself? And do you see the difference going back to the more normal levels in the future? Or what exactly is happening here?
I told you major retail is the bulk pack sale. The bulk back sale in the previous quarter year-on-year was quite high, and the pricing was also good. Even the bulk pack sales of Daawat was also good. But in quarter 2, what happened, the bulk pack sale of Daawat has increased tremendously. And my bulk pack sale, which is a premium segment, which is from INR 65 to INR 70 realization level, it has not picked up to that level in quarter 2.But talking forward, way forward, quarter 3, I'm expecting my bulk pack sales to surpass the pre-COVID scenario of quarter 3 FY '20 to quarter 3 FY '21. So that is the main reason of the difference of domestic sales between Daawat and me. And still, I'm talking -- we are working. Our staff is working. Our think tanks in the organization are working very hard to know what are the other facts. And maybe we give some clarity on that in the next 10, 15 days.
One follow-up, sir. That was very helpful. One follow-up to the question was, what changed in this quarter? What did we do differently this quarter that we are seeing such a strong growth in bulk pack? Is it normalization of the restaurants and other outlets? Or is it something else that we did at our end?
No, you are talking quarter 3. Definitely, there is a normalization and, frankly, because of the prices -- you see when you -- when I talk of a bulk pack sale, it is not aged rice, it is basically a steam rice that doesn't require aging. So the paddy prices is so low and comparatively, we have offered a good price in the channel, so even the distributors, they see that we should have our stocking. Not only distributors, I mean the distributors, the wholesale, the whole chain is of the opinion that we should be in a stocking mode.So in that mode, they think if we want to stock, why not KRBL? Why should we go for other? It's a tested product, INR 1 or INR 2 here and there, KRBL product will sell. We should not stock others people. So KRBL has the advantage. And due to the stocking spree, I think our sales in quarter 3 will see a record.
Okay. That's very helpful. Sir, my second question is on Saudi Arabia. So just curious to know over, let's say, the last 4, 5 years, looking from 2015 to now, how has [indiscernible] of Saudi moved? Because I did not get the number correctly. I was part of the AGM, but I remember it has fallen down by around, I think, 50%, 60%. So if you could confirm or give us more clarity on that?And the second question here is, is it difficult for us to find a new -- given -- as mentioned, Balsharaf seems to be in a little bit of trouble in distributing products, is it difficult for us to find a new distributor to distribute our product in Saudi?
See, Saudi Arabia, no doubt, it is a big market, and we were one-time the leader into Saudi. But about 5, 6 years back, our distributors came into financial problems. And because of the financial problem, we had also to suffer along with them as far as our share and quantums were concerned.But as far as the share of India Gate Classic and India Gate Super is concerned, which we call it Bab Al Hind over there, they are still intact, but there were other 6, 7 brands like Golden Sella, cream color sella, they were [indiscernible]. And those sales came down. For example, 25,000, 30,000 tonnes we used to sell Golden Sella. It came down to 6,000 tonnes. No, it affected even India Gate Classic. We used to sell about 10,000 to 12,000 tonnes of India Gate Classic. It came down to 7,000 tonnes.Balsharaf, only just about 2 months back, they got clearance from the bank. They settled with the bank. Many things are lined up. So they are coming back to the track to ensure that they come within next 6 months to 7 months in the same foray as they were about 5 years back, slowly, but it will take time.In the meantime, because whatever has happened with Balsharaf, we are already in a search of a good distributor. We do not want to get ourselves involved with the wrong distributor and then start feeling or giving them a picture that you were the best and we are not able to get good distributors. So we are locating, and it is not that easy to look at a good distributor. We don't want -- there are certain people who are daily -- on a daily basis contacting us to give the agency for India. They -- that we can't give. We have certain agreements with Balsharaf.So we are finding reasons to change a distributor in abroad. It's not an easy job. Just now we changed a distributor in Dubai, and the new distributor is doing fantastically well. You know for 6, 7 months, how much hard work and the [ law cases that is]. And that -- and finally, just about a month back -- 2 months back, we came out of the distributor. So there are some legal formalities which are to be done. It's not that easy to change a distributor, but we have decided something else that we have located a good distributor. We are on -- in good communication with him.And rather giving the old brands, we will give certain brands which we were not shipping to Saudi Arabia. For example, Nur Jahan is one brand, Unity is another brand, which were not there into Saudi Arabia. So we are working with that. And hopefully, I see -- so the Saudi Arabia problem, according to me, is up to the third quarter from fourth quarter, we will be well off.
The next question is from Govindlal Gilada, who's an individual investor.
I got only 1 question. Versus last quarter and -- immediate last quarter and last year last quarter, comparing this quarter and last year quarter, how prices of our consumer packs variation? Anything can you highlight, sir?
There's no change. There's no change as far as realization of consumer packs is concerned. But I tell you, 2%, 3%, there may be the promotional given to the retailers. That could be there. Otherwise, not much change in the realization.
I am not sure, sir, I'm right or wrong. Somebody is chatting my friend. He told that almost 10% have dropped. That's why I'm asking.
Not at all, not at all. And it is not reflected in the numbers. Don't go on rumors. Study the balance sheet, study our presentation. The consumer price realization is not affected at all.
The next question is from Dhruv Kashyap from Edelweiss.
Congratulations on a great set of numbers in the previous quarter. My question, the first one, I just had to ask you -- the first one, Mr. Mittal, on the export part, if you've listened to the Prime Minister in the global call the other day, where he had mentioned that he wants to make India an agricultural export hub, how would that statement pan out for us in KRBL in terms of geographies, categories, products, et cetera? So if you could share some color on what are your thoughts on, if India actually becomes the agricultural hub, what all do we need to do or benefit in that sense?
Good question. Actually, the biggest strategy for giving that statement and discussing on the ground and [ structural ] environment is 2 different things. Basmati rice is the only agro product, which is -- which falls under negative list. No subsidy, nothing is being provided of any sort by the government. For last 7, 8 years, there has been a demand from the rice exporters, especially KRBL and 2, 3 others who are into branding said there is 2 heavy charges of slotting charges abroad, especially Europe, America and many other countries.Now slotting charges, as in many cases, government is providing to other exporters and other items, we said at least provide us so that we are able to market our brands. Today, 80% -- I'm using the word 70% to 80% rice going out of India is the private label or the brown rice, who are the people who are selling their own brands.If you look at the global brand, that is 1 company that is KRBL who is selling globally one brand, India Gate; and second, who serves their brand is Daawat but they are manufacturing and reprocessing; 1 unit they have in Amsterdam and other unit they have in America. In America, they are also not doing everything at Daawat and so is the case in Amsterdam. I'm not trying to criticize, it is not my habit. They are doing fine. We should -- They are our friends and we should salute them. What I'm trying to tell you is giving a statement is very easy. When it comes to practically, when you want to talk to Piyush Goyal, or when you want to talk to somebody, first thing, which is required to really boost the branded exports to different parts of the country, we want it should be taken out from the negative list.Let me give you one example, what stepmother treatment they are giving to us. Under MSME, they have provided 5% interest subvention. [Foreign Language] now, MSME gets 5% interest subvention, what is the MSME? Tomorrow, you put up a packaging plant, start exporting to Iran, your turnover is INR 500 crores, INR 600 crores because our packaging plant cost INR 20 crore, INR 30 crore, INR 40 crore, you get an MSME and you get the subvention. All big corporates, they do not get any subvention because it is under black list -- it is under negative list.Many things do happen, but let us thank God. I think the investor should salute KRBL and Daawat or whatsoever -- whosoever companies are exporting branded products, we are paying 5% GST. We have not been given any slotting charges. We have been given no subsidiary. We have been given nothing by the government. Still worldwide, we are able to place our product at a premium price. To sell basmati rice today at $2,400 compared to my second [ rival ] not above $1,500. There is a difference of $1,000, and we are not reducing our share in spite of COVID.
Just as a follow-up to this question [indiscernible], like in other industries like steel, for example, or auto ancillaries, they have industry body that keeps making representation to the government, is it that we don't have one for the rice industry or is it the government is not kind towards us to look into us?
We have both. We have both the problems. Today, our association is not very effective. Let me tell you, and they don't think to that amount -- to that level, what was the thinking used to be about 4, 5 years back of various people when companies like KRBL, Tilda, Satnam, Daawat, there were 8, 10 people who really did good in the industry which are no more. Somebodies have become NPA for certain reasons. Today, our association doesn't have any capable person right from A to Z who can represent the industry [Foreign Language] these are what norms.You will not believe we have given at least 20 times our demand to [ PLT ] chamber, to FICCI, to CCI. But they say, okay, then you require a follow-up. Now follow-up cannot be of KRBL. They want follow-up from the association. If any individual goes over there for any presentation, it is not entertained. The problems are entertained by the association or the body which represents.
APEDA?
APEDA is -- now let me tell you, these are not something to discuss in public domain. They are just -- it is wrong on my part. Why should I unnecessarily -- when I'm doing so fine, why should I blame the government? It were [indiscernible] and we did it of our own.
[Operator Instructions] The next question is from Alok Singh from AXA Mutual Fund.
Most of my questions have been answered. Just one clarity. The Chairman mentioned about some warehousing issue. That was not very clear to me. Can you just put it -- more light on that, please?
Yes, warehousing issue in respect of ED?
No, there was -- you mentioned that there's some deposit which you are making because of which the warehouses...
Let me tell you -- good, good question.
Yes, yes, ED, yes.
Yes. I tell you what happened that the case as far as tribunal was concerned, that we won the case over there and they say there is no need of holding any warehouse of KRBL, that was -- we got a very good order from the tribunal. This order we got on 17th January 2020 for restoring our godowns. They never did it. So there were 2 thought processes on which way we are going. Should we go to contempt of courts against ED? Or should we file an application to the high court. The lawyer suggested, no, you should not fight against ED. They have been given enormous power. They can do any illegal activities also, which becomes legal as far as ED is concerned today. Better we fight softly and let us file an application in the court. So we filed the application in the double bench of High Court, that this is what we have got the order of tribunal and we want our godowns. Season is coming. Our stocks are already lined over here. So let us remove the goods and let us allow us to keep new goods.The court in our first application, they allowed, "Okay, you can remove the goods. They are perishable in nature, and the ED should not hold your goods. They have got no right to hold the goods, and you can hold the goods." But for using the premises, they had some reservation till the time the appeal which has been filed in the High Court is listened and finalized and being disposed off.Now that appeal is coming on somewhere in December -- 25th December or I do not know -- I do not remember the date. We filed another application. We said, no, we want to release our godown, and we want to keep our goods, and we are ready to pay to ED what -- equivalent amount what they have demanded to freeze our lands. So the court was happy to announce, [Foreign Language] "Okay, you deposit INR 11 crore, something less, for the godown you want to reopen because your season is there. We do not want to hamper your business. You deposit the amount and you can use the godowns."
To add on to more clarity. Sir, this is only limited to a INR 15 crore question and this warehouse is limited to a portion of warehouse, which is just adjacent to our Dhuri factory. Nothing to do with our regular and the 2 million square foot of warehouse. It is a very limited warehouse of value of INR 10 crores, INR 11 crores what we are talking.
The next question is from the line of Anshul Saigal from Kotak Portfolio Management.
Great numbers, congrats. I have 2 or 3 questions. One is, you mentioned that this year, you will be deploying cash to buy 20% to 25% more inventory. Is that over a number of 7 lakh tonnes last year, which means that we will be about 8.5 lakh tonnes this year?
Yes.
Could we surpass that, Anoopji?
No, it could be even -- I mean more than 8.5, it could be even more...
Depending upon the price, it can surpass also.
Okay. Second, there was a question which was asked about price declines of 10%, what we have heard and checked is that, in fact, in Classic, we have raised prices. Is that a correct -- I mean India Gate Classic. Is that a correct understanding and raised prices are 4% to 5%.
Who said the prices are declined by 10%?
Sir, someone in the call suggested that, which you had refuted. So what I'm saying is that we have been given to believe that, in fact, you have raised prices in India Gate Classic by about 4% to 5%. Is that correct?
In the domestic market, yes, we have raised, but simultaneously, there was a mind behind raising. In the festival season, we were giving -- we wanted to give a push to the retailer, wherein we have given a very big scheme to the retailer that buy 20 kg Classic, you will get 1 kg within the box. That means 5%. So what we raised 1 month back 5%, we are passing out that 5% to the retailer for this festival 2 months.
The next question is from Anish Jobalia from Banyan Capital Advisors.
[Technical Difficulty]
Mr. Anish, sorry to interrupt, but we can't hear you.
Hello?
Yes. Please go ahead.
Yes. So looking at Q2, we had some trickling down impact of revenues from Q1 to the -- Q1 of around INR 350-odd crores that you were expecting in Q2. So after we adjust for that, the revenues are lower than the Q2 of FY '20, which itself was an abnormal quarter last year because some of our shipments were delayed to October 2019. So there have been some comments that the reason is because the bulk pack segment not doing well in the HoReCa. But now going forward, in H2, also, we have some understanding that in FY '20, we are looking to do similar revenues as FY '20. So we need to grow by 20% plus, around 24%, in H2 over the last year. So do you think we'll be able to achieve this? And why -- or else what is our revised guidance around the entire year numbers?
I don't understand your logic what you are talking about quarter 2. But anyway, way forward, what we are talking, that we have to grow 24% to match FY '20 in FY '21. Yes, you are right. And I'm quite hopeful. My management is quite hopeful that we will reach that number. But in the forward-looking statements, we said that there can be a deficit of 2%, 3% because of the pricing of the new crop, 4%. But if you talk of quantitative analysis, we will surpass FY '20 numbers in FY '21.
Sir, my second question is, what is our thinking around our INR 8,000 crores revenue target? Have we had any change in expectation around the time line? And considering all the positives and negatives that have happened in the last few months, what are the top 3 drivers which are working in our favor to say...
Yes, it is very much in the total line of the management to reach INR 8,000 crores. But maybe due to COVID, the time line may be extended for 1 year, number one. Number two, as we said previously also, our main aim is to increase that number is seasonal rice. Number two, introduction of more SKUs, newer varieties of basmati rice in the international as well as domestic market. Unity is one of them. And number three, we are opening up in health segment. And in times to come, we are open. I tell you, we are open. Our Chairman is open, our management is open for M&A. Any good merger and acquisition can boost our top line tremendously.
The next question is from the line of Manish Bhandari from Vallum Capital.
[Technical Difficulty]
I'm sorry to interrupt you, Manish, but your voice is breaking. Request your to use the handset if you're on hands-free.
Is it okay now?
Yes, sir. Please.
Yes.
So I have a question regarding the [Technical Difficulty] all the money which we were supposed to receive from the income tax department has been received?
Manish, we have made the representation. We have made the application. The money is not received yet. And I tell you, in response to that, in response -- the response is very weak. We have not received the payment yet.
[Technical Difficulty] maybe INR 100 crores, INR 200 crores?
It is INR 130 crores.
Sir, my second question is regarding the Idli. Is there any update about the foray what we have made a year back?
Yes. Idli market is very encouraging, and the sales are good in Karnataka in the radius of 300, 400 kilometers. And I tell you, we started with 10, 15 tonnes per month. Today, it is 250, 300 tonnes per month, and I'm talking consumer pack of only 1 kg, wherein the margins are good. It's 10% plus. But Varun (sic) [ Manish ], I tell you my experiences of last 1 year that we need to have our own processing and manufacturing unit in Karnataka, which we are doing already for regional rice in next 1 year when we will have processing and packing plant for regional rice, especially for Sona -- sona masoori, then definitely a small plant of Idli rice -- Idli rice, rice atta and so many other products will also be done because the people we are dealing with to manufacture Idli rice, somebody we can give example of ITC.ITC doesn't have any plan. He does everything all over India with the different vendors. I tell you that you can't compare wheat with the rice scenario because the yields are not confirmed, qualities are not confirmed. I mean they are not earmarked. So ultimately, I think the success story will come when we'll have our own manufacturing plant.
The next question is from Shailesh Kumar from Insight Edge.
Sir, I have a slight observation. If we look at our competitors' export revenue, they have done almost 40% higher than us. They have done around 123,000 MT of volume and INR 102 per kg of average realization. I mean how do you see your company vis-Ã -vis your performance for the quarter? And is it a sustainable one or it's a flash in the pan?
Yes. I would like to answer this question regarding export revenue, difference in the price realization there. If you study the balance sheets of LT Foods, the realization of revenue is on the basis of what price he's getting in Amsterdam and what price he's getting in the U.S.A. I mean the PTRS of USA and Amsterdam are being shown because those are the subsidies and ultimately in consolidated balance sheet, everything, the revenue, everything comes.And if you are intelligent enough to compare -- to reach to that revenue, maybe some amounts would be -- get lesser in the top line, but certain expenses like employee cost, interest, and there are many more expenses, if you go in the details, the difference between the expenses of KRBL and LT, maybe more than INR 100 crores, maybe more, we have to study more. If you compare the quantity of INR 100 crores with the quantity of exported quantity, the difference may be INR 10 to INR 15 a kg.
Exactly. I do not know whether it is good in the public domain, all people know us very well. There is a huge quantity of private label what LT does, which KRBL does not do that business.
And I don't understand how can you have such margins in private label? People are doing private label or a bulk cargo of brown rice at even 1% or 2% margins.
Sir, the very purpose of putting this question was that I was really puzzled to understand this particular equation. That is why I have requested you to put some light on that, nothing else.
Yes. Yes. See, I told previously also, these are by only broad observations after seeing the numbers of LT. But we are going into the details. Maybe after 7, 8, 10 days, you can call me on phone, I'll give you a better understanding.
The next question is from the line of [ Chethan Doshi ] from Tulsi Financial Services.
It is [Technical Difficulty] set of numbers, it is very commendable, and we expected the similar performance of the company. As a kind gesture from the company, like most of the textile company, what they do to -- for the shareholders, do we have any proposal to offer some special discount to the shareholders for our Classic India Basmati?
Yes, we can think of it. We can think of it. Your proposal. Mr. Mehrotra, write it down and discuss in the next Board meeting.
Okay, sir.
The next question is from Sarvesh Gupta from Maximal Capital.
Just 2 questions. One is, while we are seeing like 25%, 30% decline in the paddy prices and given that we are more on the branded segment, I think the prices of the final product should be stabilized, resulting in some increase in the margins for us. So isn't this a very, very good situation in the last several years that your final product prices -- I mean your margins will expand because of lower RM prices?And then we are also saying that by Q4, Iran demand should come back, which should again increase the prices of both your inventory as well as final goods? So this looks like a very, very unique situation that we are in, where we can buy cheap because of Iran in Q3, and then prices will firm up by Q4 if Iran starts buying again. So that is number one.And second is I saw a sharp increase in the other expenses in this quarter. Can you just comment on that?
Number one, your observation regarding the uniqueness of the season, I would comment this uniqueness may be a unique number -- unique period after 7, 8 years. We have previously also seen. And because of the previous 8, 9 years numbers, our inventory, compared to the industry, compared to the market values, were very, very cheap. And we are seeing this opportunity. It's a unique -- what we are seeing a big, big opportunity for KRBL as far as our inventory management, as far as our realizations in the finished product segment is concerned. I hope I answered your first question.Second was regarding?
Other expenses spike in the quarter 2 results?
I don't agree. Can you be a little specific which part of other expenses?
The other expenses have gone up to INR 93 crore, if I'm not wrong, compared to...
See, other expenditures is directly related to the quantum. If the freight to Kandla -- if the quantum is 5x, then freight to Kandla will increase 5x. Fumigation, clearing forwarding charges, railway -- CONCOR railway freight. I mean the other expenses conclude a lot of these type of expenses which are subject to the turnover of the company. I mean they are not directly linked with the marketing or anything else. So I think even Mr. Mehrotra can explain you on the mail. There's no point discussing in the con call.
These are the increases only in the variable expenses.
Okay. Understood, sir. Sir, any guidance on the gross margin for FY '21 given the prices that we are seeing? So in FY '20, we were at 28% gross margin. And in FY '19, we were in 30%. So any guidance on the gross margin in the FY '22, so in the next year?
FY '22 comments, I won't like to comment, but FY '21, it will be in the same range of '19 or what we were in FY '20 or so. And I don't know what you talk about gross margins. I'm talking of EBITDA. EBITDA, we are working around 20%, and we should be around 20%, 21%...
No, for next year, given the fall in the RM prices?
Yes, we will expect increase, definitely. We will expect increase, but it's very, very -- looking forward -- way forward, I won't comment on the number. But definitely, it's encouraging, I should say.
We'll take one last question. We take the last question from the line of Dhruv Kashyap from Edelweiss.
So my second question which got cut off earlier was that does this whole thing about the GI tag for the European Union, could you just tell us as to the progress and what is the likely implication outcome, et cetera?
Yes, actually...
Our Chairman will answer.
Yes. As far as GI is concerned, already, we have won from all the places. And we have won -- now there is an appeal pending with the high court in IPAB. They have asked us to, again, [indiscernible] everything and we have again filed an -- [Foreign Language] the case is going to be heard again in IPAB, where we have won already, so that is not going to change.Now the present case is lying with Supreme Court. They have filed the -- MP government has filed an appeal in Supreme Court, and they are trying to put the political pressure because [indiscernible] is personally interested. So he's putting pressure from all sides, what he can maximum do to get something in his favor. But I think as far as law point is concerned and whatever are the documents and whatever are the decisions taken by the Chennai High Court and IPAB, I don't think so they are going to win it.They can temporarily get the benefit, the MP government, for another 1 or 2 years, they can repack the goods. Otherwise, I think so -- because one thing is very clear that MP government -- it is not possible for MP government to get the ID tag. That's impossible.Related to the ID tag, let me tell you, Indian Basmati exports will come into trouble because then you will find even China, Thailand, Vietnam, any country growing basmati rice. The fight started back in 1998 when America tried to patent basmati rice. And from there, we have been winning the cases one by one, one by one.Today, as a country, we have got 96 cases, one worldwide, whereby no country can keep the word per se, bas and mati, no bas and no mati. Only there is one country, America, that too in an area of Texas, where they grow about 2,000 tonnes of Texmati because there is a law in the trademark that if a country is growing basmati continuously for 3, 4 years and marketing in the market without any opposition, the word I'm using without any opposition, then he has got the right to use it. And that basmati, they are selling at a throwaway price, it's a third-class quality. But to retain the brand, they are growing every year, only 2,000 tonnes and marketing under the brand name of Texmati.
We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Thank you, once again, for your interest and support. We will continue to stay engaged. Please be in touch with our investor relations team for any further details or discussions. Look forward to interacting with you soon. Happy Diwali to all. Thank you very much.
Thank you very much. On behalf of KRBL..
Thank you.
On behalf of KRBL Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.