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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 Q3 and 9 months FY '20 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Siddharth from CDR India. Thank you, and over to you, sir.
That you. Welcome to KRBL's Quarter 3 and 9M FY '20 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 on the financial performance by Mr. Rakesh Mehrotra. Thereafter, we will have Mr. Anoop Kumar Gupta, sharing his perspectives. 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 conference call could be forward-looking in nature, and actual results could vary from these statements. A detailed statement in this regard is available on KRBL's quarter 3 and 9M FY '20 investor presentation, which has been shared to you earlier. I would now like to invite Mr. Rakesh Mehrotra. Thank you, and over to you, sir.
Thank you, Siddharth. Good afternoon, everyone, and thank you for taking out time to join us on our Q3 and 9 Months FY 2020 Earning Conference Call. I'm sure all of you would have gone through the results, the original documents circulated earlier, which are also available on the stock exchanges and our website for easy reference. During the quarters under review, we demonstrated a strong performance where our consolidated revenue from operations stood at INR 1,329 crore as compared to INR 936 crore in the same period last year, representing a growth of 42%. Export contribution to the top line stood at 49% as against 36% in the corresponding period last year. EBITDA came in at INR 243 crore, higher by 17% versus INR 208 crore in Q3 of the same period last year. Previously for Q3 FY '20 increased by 29% to INR 211 crore as compared to INR 164 crore in the same period last year. PAT stood at INR 159 crore rupees in Q3 FY '20, up by 48% as against INR 107 crore in Q3 FY '19. Moving to the 9-month period, we reported the consolidated revenue from operations at INR 3,437 crore, a growth of 18%. Export contribution to our revenue stood at 46% versus 42% in 9 months of FY '19. EBITDA came in at INR 655 crore as compared to INR 631 crore in the same period last year. PBT for the 9-month period stood at INR 557 crore as against INR 536 crore in the earlier 9-month period FY '19. The PAT was also at INR 409 crore, higher by 12% as compared to INR 364[Technical Difficulty] Sorry for the disruption due to some issues. Okay, I'll [indiscernible] the cash generated over the last 12 months has helped us significantly reducing our working capital debt as of 31st December 2019, which has stood at INR 820 crore rupees as compared to 1,520 crore as on December 31, 2018. Whereas, our inventory levels peaked at INR 3,072 crore at the end of Q3 FY '20, owing to paddy performance between October and December 2019. This compares to INR 3,365 crore at the end of the same period last year. The road ahead appears promising for us, and we'll continue to drive sustained performance[Technical Difficulty]
Ladies and gentlemen, kindly stay connected. We seem to have lost the line of the management. Sir, we are back in the call. Please go ahead.
The road ahead appears promising for us, and we will continue to drive sustained performance with focus on maintaining a strong balance sheet and further leveraging our brand. With this, I now hand over the call to the Joint Managing Director, Anoop Gupta, for his prospectus.
Thank you, Mr. Mehrotra. I welcome you all to KRBL's Quarter 3 and 9 Months FY '20 Earnings Conference Call.We reported increasing performance during the quarter under review led by our team focused on business fundamentals. Performance in quarter 3 was further supported by shift of some shipments from quarter 2 to quarter 3, which was stopped at the port due to delay in upgrading their [ receipts ].Overall, I believe that we are best positioned to deliver solid performance over the next few years, given the opportunity. India has been one of the top exporters in the globalized market, accounting for more than 20% of the global exports, and this is expected to increase going forward. As you would be aware, we have set a milestone of achieving INR 8,000 crore of top line in next 4, 5 years. And I'm glad to share that we are moving in that -- in the right direction, led by healthy demand in both domestic and international markets as well as our unique positioning within that. With that, I would request the moderator to open the floor for questions and answers.
[Operator Instructions] Your first question from the line of [ Jan Momonia ] from Care Portfolio Managers.
Sir, congratulations for a good set of numbers. Yes. Sir, domestic sales has grown by 12%. So what was the volume growth? And how is the outlook for the coming quarter?
The volumes have -- the domestic volumes have grown from 95,541 metric tons to 1,08,007 metric tons so by almost 12% in the value services segment.
How is the expected volume growth going forward?
First, this fourth quarter of FY '20, we are expecting the same as we have done in the third quarter, and we are doing very well.
Sir, in case of exports, our average export on quarterly basis, around INR 300 crore, INR 330 crore. So before we exit some quarter because of shifting of the -- one of the consignment. So what kind of export growth we are expecting going forward?
So export growth actually, to give the absolute numbers or percentage would be difficult because there are 2, 3 disturbed areas as far as export is concerned. One is Europe and other is Iran. Iran has always remained, for last 10 years, the premium place for exports, and we export around 32%, 33% of the country's export. Whereas in Europe, the total exports were to the tune of about 340,000, 330,000 tonnes, which has come down to 120,000, 125,000 tonnes. And from October, November, there were no shipments which have gone to Europe because day-by-day, they are becoming more stringent as far as pesticide residue are concerned. As far as Iran is concerned, let me tell you, in the next quarter, there is a good news. There is a shortage in the market. Prices are going high in the domestic market. They require rice, and except India, today, because of our payment mechanism, nobody can supply them any type of grains. They have acquired some grains from Russia of 2 million tonnes, but I've been given to understand that payment also went by squaring the Russian rupee payment with the Iranian rupee payment. Because we had to give to Russia some rupee payment, it was going to that mechanical.So if today, let us say, this money -- money or mechanism is opened and Trump doesn't give any negative remarks, I'm 100% confident that, this year also, Iran will buy because they require rice. They require minimum 1.4 million, 1.5 million tonnes for their consumption. And they do not have any other source. The biggest question mark where the numbers cannot be mentioned or told is that, what will happen in next 2 months, 3 months, 4 months with Iran. Otherwise, things are everywhere -- let me tell you, this year, for example, looking to the prices, as we understand that Saudi is going to import 20% more, same as the whole Middle East. Everybody is thinking that whatever are the today's prices prevailing in the market, they will not come again. And we have -- we are doing exceptionally well in rest of the Middle East countries.
Sir, there were -- total export for 9 months is higher by 30%.
Yes.
From INR 1,230 crore to INR 1,590 crore. So is it because of Iran, or we have achieved growth in the Saudi Arabia and other Middle East countries?
No, no. It is altogether. We have done -- because of -- our brands are doing very good, and we are a FMCG company, the demands of the brands are also good. We are doing Iran business also. We are doing other businesses also. We were quite aggressive. We were aggressive quite because the ultimate aim of the company was that to ensure revenue growth, along with the bottom line, which I think so, bottom line also we have done good by achieving an increase of 17% in [indiscernible] number.
Sir, how are the paddy price this year?
Paddy prices this year are -- add on debt is INR 28,000 to INR 29,000 a tonne for Pusa 1121, INR 36,000 to INR 37,000 a tonne for Basmati, and Pusa Basmati 1401, they are around 24,000, 25,000 tonnes, and they are lower by a minimum 20% over last year.
Sir, I could not get that stock of inventory figure. Sir, can you repeat that? As of 31st December, this quarter and next [indiscernible] quarter.
Yes. The -- we're carrying paddy stock of...
[Foreign Language]
Figure will be fine. Yes.
The technical for this total number is, I think, 2,900 -- we're carrying a total inventory of 3,072 crore as on 31st December 2019.
And what about 31st December 2018?
31st December 2018 was 33,363 crore.
33,300 crores?
Yes. As Anil said, the prices are down, though, we have almost same quantity, but the value is less. The purchase cost has been bad.
[Operator Instruction] We have next question from the line of [ Akash Shah ] from [ AMS Securities ].
There has been a drop -- consistent drop in the gross profit margin. The reason for that?
Drop in the margin, if you see -- if you really see the stock valuation, the valuation of the stock has come down by 20% in this quarter compared to the last year crop. And my [indiscernible] down by 1.5% to 2%. You see, we have done so well in a market where the prices are less by 20%. And our [indiscernible] dip of only 1.5% and 2%. According to us, we have done a remarkable job.
So is this the new normal? Or do you see any revision or upward movement?
Now definitely, the stock is valued at the current price. Now the -- naturally, in the coming quarters, our [indiscernible] will be again 20 plus.
Okay. And my second question was, there's a sharp drop in the price realization of the -- in the export market. What was the reason behind that?
Yes. There were 2 reasons. First of all, if you compare to last year, the prices have been dropping since January, February of the last year and continue up till now. If the prices in the international market are dropping too, you have to many times realize -- sell the goods as per the market trend. But in our case, our majority share is -- majority share is of the branding, so there should not be so much of difference, but the main difference came because we sold this year wide bulk quantity to Iran also and to many other countries also to the government of those respective countries. And that's why the prices -- the realization are -- drop. And that is the reason of EBIDTA also coming down. There were 2 reasons.
Okay. So the composition was of the lower-priced product and the overall market price has also decreased?
No. It's a quality also. Let me tell you, today also Basmati has being sold, right from $800 to $2,000, my India Gate classic is sold at $2,000, and there is a variant of Basmati rice which is sold at $800 to $900. It all depends upon you -- we cannot generalize in Basmati because there are blends of Pusa with 1121, traditional with Pusa. Basmati versus Basmati. I'm not talking about mixtures. So there are 2 things. One is overall price pressure because of the new crop. And other is that there are various variants and various brands which price different prices at different profit or margin.
That's what I'm asking, sir. Composition -- in the sales composition, the contributions from the lower-priced product has increased compared to higher-priced products?
Yes. Some percentage, you are right. If you compare it to [indiscernible] fully -- the lower sales, the percentage would be higher.
Okay. Okay. And what -- have we exported anything to Iran in Ghee?
Yes, we have exported to Iran. We have exported to Iran. And you will be surprised in spite of so bad news is coming in the media as there is not a single dollar which is pending in Iran of KRBL. We have received 100% payment.
We have next question from the line of Nitin Awasthi from East India Securities.
Sir, just one question I had was regarding the noise which was being made from -- in a few newspapers about a tax which will be levied on Basmati rice being that the development of Pusa, government had a hand in the development of Pusa rice but could not benefit in form of royalty on that rice. Any thoughts? Sir, your thoughts on the same, sir?
I'm listening for the first time what you are telling. There is no control whatsoever, neither there is any MSP. There is nothing of the government. It's just completely free trade [indiscernible] commodity. There is no government interference, not at all. Neither have I heard the news, what you are telling me, neither in the media, nor in the ministry. I go to the Ministry of Agri, but I've not heard this, what you are telling me.
Your next question from the line of Prateek Giri from Emerge Capital.
Firstly, sir, congratulations for good set of numbers.
Pardon?
Sir, congratulations for good set of numbers.
I'm not clear.
Congratulations for good set of numbers.
Thank you.
Thank you.
Yes. Sir, we recently saw a brand positioning from KRBL in the trendy YouTube segments, sir. There we have been seeing KRBL, I guess, some high metabolism rice or that vital variety being advertised there. Which is very commendable, sir, actually. So I just wanted to get your sense on this that has there been a change in strategy of our brand positioning? Because prior to this, we were mostly into this Biryani segment, and we used to advertise ourselves as Biryani leaders, kind of, Biryani rice leaders. But now we have been seeing a very positive advertisement or this brand positioning strategy change. So sir, some color on this, sir? Are we targeting youth or whatever strategy in this segment?
No, this is a health segment. It's not that Biryani is going separately. This is a brown rice segment, which we are advertising, and we are getting a very good response. We are marketing this product in a 1 kilo jar, and the response is phenomenal, and we are selling in the [ gyms ] also. And there are 2 types of brown rice. One is Basmati and one is non-Basmati. So we are advertising that. It is not the strategy. It is the strategy of a particular SKU. It has nothing to do that Biryani, we have lost Biryani. We are doing very well in Biryani also.
We have next question from the line of Varun Goenka from Nippon Mutual Funds.
Yes, sir. I have 3 questions. One, [Foreign Language] non-Middle East volume growth, how is that trending? Or how is that responding?
Let me tell you. See, if you look at -- to the India's total exports, as on date, including the Persian Gulf, we have about 76% share of the Middle East, including Persian Gulf. And 24% is rest of the world, which includes Europe, America, Africa and Far East and part of the African East Coast and West Coast. So that is the total quantity what we are doing. It means our focus, of KRBL, as far as export is concerned, it is always on the Middle East, including the Persian Gulf. So -- now into -- now the only concern, which I told you into export is the Iran and Europe business. Iran is quite positive. We sometimes get so good news because, recently, 15 days back, there is a shortage of rice in Iran. People are demanding rice. Prices have increased in the domestic market for which the Iranian government is also concerned. So they cannot afford to not to import rice, whether they import from me or from somewhere else. Now Basmati is not available somewhere else. So their eyes are only in India. The only thing is they want to request the Indian government to buy something to create that buffer, what they had 1.5 years back of about INR 13,000 crores, INR 14,000 crore against the import of crude oil. Now those negotiations are going on, and I do not know how Trump is going to help India to help Iran or whether what will happen. That is the only question mark.
But if prices are so attractive, and given our cash flows and balance sheet is so strong, Foreign Language] it's not procurement maximum [indiscernible] sir?
We [indiscernible] about 670,000 tonnes of paddy. And this year, we have procured about 80,000, 90,000 tonnes of rice as well. And still, we are buying. We are looking at another 70,000, 80,000, 90,000 tonnes of paddies.
Okay. That's great. And just 2 more things, sir. In the power side, I'm seeing our EBIT going down. And I think there are some receivables also coming. So [Foreign language] the kind of tax benefit and return that we were making, maybe over the next 5 years or 10 years, we may not make the same, including receivables, including lower margins. So how are we seeing that?
Are you talking on 9 months or for the quarter?
Nine months.
For the 9 months. Yes.
For the 9 months, there was -- in the power generation channels, the generation is a little bit down in the generation of the wind and solar because of the monsoon and these things -- highest -- longer monsoon and a lot of longer winter also. And there was some REC sales last year, which were not there in this year with REC being [ fast ]. So apart from that, we are all on track almost on the same level.
I think the ballpark [Foreign language], what was the EBIT level annually for our total business that we should expect and [Foreign language] receivables status, sir? [indiscernible]
Varun, we are expecting INR 110 crore to INR 120 crore as our revenue from the -- our results, out of which we have to just give annual maintenance contracts to Suzlon. That may -- and what was next question?
Right. So just a final thing, sir, at -- you're talking about INR 8,000 crore of sales in 4, 5 years. So anything that you can share maybe on what are we doing on investing in middle management to be strong or distribution. Our branding continues to be very, very good. It's visible on YouTube and other areas. But we see across all other companies, they are heavily investing in very strong middle managements, which can take the company next 10, 20 years so...
Varun, we are investing a lot in logistics warehousing and lots of processing and packaging plants. We are investing -- this year also, we are going to invest for next 18, 20 months regularly. Because that is the only way where we can reach to that type of a top line, number one.Number two, our distribution level from Kashmir to Kanyakumari, there is not a single place which is left empty. Our distribution level is very strong. And in the last month only, December, we have created 60 new SKUs in Unity brand. This is a very average-priced thing which can be very well afforded by the Indian community. I am expecting this Unity brand to be about INR 1,000 crore, INR 1,200 crores in next 1 or 2 years.
Okay. That's great, yes. So the Unity brand, the institutional brand, you're also taking it to retail?
To the consumer, yes.
Right, right. And sir, GST rate, [Foreign Language] is there any improvement now because the GST rates might go up, then that might deteriorate our position, if that happens at all, for the institutional segment?
A lot of representations have made, everybody has said that you should test grain at even 1%, everybody from now to south, everybody is saying that 1% or 2%, how can they increase? I don't think [ it will increase ].
Yes. Great. Yes. Fine, I mean, our results have been fantastic for the last 2 years. So even in the more difficult environment, we've done exceptionally well. I'll come back in the queue.
We have next question from the line of Manish Bhandari from Vallum Capital.
I have a few questions. This is regarding the target of INR 8,000 crore, which you have put to yourself for 4 to 5 years. So how much will be from the rice, and how much would be the non-rice business in this? And does it include any kind of inorganic growth rate, which you would have assumed?
This is totally, I think, 95%. This is -- we are not investing anymore into energy. So whatever energy, we are getting INR 120 crore per annum. It won't be increased by -- from that. So 98% of the revenue will be from rice only.
So when you mean the -- your efforts in sooji or any of those areas...
I mean rice and allied products, there's -- we have achieved [indiscernible]. It's a rice product.
Okay. Sure, I get your point. And sir, one metric which you keep on giving is about the -- your volumes, which has grown in the domestic market. Can you also share how much is the market share gain in the domestic market? And how much the domestic market has grown in this quarter?
You see, we don't get the report from [indiscernible] prediction on a quarterly basis. I will get on 31st March. So I cannot tell the numbers, but as for the market feedback, we have -- we are above 35%, 36%.
Sure. I have another question regarding the silica. So I'm told that there is a process from where the rice husk can be used to make silica and that is one product which goes into the tire industry. And many of these companies are using to mix it with the carbon black. So do you make it? And are you planning to make this product and how innovative it is? Have you ever evaluated?
Yes. No, actually, we at KRBL are working on this project since 2004. We went to Japan. We went to Arkansas in America also to find out how to create silica. We even collaborated with one German guy but could not succeed. When it comes to a lab model, it is a successful process, but when it comes to commercial models, it is not a viable project. The amount of water, amount of electricity and so many things, then it becomes a nonviable project. Yes, you are right. I have recently understood. No, we gave certain -- as to the tire industry, but they could not -- they took our 1 or 2 lots, but they could not work or they could not succeed on that. But recently, I've been given to understand, we call it amorphous silica. Now this amorphous silica, I've understood that, in China, somebody's succeeded, and we are planning to go and see if somebody can show us the plant. It is in our mind for one simple reason that we are the only company, today I would say, in the world, not in India or Asia, in the world, which, like sugarcane, we utilize all verticals, for example, husk, you know, we convert into furfural, furfural into furfural alcohol, then we make power. Bran we use Rice bran oil. DOC we use with cattle feed. Everything is utilized. Only one thing is left, that is the amorphous silica, and we are desperate. We do not want -- we should be -- it should be 100% byproduct utilized company.
Sure. So I would have something to send you across, and I did got to know about how people are doing it. And sir, my another question is regarding a year back on the...
Are they doing in India? Or they're doing outside India?
No. They are doing in India.
Making silica out of ash?
Yes, I will share with you. I'll drop you an e-mail on this. So one question was regarding the -- 1 year back on the conference call, you did make a point about the GI certification or maybe a certification where we could have a distinguishing between a 2-year age-old Basmati versus a 1-year-old Basmati on the -- on our selling proposition. So is there anything which you have done on this?
See, GI issue is total [Foreign Language]. There are various cases filed. One is at Delhi High Court. Another is in Madras High Court. Another is in Bhopal -- Indore High Court. And people who have invested in it, they put one case after another to ensure that whatever is the originally GI area, they want to expand that area. We -- which is a subsider. As far as 2-year aging is concerned, we are the only company who is doing this 2 years of aging. But there is no -- there cannot be any scientific recognition or a certificate which can confirm that this rice is 1 year or this is 2 years or this is 2.5 years. About 4 years back, this [indiscernible] company, they filed a suit against us that they are telling wrong -- that they're putting wrong declaration on the pouch that they're 2 years old. And we went all the way to Bombay, to the registrar...
Advertising council.
To the advertising council, and we proved with the chartered accountant letter of our storage pattern and everything that, generally, KRBL products are 2 years old.
Sure. So there can't be any technological innovation in this?
There is no technological innovation.
Sir, I have another question on -- regarding the loss of market share of Basmati in Europe. So is there any other thing what you can do to regain the market share in Europe, which is non-pesticide seeds and from their paddy onwards to back -- working the chain backward?
No. Right, a lot of work is being done. The Ministry of Agriculture is doing its best, what it can do. Every 10 days, they call us, there are various meetings at the state level, at the center level. The only remedy and the only way is that we start producing the rice that is pesticide free. If we are not able to do it, Europeans are not going to agree to it, number one. And this stringent control will slowly, slowly, maybe in next 3, 4 years may come and spread to other continents of the world. So therefore, it's a matter of concern for the rice industry. We are spending crores and crores rupees. This time, a big job was done by the Punjab government. It's the secretary of agriculture, Mr. [ Punia ]. He did a remarkable job being in the government. He became proactive and really did a remarkable work at the field level, and we got sufficient material of pesticide free also but not to the numbers of quantities which are required to be exported. Maybe I could -- I have today, about 10,000 tonne. I required 50,000 tonne. So there is still a gap of 40,000 tonnes, so we are working hard, I think, so within 2 years, there will be a solution that our 25% to 30% crop of what we produce will be pesticide free.
Sir, you made a comment about the size of Unity brand to be INR 1,200 crore. Is it at the company level or the retail level?
No, I'm talking at the company level.
And how much will be the India Gate as of today?
India Gate is -- balance, I think, India Gate, it's about INR 1,200 crore, INR 1,300 crore rupees. If you talk of -- only domestic I'm talking.
And you have to include domestic and our export?
Well, our 70%, sale -- 65% to...
65%.
65% of our top line is India Gate.
We have next question from the line of Anish Jobalia from Banyan Capital.
Yes. Congratulations for good set of numbers. Sir, I just wanted to speak a bit on the volumes, like just looking at our inventory levels, which is flat as of December as compared to last year. And there was a shift of the orders from Q2 to Q3 as well as there are some bulk orders in Q3. So if you can provide some guidance around how do we see the volume growth in Q4 and FY '21? That will be very helpful, considering all the factors which are hitting us.
So we are doing well. If you see quarter 4 of FY '20 would be same as the quarter 3. We would be -- I think it will be a repetition. And as far as next year is concerned, we are quite positive and minimum 15% to 20% we'll like to have increased in the top line.
So can one assume then that the volumes that we did in Q3 will also repeat in Q4? Is that what you're trying to say?
Yes. Volume would be -- more or less would be same. From -- actually, there was around INR 200 crore shift from quarter 2 to quarter 3.
Right. So if you were to adjust for -- there were some 52,000 metric tons you had mentioned in last call. So when you adjust for that...
It was around INR 200 crore. So we are left with INR 1,130 crore, INR 1,140 crore, which we are 100% sure of achieving that number in the fourth quarter.
Okay. And then in FY '21, we'll get a value-wise growth of 15% to 20% is what [indiscernible].
Yes. We are looking at that only.
And could you, if possible, split this? Like how will this be growth-wise in FY '21 for domestic as well as the export market share?
Generally, if you see our 7-year -- last 7-year trend, it is always like 50%, 52%, or 53% here and there.
Okay. So growth would be equally split between the domestic and export market?
Yes, yes, it will be equally.
And second question around the margins. Like you mentioned that the stock has been revalued. I mean, the inventory is now at lower price. So with Q4 as well as FY '21, we should see like more than 20% EBITDA margins. Is this what you were trying to say in your initial comments?
Yes. We are looking at that only because now the prices -- according to us, today the price in the market is the lowest in last 2, 3 years. So we think it is the time to build up the inventory. And I think, going forward, our EBITDA will increase.
Okay. And one question around the business model is, like whatever we are buying today, sir, that start -- gets reflected in the gross margins, say, 2 to 3 years down the line only, right? I mean is that the right way to understand, like if you're buying paddy at INR 28,000, INR 29,000. So that impact will come 2 to 3 years down the line? Or how should we...
No, no. It will come after 1 year. Not 2 to 3 years. 1, 1.5 years, it'll start coming.
Okay. And if possible -- is it possible to give some update around the tax liability that is spending, like you mentioned, like we are very confident of getting our favor. So is there any update around that?
Yes, we are hopeful that orders should come by maximum within this fortnight. And as far as tax is concerned, we have already deposited INR 193 crore. And we are very hopeful that order will come in our favor.
Okay. So in the next 15 days, there should be some clarity around the tax level?
Yes. Hope so.
We have next question from the line of [ Dara Muchala from Elusive Advisory. ]
I actually wanted to understand something about how India consumes broken rice. So in terms of percentage of our sales, approximately how much should be broken rice? And two was, are we seeing a trend of people -- like how good is the trend of people moving from unbranded, the loose broken rice to branded broken rice?
You see India -- the total consumption in India is about 2.3 million, 2.4 million tonnes out of which around 35%, 40% is broken rice. So for KRBL also, of my total sales, 30%, 35% is my broken rice and 65% is head rice. But slowly, slowly, people are moving. The person who was eating Mogra has shifted to Dubar. A person who was eating Dubar has moved to Tibar. A person who was eating Tibar has moved to Super or -- these are head rice I'm talking. So people are shifting on the grade. And it depends upon the price also. If you compare the pricing from last year, it is lowered by 5% to 10%. The shift is more on the upper, upper scale. The person who is consuming Mogra has shifted because of the price. So there's a shift from the -- from broken to head rice.
Okay. And what is the trend like in the markets outside India? Do people consume a lot of broken rice? Or is it largely head rice.
Broken is not allowed to be exported outside the country. It is only to be consumed within the country. As per the government policy, we are allowed to only export head rice.
Okay. And another question more on our future growth plans. So even outside of Middle East, are there any other big markets that we can tap? Because like you explained the Europe problem for now, but apart from that, are we seeing any trend towards Basmati consumption outside of Middle East?
Yes. Yes. See, let me tell you, if you look at the 5-year chart, there has been a tremendous growth for countries like Mauritius, Seychelles, South Africa. These have started importing quite good numbers compared to what they used to import about 5, 7 years back. Similarly, African continent also. Countries like [Congo] who are big markets of non-basmati, they've started importing some basmati rice. The African continent is importing basmati rice. Then there are markets which you have -- we are developing that is Argentina and Brazil, they both are also going to -- Argentina is already importing, but Brazil, there is not yet customer of ours. I do not know whether something is going to Brazil or not. Then one of the biggest market which we were dreaming we could develop was China. And there is a good demand in China for Basmati rice, but because of the government's controls, and -- most of the rice is controlled by the government of China. That is becoming what hinders to us, otherwise, China can become another importer of about 300,000 to 400,000 tonnes of basmati rice. And you will be surprised that we have done already a good contract with Japan. Japan has started importing about 700,000, 800,000 tonnes, which was a market of just 100 tonnes 5 years back. So the markets are developing and increasing. We're actually working more towards Europe. Europe is a market which I feel looking to the Asian population and even the local inhabitants like U.K. U.K. is a place where the locals also eat a lot of basmati rice, not the other parts of the Europe, but especially U.K. So what I feel that in -- if we are able to produce pesticide-free, this market is going to develop -- a good share of the market will come from Europe also. It is -- so we are trying all the fronts to enhance this, to enhance the quantity from 4.4 million tonnes to 5 million tonnes.
Okay. And you also -- about Europe. The fact that we are so well-connected with the farms. What is preventing us from reducing the pesticide-residues in our produce?
Yes, it's -- there are 2 things. First of all, is that we -- our habits die hard. For the last 50 years, farmers have been growing their produce with a particular mindset. And to change their mindset is not very easy. That's number one. They're always worried that what will happen if my crop becomes affected with the disease or with -- so they start using too much of pesticide because the cost of the pesticide per tonne if you look or per hectare, per acre, if you see, it's not that much compared to the crop size. So to enable to save them from any disaster of the crop, they use too much of pesticide, which is slowly, slowly, we are making them understand, no, this is the wrong philosophy. And if you continue to do like that, not only you're spoiling the crop, but you will spoil the soil of the country. You will spoil the water of the country because the same -- when the rain comes, the same pesticide, it flows inside the earth also. So there are many things which we are educating to the farmers, and I'm quite sure I told you, it might take another 1, 2 years, maximum 2 years that we will win over this situation.
We have next question from the line of Rajeev Agrawal from DoorDarshi Advisors.
Can I -- I have a data question. So can you break down the inventory that you gave in terms of the paddy and the rice and also the quantity that you have?
On the inventory levels, we are having, I mean, capacity of 5,16,877 metric ton valued at INR 100 -- INR 1,467.82 crore, and the price is INR 28,398 per metric ton. And we have rice stock of 3,08,424 metric tons, valued at INR 1,500 crore and average price is INR 48,640 per metric tons.
We have next question from the line of Dikshit Mittal from Subhkam Ventures.
Sir, my question is on the extent of the inventory valuation loss that you have recognized in this quarter.
See, there's no inventory loss. What I said, the market was down by 20%. And instead of that also, we adjusted our inventory accordingly and our EBITDA was down just by 1%, 1.5%. If you see the valuation of price on the last quarter, it was at INR 50. This quarter, it is INR 48. So basically on a 3 lakh tonne of INR 2 means around INR 60 crores. So [indiscernible]
Okay. So this correction is on the finished inventory of rice?
No. We have 2 types of inventory. One is paddy and one is rice. Rice also will keep for aging. It's not finished. It's semi finished.
Yes. Okay. Okay. And sir, have you taken any price cuts in light of this fall in the basmati rice?
We have not taken a price guide. If you look at the domestic market, we have given some coupons to the retailers, some schemes. So instead of price cut, we are giving promotion to the retailer.
We have next question from the line of Kush Gangar from Care PMS.
Sir, my question was on other expense. Our other expenses have increased significantly in this quarter compared to year-on-year. Was it mainly due to ad spend?
No, no. It is a trade on sales, clearing charges. You see the quantum over to last year is too much. So pro rata, the expenses are also high. And even advertisement is high. You are right, about INR 10 to INR 15 is a difference of advertisement amount if you compare with the last quarter, same year. And there is a difference of about INR 35 crore, INR 40 crore on trade on sale advertisement and other expenses on account of -- we are related to sales.
Right, right, right. And with respect to your interview in probably the last quarters after last quarter results, you mentioned that you want to increase the promoter holding to 62%, 63%. How do you aim to do that, sir? So we have been buying from the open market. But because of the silent period, that must have been strong. But -- so is there any possibility of buyback? Or how do you aim to increase that?
Yes. If we look at it, buyback of window was closed for last 1 month, now it is going to open tomorrow. We'll look at it. We will look at it, whatever the market is.
We have next question from the line of Karan Chopra, individual investor.
Sir, I would be really grateful if you can tell the latest updates on the ED case?
ED?
Yes.
No. ED case, you see AA, Adjudicating Authority, has confirmed the attachment of the property. We immediately went to the tribunal and tribunal has restood the possession to the company, but they have taken a undertaking from us that we cannot sell or we can not do anything of the property but we can use the property until the case is decided and the case will decided in 3, 4 years, 5 years, whatever. But the amount is limited to INR 15 crores.
How much time it is going to take, like, for the case, is there no time bound or no limit as such?
Generally, what we have been heard, the cases take 4, 5 years.
Okay, fine. And like, any prospect of GST on the unbranded rice, in this maybe, like, in the coming months or year?
Any? I could follow up.
Like GST on unbranded rice? Any possibility?
At present it is zero, I don't think government will go for a tax on the non-branded rice.
Okay. And like, INR 183 crore, like we have submitted for the income tax case, in case, like you said, the case goes in our favor, like all that amount will be remitted back to the company?
Yes, definitely, with 6% interest.
Okay, that will directly go into the profits of the company?
Not profit, reserves of the company.
It will reduce our debt further.
It will reduce our debt further. It will -- it has not gone from the profit, so why it should come in the profit?
We have the next question from the line of Subhankar Ojha from SKS Capital.
So I missed out your answer on potential buyback. If you can just share your view on the same?
So we were buying up to 31st December. Thereafter, the window was closed for 1 month. Now the results have come, and we are going to restart buying up again. [indiscernible] has...
That [indiscernible]. Yes, that you are doing. I'm saying a company doing a buyback?
No, we don't have a proposal for the company to do buyback because I feel our liquidity is already too less in the market. And if we start further squeezing the liquidity, it will not be -- it will not give a good reflection. Already, there is no liquidity in the much liquidity in the market.
And in terms of -- so the promoter has been -- was your buyer prior to the trading window got closed, I think, and it's again opening on Monday, I believe.
Yes.
That you continue to do, right? I mean that -- [ I think ] you have?
Yes. And we will continue depending upon the availability of the funds in the director's side.
So we have next question from the line of Manan Patel from Equirus PMS.
Congratulations for good numbers. Sir, I have one question. In one of the interviews, you mentioned that you're looking at divesting the energy business. So do you have any updates on that?
No. We had tried, we had appointed KPMG and E&Y also, but it doesn't make any economic sense to us to disinvest the energy business.
Okay. So for now, it will be in the business?
With KRBL only, yes.
Your next question from the line of Varun Goenka from Nippon Mutual Fund.
My question was regarding the [indiscernible], that's already been answered.
We have next question from the line of Sachit Khera from Smart Equity.
Sir, could you tell me the inventory figures as on December '18, if that's available with you, volume figures for paddy and rice?
Yes. The -- for paddy, we have -- we had 3,37,065 metric tons, valued at INR 1,581 crore, average price is [ INR 46,905 ] per metric ton. Sorry, this is for rice. And the paddy is 5,00,392 metric ton valued at INR 1,675.59 crores. Average price is INR 33,486 per metric ton.
Sir, in Q4, do we plan to considerably increase our procurement considering the low paddy prices?
You see paddy season has already gone. 90%, 92% of the paddy has already come in the market. Now the balance, 6%, 7% paddy is there and we are regularly buying. We have already bought 670,000 tonnes. And I told you previously also that we intend -- we intend to buy another 70,000, 80,000 tonnes.
But sir, considering that the price -- so acreage this time was higher, right, for basmati?
It was more or less same. It was higher by 2%, 3%, 4%, but...
And isn't it our policy to sort of slightly increase the procurement by 15%, 20% if the prices fall by end of quarter?
So when you talk of procurement, it's not only the funds -- availability of funds, funds. So I can by 100,000, 200,000, 300,000. And I wish -- let me tell you why we want as a company carry these prices to procure another 200,000, 300,000 tonnes, and we have funds also. But the reason is you require place, you require godowns, you require so many other infrastructure, logistic problem. And if you don't handle paddy properly, then it becomes damaged, discolored. Therefore, many times, you have to look into the paddy. Many a times, what happens that if we require paddy and we feel that next year will be a difficult year, then In March, April, also, we start buying paddy from the inside sources, people, those who are hoarders. From hoarders then, we buy paddy and rice both. So it is a [indiscernible] let me tell you, basmati, or I mean, it is not that easy because you have funds, you can buy as much quantity you want. It is -- you require a special care to handle those quantities.
Okay. And I mean -- sorry, I was under the impression that KRBL increased its warehousing capacity last year. So I mean, over the last 1 or 2 years, so procurement might potentially be higher. So I think that was my mistake. I apologize.
Do you know how much of warehousing I have? If I tell you the figures that today, my warehousing would be around 2.4 million to 2.5 million square feet, number one. Then in that, I keep only rice. There is no paddy. Let me tell you. And paddy, for paddy, we have around maybe 6 million or 7 million square feet of area on which we keep paddy. So already, we are increasing -- nobody in the country has even 1/3 what I have.
Right. And sir, the institutional sales, are we still suffering in the bulk packs? I mean, because I remember in over the last one of the calls, you've been mentioning that there, maybe, people are getting more economical considering all these online delivery restaurants and whatnot developments taking place.
You see despite GST, our brands are doing very well. I told you, Unity is our institutional pack, especially for biryani rice and doing very well. But definitely, the person who is not paying tax, he has a hedge of over me.
5%.
5% is a big amount. So he's entering the new markets of where people see only price, not the quality. So there are a lot of buyers and of every kind in India. For them, 5% is a lot of money. They don't see the quality, they see the price. So people are entering that segment without tax.
And there's no input, if I understand correctly?
No. There's no input further to this, yes.
We have next question from the line of Jayant Mamania from Care PMS.
Sir, you said that this year, the paddy prices were lower by 20%. So what is the reason? Is it a higher crop or a disruption in Europe and Iran?
No, no. It is primarily because of the higher crop, primarily because of the higher crop. This year, the demand comparatively, there is an effect of Iran and Europe also, number one. And this year, the crop was higher by 3%, 4%, 5% over last year.
But the acreage remains the same?
No. Acreage was also more. Acreage was also more. Let me tell you what tragedy happened. There were some early sowing farmers in Punjab and Haryana. Their yield per acre came very less and we got panicked that the paddy might not be 15%, 20% lesser over previous year. But luckily, for 15 days, we saw that panic. After 30th of October, you can say 20th of October, things went very right and yield, everything, percentage were okay, and we were able to achieve rather 2% or 3% more paddy production over last year.
Sir, we have a problem in Europe due to pesticide residue. Is there any possibility of this proping up this problem with the Saudi Arabia or Middle East countries?
No. There was a problem which cropped up in Saudi Arabia. There were two, three delegations, which went toward there which were accompanied by our joint secretary and the government officials also, and we settled out that problem. Now a procedure has been drilled out. And for the last 3 months, from the new crop, good quantities are going to Saudi Arabia. And it is working very well. There is no problem whatsoever in Saudi Arabia. No other country other than Saudi Arabia has imposed any problem as far as Midle East is concerned.
Okay, okay. So that IT addition for the -- which is -- which has generated demand of around INR 700 crores plus penalty. So it was for cash purchase?
It was?
FFor cash -- is the addition of cash purchases?
Yes. It was 90 -- 90%, 95% was the direct purchases from the farmers against cash payment, which which we are allowed to do as per the law.
Correct. Correct, correct. Yes. But that cash purchases are added to the inventory, so that was not considered. Inventory must have been added for the cash purchases?
Actually, they have excluded the purchase.
Okay. Okay. Then the inventory must have reduced to that extent, actually?
That is only for the income tax level.
Correct. Correct, correct. Sir, last question, ours is an FMCG company, and there is a cash flow of INR 600 crores. And if you look at the market, the FMCG companies are valued around [ 50, 60 P ]. Even consumer durables are valued at [ 50 P ], while ours is only around, say, [ 15 or 12, 13 P ]. One thing that I have noticed, our payout is very low. Normally, in FMCG company, the payout is 30%, 40%, 50%, whereas our payout is only 12%, 13%. So -- and our cash flow is around INR 600 crores, and we don't have to do any major Capex. So can we expect higher payout in future?
We can think.
Yes, we'll think of it. Yes. That's a good point. We'll look at it.
We have next question from the line of Anish Jobalia from Banyan Capital.
I had a few follow-up questions which I asked earlier. So in terms of your inventory levels, like we mentioned, that the volumes are flat. So I just wanted to understand like -- because you're expecting 15% to 20% growth next year. So why isn't our inventory level also higher by that one because you already have that visibility of that happening? So how should one understand this -- your inventory levels today? Like if you can just explain that.
We are in mid of our purchase. We are going to buy. We will buy up to March, April, May. Our inventory level will be -- this year will be the highest level in terms of quantity because the prices are down by 20%. If you are comparing with the value in terms of quantity, I think we are the highest as on date.
Right. But I think, as you mentioned in the initial remark, it is flat, the inventory levels, right, and value has come down by 20%. So I was just thinking...
That is December. Now we are buying from 1st of January continuously. We'll be buying in February also, March also. The market is flat, so why we should be in a hurry? We are buying slowly, slowly.
Okay. And in -- so overall, we are expecting that INR 8,000 crores would happen in 4 or 5 years. So that like implies a growth rate of around 10% to 12%. And in the past also, we have grown at similar rates. So what has changed in our outlook for FY '21 that we are confident of 15% to 20% growth because that is much higher than what we have done in the past?
We have doubled our SKUS. Previously, I was marketing about 110 SKU. Today, I'm marketing 175 SKUS, number one. The acceptability of the brand in the consumer segment is great. Even in the market where the market is down by 20%, I was doing very well in the third quarter, where the new crop came and we sold the old quantities. And the very -- if you see our third quarter sales is about above 105,000 tonnes 105,000 tonnes.
108,000.
108,000 tonnes. So we are hopeful that we'll reach this number in next 4, 5 years.
Okay. And could you give the quantum of the bulk orders in this quarter? And that would not be repeating going forward, right? I mean, it is like more of on the spot demand.
There's hardly any bulk orders. Bulk orders -- no, hardly any bulk orders. There's hardly any bulk orders. All are branded sales. And...
But we are expecting that the markets open up. We are expecting to get some bulk orders from Iran, but we will not do any business till payment position, everything is clear, and they are in a position to open the LC and things are clear. We will do -- we are not going to leave such a big market, which has 32%, 33% share of the India's total export. How can we leave that bigger market? But we have to ensure of the payments. Payment is the only concern. Till we are 100% sure of the payment, we'll not continue that business.
Okay. And when you're factoring -- when you are mentioning 15% to 20% growth. So are you factoring the tightness from Iran, from U.S. or that can be a change like a delta in the next year, like things can deteriorate if Iran situation is not good?
Let me tell you, in agriculture produce, it's a totally complete agriculture produce. See, products cannot be taken into consideration anything can happen. How can it be factored because it could be a bonanza also, it could be a win-win situation also, it could be a disaster also, a complete disaster. So it is too difficult to predict as far as agriculture crop is concerned. Tomorrow, you say, if there is a plan in Punjab-Haryana, what will happen? Definitely, the whole industry will come into big problems. So these types of facts cannot be anticipated. Okay, what type of risk can be there?
But one thing is there. You see Iran, whether there's a restriction or not, they eat rice. They won't die of hunger, whether the rice goes from Dubai, whether the rice goes from anywhere of the world, it will be Indian basmati only. It doesn't have much problem on that trend.
Thank you so much for answering. Thank you very much, sir. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for any closing comments. Sir, over to you.
Thank you, everyone, for joining us today on the call. Hope we are able to address all your queries. Should you need any more clarification, please feel free to reach out to us or our Investor Relations partner, CDR India. Thank you once again for your time.
Thank you very much, sir. Ladies and gentlemen, on behalf of [Audio Gap]