© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
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 KRBL Limited Q4 and FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar CDR India. Thank you, and over to you, sir.
Thank you, Nirav. Welcome to KRBL Limited Quarter 4 and FY '21 Earnings Conference Call for analysts and investors. I take great pleasure in introducing senior members of the management team on today's call. Joining us are Mr. Anil Kumar Mittal, Chairman and Managing Director; Mr. Anoop Kumar Gupta, Joint Managing Director; Ms. Priyanka Mittal, Whole Time Director and Head International Division; Mr. Ayush Gupta, Head of Domestic Division; and Mr. Rakesh Mehrotra, Chief Financial Officer. We propose to commence with updates from Mr. Mehrotra on the overall financial performance. Mr. Ayush Gupta on the domestic business, Ms. Priyanka Mittal with perspectives on exports; and Mr. Anil Kumar Mittal, Chairman with views on the industry business and broad strategy. 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 investor presentation, which is available on the company's website. I would now like to invite Mr. Mehrotra. Thank you, and over to you, sir.
Thank you, Siddharth. Good afternoon, ladies and gentlemen. I welcome you all to KRBL's Q4 and FY '21 Conference Call. Trust all of you are safe and well. I hope you have had an opportunity to review our presentation and results which have been uploaded on our website. Let me provide you a brief overview of the financial performance for the quarter. During Q4 FY '21, our stand-alone revenue from operations came in at INR 974 crores. This was supported by 15% volume growth in sale of rice with healthy volume expense and achieved across exports and domestic business. With a strong brand presence shown by customers, we have improvement in bulk pack volume sales in the period, similar growth trends were observed in consumer pack volume sales, which trumped higher year-on-year. Our EBITDA during Q4 FY '20 stood at INR 212 crores with EBITDA margin at 21.75%. Gross margins came in at 32.9%. These were higher by 98 basis points year-on-year and in line with better volume growth. PBT for Q4 FY '21 stood at INR 187 crores, PBT margin in this period, this is standing at 19.13%. This is 33 basis points better than the year-on-year basis, going to cost benefit on inventories and substantially lower finance cost on account of reduced requirement of working capital funding. Our PAT for Q4 FY '21 came in at INR 139 crores and PAT margin at 14.27%, higher by 100 basis points year-on-year. Moving to performance for the full year FY '21, we reported revenue from operations at INR 3,992 crores, which was backed by consistent growth in export volumes. Domestically, we recorded robust growth year-on-year basis, general trade and modern trade in consumer tax sales. Gross margin showed 256 basis points, year-on-year growth increased at 31.5%. EBITDA stood at INR 846 crores, whereas EBITDA margins showed 133 basis point improvement year-on-year basis 21.20%. We achieved a PBT INR 751 crores, and our PBT margins showed 192 basis point enhancement year-on-year basis 18.70%. We have achieved the highest ever PAT of INR 567 crores during the year in line with reduced finance costs. Net profit margin showed a growth of 191 basis points year-on-year basis at 14%. Our company has very little long-term debt. Most of our debt is typically in the form of working capital loan. We have achieved all-time low net debt position of INR 147 crores. Our net bank debt as of 31st March 2021, stood at as low as INR 53 crores. Consequently, our leverage is -- leveraging ratio has shown marked improvement, net debt to EBITDA showed 33 basis point reduction to 0.17 as on 31st March 2021. Interest coverage ratios showed substantially jump to 32.8x as on March 2021, over 13.2x as on 31st March 2020. In line with improvement in operating trends in the business, I'm pleased to inform that Board of Directors has recommended a dividend at the rate of 350% for the year ended March 2021. Our goal remains the same to reinvest our accruals in expanding our inventory. We have taken advantage of softer paddy prices by stocking up incremental quantities in order to meet our goals over the next 2, 3 years. This gives us a unique base to grow volumes at a base that we are comfortable with in coming years. Also the announced increase in MSP for non-basmati price, the industry dynamics will support formulas in the pricing of the basmati which could enhance our inventory position further. This brings me to the end of my remarks. Before I hand over to the next speaker, I would like to share the company's view on the matter of the ED. The management of company has taken an opinion from an independent legal counsel. And on the basis of the same, the view is that since the investigation is still ongoing, no adverse opinion can be drawn. We will not be in a position to respond to queries on this matter on the call as it is subjudice. KRBL always released in highest standard of corporate governance and transparency and is determine to take effective steps to restore our esteemed reputation. With that, I hand over to Mr. Ayush Gupta, who will update you on domestic business. Mr. Ayush?
Thank you, Mr. Mehrotra, and I welcome everyone on the call today. I hope your families and you have been keeping healthy in these tough going times. So good evening, everyone. Whatever I have to say today, I would like to tackle it as a report card of our resilient organization. Resilient organizations are those that rebound and prosper after business disruption. Because they are resistant to the impact of disruption as well as adaptive, agile and sustainable in the face of disruption. I would like to begin with the key highlights of the results. To put it briefly, our India business showed great restraint during the first half of the financial year. An exemplary performance in the last quarter. Quarter 4 grew by 17.5% in volume terms. Approximately 50% of our top line is contributed by consumer pack, which is all pack sizes of 5 kg and below. This segment was boosted by in-home consumption and posted double-digit growth. This only implies that our brand framework and distribution framework have been fairly resilient during the storm. Demand in out-of-home consumption packs, we hereby categorized as all pack sizes of 10 kg above continue to improve. This channel has gone through great difficulty during the pandemic. But gradually, on a sequential basis, we are getting back to normalcy. And I do hope we will be back to normal very soon. E-commerce continues to contribute better towards domestic sales. And I'm going to be talking further on how this has really boosted the performance of the company. Being the market leader in basmati rice space, the company has now strategically forayed into the health food segment with the launch of 2 new nutritional superior products. India Gate Chia Seeds and India Gate Flax Seeds. Along with the existing portfolio of brown rice, brown basmati rice and quinoa. In the health segment, though at a very nascent stage, grew at high double digits during the past financial year. India Gate consumer packs, which contributes almost 40% to our business, had a strong performance in the last quarter of the financial year, where India Gate brand grew by more than 20%. During this period, we have added almost 1.5 million households to the consumption basket of this brand. It is important that the resilience of this brand continues as we look forward to lasting normality. The basmati market in India is pegged at 2.5 million tonnes annually. Through estimates and surveys, we are able to quantify that about 40% of this volume is catered through packaged basmati rice segment. The 60%, which is 1.5 million tonnes is still sold in loose and branded packs. As a category captaincy effort to grow the penetration of packaged basmati rice in the broader basmati rice segment, KRBL has positioned its Unity brand as a brand of choice for the price-conscious customer. While best-in-class product quality and consistency will remain the key pillars of strength, KRBL wishes to tap the market populated by regional and unbranded players of the industry. This INR 400 crore brand when nurtured over the years will prove to be the most important contributor to KRBL's growth story. So if we call ourselves a resilient organization. What are the aspects that makes us resilient? There are 5 aspects that I would like to discuss today. They are a decade of market dominance, the consumption opportunity, our growth model, focused on omnichannel, and lastly, consistent media support to our brands. Let me start with talking about our past decade of market dominance. We have had 10 years of volume-led sustainable growth. The India business has shown a robust 300% increase in its top line. The market share of India Gate brand has crawled up to a head-turning 38%. We have a leadership position in our market and it has been so for the past 10 years. Our persistent and incremental marketing investments have taken our share of voice up to 80%. This simply denotes that we are a long-term-oriented company and seek to invest in brands over an extended period of time. Moving on, the consumption opportunity. why KRBL see for itself a reasonably bright future. There is a study done by Bain & Company. And there are many more done by Kantar and Nielsen and many other consulting firms. It says, while India is a large market in aggregate, the cold reality of India is it's relatively low per capita income. As recently as 2005, 69% of India's households were classified as low income. Households with comfortable cushions, what we would call upper middle class or high income accounted for a mere 7% of the total, giving the income profile an Eiffel tower-like shape. In the last 15 years, this tower has acquired a prosperous middle, with a steady GDP growth rate of 7.5 percentage since point. Today's household income profile pyramid will become a diamond by 2030. And 50% of our roles will be in the high and upper middle income segment. What this essentially means is that India will add 140 million households in the middle class segment and 20 million households in the high-income segment. The consumption story of India will thrive. The consumption of packaged goods, of branded goods, goods with high quality and safety and good credentials will have an uptick. And that update will definitely benefit KRBL. We stand at the base of a mountain of opportunity that is as increasing as it is exciting. KRBL will have huge opportunities for future growth. The question is not what for future growth. The question merely is when? Next is our growth model. At KRBL, we are undergoing massive renovation. If I have to explain you in the layman's language, renovation is making changes to something that already exists, leading the essence intact, but giving it new vigor and perhaps a new life. It's like remodeling your kitchen, the basics, counter, dishwasher, refrigerator, wet bar will still be there, but they'll be upgraded. And that's exactly what we are doing at KRBL. While keeping the ethos of corporate intact, we are upgrading our supply chain, our technology and most importantly, our people. KRBL is upgrading its supply chain from the current multiple disfunctional stage to an integrated supply chain model. KRBL plans to further extend its supply chain capabilities to regional markets in order to cover geographies in a much more robust manner. We are taking end-to-end digitization of our channel partners. Project Disha as the world means direction. It is a step towards moving into an open culture to share, learn, grow together. Disha will create a digital interface between KRBL and its distributors. It will completely transform the way our channel partners and sales teams have been interacting till now and will strengthen organization's ability for decision-making in today's fiercely competitive market. We have been using Salesforce automation software for the past 2 years. And we are very proud to state that our sales team productivity has doubled through this journey. I'm further delighted to share that almost 30% of our generated business now flows through the Salesforce automation software, and we are further doubling our sales team on the field in order to drive a controlled GTM. Next, the most important pillar of our transformation journey, our people. People are what make an organization and quality of people is what drives culture. At KRBL, we are building a team of highly experienced top FMCG professionals at various levels of the organization. This input of fresh blood in the KRBL system is helping us overcome resistance to change in a much more welcoming manner. I'm proud to state that we are quickly moving into a productivity-driven work culture. FMCG distribution landscape in India is undergoing huge disruption. This omnichannel landscape is presenting new and better opportunities to increase category penetration in various markets. KRBL is welcoming all channels and developing policies through which we are able to coexist in a mutually beneficial manner. E-commerce has had a solitary story, a story done by many organizations. But at KRBL, we are also proud of it. In financial year 2017, less than 1%, actually 0.3% of the business came from e-commerce, whereas in financial year 2021, it contributes to 4% of our top line. Growth has been a fantastic 13x. A strong focus on building capabilities and driving everyday great execution has resulted in this performance. As I look back on the performance of the year, I'm very pleased to share that we operate at an undisputed leading market share of 44% and 35% in modern trade and general trade, respectively. When there is a crisis, consumers turn towards big brands, which have a deep foundation built on decades of trust. We continued to invest in our brands through regular advertising, garnering upwards of 80% share of voice. Our brand messaging remained relevant and contextual owing to changes in consumer sentiments. These trends also acquired a responsible outlook for the society and a brand with a heart. KRBL contributed more than 50 million meals through the largest food drive campaign during the pandemic. We are aggressive. We will fail to succeed to what is needed to succeed. We are an organization with a long-term vision. Our company is all about brand and brand strength. The love, support, trust and commitment our customers have given us is what keeps this company going. We can have our ups and downs as an organization, as a country, as a society. Your company is here to stay in the same resilient positive, respectful spirit that it has adopted for all these years. Thank you. I would now request Ms. Priyanka Mittal, the Whole Time Director to give her remarks on the export side of the business.
Thanks, Ayush. Good evening to everybody. I'd like to start by saying that COVID indeed has been a roller coaster. But I think as an organization, as a sales department, it's definitely brought us closure together. Then during the last lockdown, the entire support department worked hand in hand with the plant and the distributors to ensure that supply chain kept on functioning. And since then, we've learned a lot and appreciated our own inherent strength, the strength of our employees and the fact we live the values. It was really heartened to see that the higher purpose actually come through. So despite the logistics challenges, we continue to supply. Our distributors despite lockdowns continue to operate under great duress. One of our distributors was [ Ameya ]. And he just kept his warehouse open. He didn't charge his consumers any money. So that was -- that is the ethos on which we built India Gate and it was heartening to see that a distributor also lived that ethos. So overall, a huge learning journey that brought the entire team closer together.With regard to region update, for those of you who may be joining us for the first time. I just wanted to draw out a context on how basmati is exported and which are the key markets. So if you were to look at APEDA, APEDA data, which actually monitors overall exports, the most dominant market for basmati is Middle East. So over 70% of the total product of India go to the Middle East. And the rest of the markets are in low single digits. Whether it's America or Southeast Asia or Africa. So really, the key market for basmati in terms of existing market and potential market remains Middle East. And I'm very happy to inform that we remain the most dominant player in the Middle East from the branded side. India Gate -- your brand India Gate is the most dominant brand in the GCC, which is the highest consumer of basmati, we remain #1. And the gap between #2, #3, particularly in certain key markets like UAE, Qatar are almost half. Also in a very high-density market like Saudi, we remain truly an aspirational brand. And I think as an Indian agree branded product, that's something to be very proud of, that it is consumed by the royalties of the world, great aspirations value not only amongst Indian brands, but actually even amongst the local brands. And we saw that highlighted in COVID, where our consumers lined up to fill their baskets with India Gate. And we continue to remain buoyant in that market. We understand the consumer, and we have offered a lot of other caterings to offer to the sort of short-term changes that have occurred in the market. With regard to other markets, Americas remains a market of key interest. Despite this being a 4%, 5% contributor to EBITDA, in certain markets in the Americas, particularly in Canada, KRBL brand, India Gate continues to outperform everybody. In terms of aspiration value, we are the most aspirational brand. India Gate Classic is the most expensive brand in the market. And I'm happy to report that in the last year, we've actually gained a lot of important channel customers that actually deepened and increased that nutrition in the market. Also, we saw that happening in America, wherein through just share focus on distribution and availability, we opened a lot of new doors. And that is evident in the growth rate that the Americas business experienced. We also launched a lot of new products, which I'll be talking shortly, which are actually received well in the Americas market. With regard to Australasia, this is a market that was built earlier on, we've had over a 15-year leadership in that market. We continue to dominate that region. I'm very happy to report that in almost all mainstream accounts in Australia, we are present and we are present loudly. In the ethnic market, we continue to maintain our leadership. In the New Zealand market, we are the most higher selling brand in the mainstream as well as the ethnic market. And this is something that is also unique to us vis-a-vis our peers is that we are 100% brand focused. So while others may claim volume share of the market, I'm very happy to report that India Gate is the most dominant leader in that market. The same goes for Africa. And I think that shows our experience in feeding, scaling and maintaining leadership, right? So we don't recede grains of growth, but we actually nourish them, flush them and sustain them. And I think that is evident with our growing market share in markets like Africa. Africa after experienced challenges on product remittances and despite that, our share in the African market on an absolute basis grew. In certain markets -- Nur Jahan has -- is now close to 50% market share, which is really heartening because South Africa is a fairly evolved retail market. I think something else to be extremely proud of is India Gate share in the premium segment globally, particularly in markets that matter, which is the GCC markets. And we estimate our share of the premium market to be as high as 86%. And I'm very proud to say that there's probably no other brand that can claim such dominance, especially an Indian brand. In terms of the regional perspective, we continue to open new markets. Across that effort, proved to be arduous because of logistics constraints on container availability, et cetera, but we did open a lot of new markets last year. In terms of our strategy, going forward, I think it is based on certain pillars. We want to be relevant and we want to grow our market leadership in markets that matter, particularly in the GCC markets. I'm very happy to report on the value capture that we did this year. So we really set up our house, if I may, for growth in the coming years and in the coming quarters. And what I mean by that was value capture, we operate on a very evolved FMCG model akin to most global FMCG brands in the market. We implemented that model in some of the biggest markets of the GCC, particularly Saudi Arabia. We've seen phenomenal improvement in the availability of our products. And I think it's only a matter of time when we reclaim our market leadership in that market in the white rice segment. Our Chairman remains invested in that market because that's something that he built and he constantly steers the market through his guidance and through his experience. However, I think it's important to instill the FMCG discipline. And we are going to be seeing some early returns of that investment. We've also looked at our distribution structure, our distribution relationships, and we are looking at adding more distributors to the current pipeline, and that is sort of a widening of the funnel strategy. And we believe that if we truly want to address the market, then markets need to be segmented, we need to have a more focused go-to-market approach. And then partner with distributors who will execute that go-to-market strategy with great finesse and expertise. And so what we've done is we widened our distribution base. We've looked at Foreca channels more deeply. We've invested a bit in research, and we are hoping to benefit from that channel also. So unlike other traditional brands, which focus primarily on the -- the general trade or the traditional trade, our strategy as a brand has been to focus on modern trade, which outside India is the dominant market channel. So over 70% of the product is through that channel and in the Middle East, there is not a retail channel where we are not present. And I'm very happy to report same is the case in our key markets wherein we exhibit the dominant. So our strategy going forward would actually be to ensure that we consolidate our presence there, to grow on traditional trade. And of course, e-commerce, as mentioned by Ayush earlier, that remains an area of increased focus. We saw that, that last mile connectivity with e-commerce came in very handy during COVID, when due to lockdown, consumers couldn't go to the supermarket. So brands such as us in the Middle East who were present through the Amazon's and the noons of the world were able to do it. Distributors went -- stepped up, went online and scaled their online model, home delivery model. And so there was a lot of new huge channels which came about, and we'd like to ensure that we remain fully available to capitalize those opportunities. I think targeting and acquiring new customers has been KRBL mantra for a very long time. So while the Indian diaspora continues to drive majority of our consumption, international chef events, the master chefs of the world and the social media at large are enablers to acquiring new customers. We've seen early seeds of it in Southeast Asia. We've seen seeds of it in Africa, and I'm happy to report definitely in a market where we do really well, which is Canada. So we saw a lot of new customer acquisitions, not just South East Asian, but -- but I'd have to say starting seeds on sort of the nontraditional consumers. We kept up our efforts on initiating dialogue with the customer. And I have to say, COVID actually propelled that initiative much deeper because you have to be active on the social media, you have to have the human front. And I think just simply relying on traditional media didn't really need brand objectives. So creating I think a brand dialogue and trust became very, very important. We invested in a lot of marketing initiatives. We were on air in Dubai. We were on air in North America. And I think that also helped us in the customer acquisition drive. We also created an entire ecosystem of influencers, chef celebrities, dietitians who could actually educate our customers on buying better. So a lot of the activities weren't necessarily just about selling India Gate, but it was actually enabling the customer to make a more informed choice. And I think as leaders, bringing customers along the education curve is extremely important. And I think the last pillar, which for me personally has been the most important pillar, has been the pillar of product diversification. We started with [indiscernible] in 2016. I'm really happy to report that even though gains have been slow, but we see these fruits of labor and to see the recognition where people recognize us not just for basmati but for the health portfolio is really heartening for me. Last year, we launched 3 new products despite it being a COVID year. We launched Amaranth, we launched Rice Bran Oil in the market. And again, the positioning there is more of a health premium oil rather than an edible oil. Still early days, but we're very hopeful that with the Indian Gate brand equity, that we will see success in the coming days. In terms of the opportunity, I'd like to talk about, again, from the perspective of markets that matter. So if you were to look at the share of Indian basmati to the overall rice basket in the Middle East, we are still in about the mid-60s range, I would imagine. And so the upside to convert that non-consumer of basmati into basmati remains tremendous, that's one. Second, I think moving the consumer up the pyramid is also a perineal endeavor at KRBL's international division, we remain very, very focused on pushing the premium end of the market. But at the same time being cognizant that there are mid brands that are entering the market. We have taken timely action to address those mid end value there. And just as we've maintained our dominance in the premium end, we hope to establish an anchor position in those 2 categories as well. The future looks buoyant. Yes, indeed, the last quarter was muted. We used that to restructure ourselves internally. But if you look at future. What the future beckons particularly from the highest per capital consumer of basmati as per Ipsos, it's all positive 57%, people are spending more on food and grocery. 57% are preparing their own meals. And overall, I think people have become more conscious on what they consume. And I think with the brand equity that India Gate has, we are well positioned to benefit from that. A long terms of the massive activities that we entailed in India, I'm happy to report that on the CSR front, we actually did an initiative towards UAE's 10 million meals, wherein we gave away, right? And we believe that if we truly want to be in consumer's heart, it could not be just through pure marketing channels. We will have to be part of society. We would have to be part of giving back, not only in India but regionally. So that will be an area of focus that we will continue to build on. So with that, thank you for the opportunity. I'll turn it over to the next speaker now.
Good evening, everybody. I hope that everybody is keeping well and safe during the second wave of pandemic. I would like to update you on current dynamics of basmati business. The COVID pandemic had brought lots of hardship to the trade and industry for the last 14 months. The government had, of course, allowed running of the plants since ours is a food industry following the under essential commodities. However, we had to face great challenges in procuring empty containers for movement of cargo. Trade rates have increased doublefold, and availability of labor was down by 35%. As a result, day-to-day working got badly impacted. And so also the shipments, especially in the last 3, 4 months. Anyhow with our concerted efforts, we have managed to overcome all these stringent problems and the yearly results are before you. We now pray that there should not be any third wave and that we should all live, work and stay safe. I would now like to tell a -- brief you on the new crop. You may be aware that this year, government of India has increased the MSP of non-basmati rice to INR 1,940 per quintal which is tantamount to a farm income of around INR 66,000 per acre. To get an equal amount of farm income and that's mandi price of 1121 Basmati paddy should be around INR 3,600 per quintal, likewise, 1509 should be priced at about INR 2,900 per quintal and 1401 should be around INR 2,850 per quintal. These prices are around 20% higher as compared to previous year prices. Your company has sufficient stock of both paddy and rice, for which we must get a good premium next year. Since majority of our SKUs are 2 years old at the time of sale, we see a good future in the coming year. I would like to add something on the research side, that -- I would like to further inform you that Pusa Institute has developed a gene recombination technique by injecting 2 genes of bacterial blight and 2 genes of blast to ensure that the crop is pest resistant so that there is no need for the farmers to use pesticide such as Tricyclazole and [indiscernible] As you are aware, that pesticide residue issue has become a serious threat for basmati exports, especially in America, Europe countries, which is also being slowly spreading in the Middle East and the Persian Gulf. For example, the above 4 genes are injected in 1121 basmati paddy to create a new variety Pusa 1885. Similarly, 4 genes are injected into 1509 to create a new variety Pusa 1985. Similarly, for Pusa number 1, the new variety will be called Pusa 1882 and for 1401, the new variety will be called 1886. The idea is to inculcate the best resistance trades of the donor variety than export potent varieties such as 1401 Pusa number 1, 1121, 1509, et cetera. We are quite confident that this research under the leadership of Dr. AK Singh, the Director of Pusa Institute will really bring awesome results, resolving the pesticide residue issue for all times to come. We had been meticulously planning -- this is on domestic side. We have been meticulously planning to enter non-basmati segment, especially Govindbhog from West Bengal, Sona Masoori from Karnataka and Kolam from Maharashtra. However, we could not proceed as per our plans last year due to the pandemic. We are now working on launching this varieties in a big way. This varieties are the similar working pattern as that of basmati since you have to eat them for at least 1 year after the arrival of the new crop as to gather actual attributes and premium quality and pricing. Regarding farmer agitation, we are all working on media about the farmer agitation, which has certainly not impacted the working of our industry. As a matter of fact, we fail to understand the reason for this agitation. The new agricultural policy is going to increase farm incomes by double-fold and to help farmers to diversify. Besides, the farmer is under no compulsion to follow the new regulation. The government has further guaranteed to buy the crops on MSP. We just really fail to understand the reason of this farmer agitation. We feel there is no rationale whatsoever. As far as state and central legislations are concerned, the government has repealed the Essential Commodities Act. They have also removed VAT/GST on farm produce. The whole country has become rendered as a common market, and thus there is free movement of farm produce from one place to another. There are less obstacle and hinderances. Things are well streamlined and the working environment has become more conducive. However, the state government in order to increase their revenue, they have been making changes in market feats and rural development stuff, which makes the produce costlier for Indian basmati.I would like to add that basmati rice has put under the category of [ negative list health. ] No incentive has been provided and even the latest scheme of RoDTEP has been exempted.On GI, lately, we are hearing news about the registration of GI for basmati rice in EU. Our stand has always been that basmati rice is grown only in 7 states of North India. Moreover, India was the first for the registration of GI in the EU. Pakistan awakened and came into the picture when the GI of India was about to get registered and started confronting. In case India gets GI registration in EU without Pakistan, then definitely, India would be the biggest gainer. Otherwise, if there is a dispute and EU authority don't agree, that India may go for a joint registration.Let me little bit brief you the background of GI. Originally, the GI for basmati was applied by APEDA, excluding MP. However, registrar GI directed APEDA to include MP, for which an appeal was filed to IPAB by APEDA. And in the appeal, the direction was issued to GI registrar to grant GI certificate to basmati rice excluding MP. MP preferred a writ petition against the order of IPAB. And during the pendency of the list, GI certificate for issued and application to include MP was dismissed by the GI registrar. The writ petition filed by MP is now dismissed. The MP filed an SLP before the Supreme Court, which is pending. In the meantime, MP has also filed a writ petition against the dismissal of inclusion of MP within the geographical area of cultivation of basmati also pending before the Madras High Court.About EU markets. There is no doubt that we have lost about 50% share of the EU market to Pakistan due to pesticide residue problem. The buying nations are well aware that our quality and yields, parameters are better and our milling standards are superior. Yet, there is no denying of the fact that the pesticide residue issue had affected our position drastically, and we had lost about 50% of our market share of brown basmati rice. We are working hard on the pesticide issue and it will take about 1 year to recapture this lost market share. The industry, farmers, farming community and the government are all working in tandem to resolve this issue. We are confident that this problem will be solved for all times to come very soon.Regarding Iran, India has really lost a big share of its market in Iran due to payment problems. There are no imports of crude, including fertilizer and petrochemical help, resulting into absorption of INR reserves with the Indian banks. Though still some quantities are being routed through third countries, we are confident that import of crude will be allowed by -- from Iran and hence the rice imports should resume as before. Till the time the payment problems are not resolved, the business will be subdued.The newly developed China market came into Indian market for the first time in October 2020. There has been a big export to China of broken rice. And this is our opinion, it will continue. There is a very miniscule quantities of basmati and superfine varieties going to China, that too via Hong Kong. As you have heard just now, our younger generation is quite active in business and is playing dynamic role in our export as well as domestic operations. With their energetic involvement, coupled with our long experience, I see a bright future ahead in the coming years. Thanking all the investors once again.I now hand over the call to moderator to take the discussion forward.
[Operator Instructions] The first question is from the line of Varun Goenka from Nippon India Asset Management.
Ayush and Priyankaji, very comprehensively addressed, very exhaustive opening remark. So I think operationally or brand-wise or distribution, manufacturing, nobody can beat us, we are clear leaders, and not even MNCs can challenge in your turf. But my question is, in terms of KRBL corporate brand or legacy, what are the efforts that we are making towards improving that, the Board, the capital allocation, et cetera. I think most other participants have been talking in this line. Otherwise, we've been doing great here. Apart from Anilji and Anoopji, we'd be also eager to hear Priyankaji and Ayush.
Varun, your question, one is capital allocation and one is about the board. There are 2 questions, no?
Yes, sir. Yes, sir. I mean for example, something as simple as that where other participants were asking in the previous calls, dividend to be converted to buyback or additional buyback because the kind of brand that India Gate is, we are clearly underappreciated by the capital market.
Yes. Varun, you see today for practically 6, 7 months, we are a debt-free company as our dependency on banks have reduced too much. Even today, we have the capacity to reach the present top line without taking any loans from the banks. In the history of last 26 years, KRBL has always gained due to inventory position. This year also we hold highest inventory in the industry at the lowest price. Just to inform you, and you can note it down also, we have 23,41,000 tonnes priced at INR 27,374 per metric ton. We have rice 4,45,000 tonnes at a price of INR 42,920 per metric ton. This is total valuing at INR 2,841 crores.So it is our great benefit to hold surplus cash in the balance sheet for the company. Going forward, as Anilji said, with the increase of procurement of basmati paddy, and regional non-basmati business where aging is required, liquidity plays a vital role.As far as your question about buyback and converting dividend into buyback, I tell you this is still pending in the Board, and nothing has been materialized. The matter is in the pipeline. We'll let you know whenever it is materialized.
Sure. Sure. My second question being, in terms of our brand -- the size of the brand that we are, I still feel our margins are materially lower versus other FMCG companies. So maybe because we are overdependent on the wholesale channel for distribution. So is there any thought to increase gradually the net realization to us by going directly to consumers or disintermediating as much going forward, directly selling at e-commerce, something like that?
Yes. Priyanka will answer you.
So thank you, Varunji. Lovely to connect with you again. With regard to this thing of using wholesale as a channel, I think on the export market, that's not true. We actually use a distribution-led model. And unlike others that just trade with the distributors, with most of the distributors we have a fixed markup arrangement, which is capped. So their markup is capped. And then we have distribution drive KPIs with them, which we monitor on a monthly basis. Earlier, we were monitoring on a quarterly basis, now we monitor on a monthly basis.So in terms of your question on realizations being low, I think I alluded to it in my presentation, and without being very specific on this call, for competition reasons, I can tell you that our unit value realization is amongst the highest of any commodity in the world. If you were to just compare it to APEDA realization of basmati on exports, and you were to compare it with my export realization, I would imagine that it's going to be a 60% premium over what the industry realizes. So that is a pure aspect of branding and premium positioning. As on the export side, if Ayush would like to comment on the domestic side with regard to premiumization? Ayush, over to you.
Yes. So Varun, thanks for that question. I think we had a brief chat on this earlier as well where we say that domestic realizes almost 65% of its MRPs on its product. And you -- and we spoke about companies realizing over 90%. Yes, we are still a long way to go in that direction -- at that number, but we are really working on our supply chain. We're really working on opening regional distribution centers where we reach directly to our retailers or e-com players, and that brings in a lot more efficiency and cost-saving as well.And our objective really, I would not be able to quantify as such. But from that 65% number, I think, we should be moving up considerably in just a matter of 1 year or 2 because we've put exclusive resources on that front, and we are looking at business from a supply chain cost perspective.And also to add a little bit on the corporate PR front, more than corporate PR, I feel that I spoke about renovation in my statement. I think when change happens from a foundational aspect, it will eventually show to all of us. PR really will be a newspaper test to what we have done so far. And it's not a 6-month or a 3-month job that PR can turn things around. We all know what KRBL is, what it has gone through. So it's a journey. It's a journey. So we are all moving in the right direction. We are transforming in the right manner, and it will eventually show up. That's what I believe.
The next question is from the line of Mr. Chetan Doshi from Tulsi Capital Market Limited.
My question is, is any sale carried forward due to this non-availability of labor and second wave of COVID from March ending to the current quarter? And the second question is, what are your plans to increase shareholders' value? Because, see, I think, last 10 years, if you see, our profit has gone up from say INR 100 crores to INR 560 crores. But if you see in last 3 years, the shareholders' value has depreciated. So when we say in terms of leadership, it is not getting reflected on the shareholders' value. So please, your comments on this?
As far as carryforward of sales is concerned, there is no much, which is carried forward. So we are normally what has been carryforward. This is normal in the business.As far as the question of creating value for the shareholder, you know what is happening from last 3 years on the legal structure, which I will not like to comment, but market has really discounted that [ trend. ] You also know 3 years back, we were at INR 670, and today, we are at INR 240 to INR 250, whatever. So market has discounted that not because of the business, because of some legal issues. And I think the worst has happened.Everything now is going to be on the positive side only. The worst has happened and market had discounted with the full flow, the discount -- market have discounted the market -- discounted my share price. No, I think everything has been done well, and we are very positive in the future.
Sir, but what are your plans to increase the shareholders' value? See, suppose today, you've increased 50% dividend. We have generated enough reserves, even if we double the dividend, then also it's not going to affect your balance sheet or the cash flow. So we should be generous because see this type of profit in the history of KRBL, it is a big achievement. And I congratulate the entire team for this. So you have to be little liberal to get attention and take care of the shareholders who have been associated with you for so long.
Yes. You are directly or indirectly talking about buyback, which I've answered in the Varun question. And why I require surplus cash, we are dealing in a commodity where aging is the key. And aging, not to the tune of just 1 year, it is to the tune of 2 years. And when we sell the product after 2 years, it goes up to 3 years. So working capital requirement is the key in this business.If you compare basmati rices balance sheet of our peers, the biggest strength what KRBL is today is our balance sheet, and that is because of the cash strength. Today, if I'm able to give the margin to my bank on my stock at the rate of 60%, where others are giving 10% margin, then you see my interest borrowing rate is cut by 200 basis points. My average borrowing last year was 4% per annum. And you see the balance sheet of other peers or anybody in the industry, it is not less than 6%, 7%. So these are the benefits because of the liquidity, which is coming in the balance sheet. And going forward, where we are talking a top line of INR 8,000 crores in the next 4, 5 years, we need that liquidity. And aging is the key in the industry. I hope I've answered your question.
The next question is from the line of Abhishek from Sky Ridge Wealth Management.
Congratulations on the good operational performance. Sir, I wanted to know about your capacity utilization. Obviously, you have a very large processing plant. And I wanted to know how much scalability do you have from here without expanding too much on CapEx front?
Yes. You see, Dhuri, which is in Punjab, that is our -- the largest plant in the world where we have the capacity to mill about 140 metric tons per hour. In other words, we have 1 million tonne capacity per annum. Today, we are at 45% capacity utilization at Dhuri plant and in our Ghazia plant, we have 90-plus capacity utilization.As far as Dhuri plant is concerned, I'm saying from last 3, 4 years, to reach a turnover of INR 8,000 crores, we don't need any capital expenditure as we have a sufficient capacity to mill the paddy and rice. Maybe we would be acquiring some INR 100 crores, INR 150 crores for more warehousing. Otherwise, there is no capital requirement for increasing the revenue of the company twofold.
Okay, sir, that's good to know. Sir, and my second question is regarding your realizations. Sir, do you understand that the realizations took a major hit during last year. So are we seeing some pickup there or are we still trading loans?
I think investors have taken not rightly the realization. I tell you, as far as volumes are concerned, our total volume has increased by 1% as compared to last year. Number two, cost of goods sold, COGS, is reduced by 17% over to last year. And our realization is reduced by 12%. You see COGS is reduced by 17%, and our revenue realization has reduced by 12% as compared to the previous year. So this loss is only due to the -- less realization is due to the inventory, because the inventory was cheap. And for certain SKUs, we have to pass that benefit to the consumer because low-priced SKUs are quite market sensitive, we have to pass on the price to the consumer.And number two, the realization of non-basmati export, if you see, it has been reduced by 40% as compared to last year. This is due to the export to China, wherein 100% broken is exported. Whereas basmati export is concerned, the downfall is only 5%, and in domestic it is 10%. So mainly the less realization is due to China, where 100% broken and less value product is being exported. And despite less value realization and less revenue, the EBITDA has increased by 130 basis points and net profit has increased by 188 basis points. This is the highest ever profit by KRBL.
The next question is from the line of Mr. Jigar Valia from OHM Group.
Congrats for the numbers. Sir, my first question is a clarification. With regards to our roughly INR 1,800 crores India business, did I hear correctly that 50% is consumer pack, so which is 10 kgs and below, so which would be roughly INR 900 crores. How much of this would be e-com? E-com, I believe, would be largely consumer pack. If you can help understand this.
Ayush will answer.
Yes. So as I said, 50% of consumer pack is contributed to our top line. E-com business, I mentioned, 4% of our top line is contributed through e-com business.
Understood. Understood. Sir, with the balance wholesale, which is there, which is 10 kgs and above, and within that, there is a mention in the presentation that Unity is a INR 400 crore brand. But INR 400 crore would be at the brand level. Probably, at the company level, what could be the Unity value out of this balance INR 900 crores? And would this largely be -- you categorize as HoReCa or HoReCa is mapped separately? Is entire 10 kgs and above kind of factors HoReCa?
Yes. I tell you about Unity brand, it is basically, [ today's time, ] it is a HoReCa brand. Out of INR 400 crores, INR 320 crores, INR 325 crores is HoReCa. And it is a very famous brand as far as Biryani is concerned. In South, if you go, any Biryani house, if he's selling good Biryani, he's using Unity. What we are saying that we have converted this brand into a consumer brand as well, and we hope to achieve INR 1,000 crores in next 2 years, 3 years maximum. And there are about 20 SKUs of consumer brand, which we have launched in the name of Unity, which are quite cheaper to India Gate and quite affordable to the middle class or a lower middle class -- or upper middle class people.
Understood. Sir, that would be outside of wholesale pack. So this entire Unity number that you'll be sharing would be outside of the wholesale or the HoReCa pack?
No. So just this INR 400 crores includes HoReCa, but what I'm [indiscernible] an increment of INR 500 crores...
INR 50 crore will go to INR 1,000 crores or INR 500 crores?
Yes. Yes.
Okay. Great. Sir, can you help us understand on a full year basis, what has been our market share change in the key markets, India, Middle East, maybe even U.S.A. or others?
Priyanka? Priyanka will answer.
So with regard to the Middle East, we continue to remain, like I said, a dominant market leader in the GCC countries. So in UAE, we continue to be the #1 brand in UAE. Same in Qatar, same in Kuwait. In Oman, based on EPoS data of retailers, we can also gather that we are the #1 brand because ACNielsen does not track that region. And in Bahrain also based on EPoS, we can gather that we are #1, again, ACNielsen does not track.From a Saudi perspective, on -- in the white rice category, we are definitely the second biggest player of the category. But like I mentioned on the call, definitely huge room to grow in Saudi, and we shall see that unfold. In terms of U.S.A., we don't [ suffice ] to Nielsen, so I would not be able to give you a Nielsen-specific number. In Australia and New Zealand also we get data from mainstream retailers as well as we do a retail traditional market share study and we can confidently say that we are #1 -- a dominant #1 in Australia as well as New Zealand.We also enjoy leadership in other markets. As is evident in the deck, we are the #1 brand with our brand, Nur Jahan, in South Africa. We are #1 in Fiji. We are #1 -- and so in certain Northern African markets, again, we enjoy a dominant position.
Got it. Basically, I was looking at market share change. I understand we are #1 in most of these markets. But more in terms of the market share change, and even within India, when we look at 38% market share, this is within the consumer thing or the overall 1,800-plus level?
Yes. So the 38% market share that you talk about India. India -- the bulk market of India is quite unorganized and Nielsen doesn't capture the 25 kg bags in its report. But the Nielsen report captures up to 10 kg in its report. So the 38% market share is pertaining to all packs 10 kg and below.
Got it. And within the other markets that Priyanka ma'am explained, there is a positive market share growth for each of the markets or any noteworthy changes in the market share that you can highlight?
So from an FY perspective, I can tell you that we've retained our market share position in almost all of the markets. We did not subscribe last year, so I cannot tell you from an FY perspective. But what I can tell you is that we continue to maintain our leadership position.
[Operator Instructions] The next question is from the line of Mr. Gurpreet Singh from GE Capital Management.
Hello?
Gurpreet Singh, may I request you to speak a little louder?
Hello. Are you able [Technical Difficulty]
Sir, we are losing your audio. May I request you to speak over the handset?
Hello?
Yes, sir. Go ahead.
Gurpreet Singh from GE Capital. Good to see Priyanka and Ayush on the call. Anoopji, my question is to you; 2 years back, May 2019, you had indicated that you'll be targeting a turnover of something like INR 8,000 crores in 5 years. So I just want to understand, are we on the target in next 2 to 3 years?
Gurpreet, you see we have shifted that plan of INR 8,000 crores from last year to now because last 1 year and 1.5 years has gone, you know the reason. And I'm saying from now it can be even from the third wave, I don't know. So from last 2, 3 years, we are achieving basmati rice sale to the tune of 5,65,000 tonnes to 6,10,000 tonnes annually, which is practically 9% to 9.5% of basmati production in India with the help of marketing initiative, both in domestic and exports, as told by Ayush and Priyanka. We would like to increase this by 50 basis points each year and to reach at least 12.5% at the end of 5 years. In revenue terms, it will add extra revenue of INR 1,500 crores if I reach to 12.5% of India's production.Number two, our plants are for having processing, packaging and warehousing units in Karnataka, West Bengal and Maharashtra as told by Anilji. This will give a boost to the sales of premium rice requiring aging as in basmati rice. This will add another INR 800 crores to the revenue.Number three, we will be exporting non-basmati rice, this premium segment to different parts of the world with our premium brands. This will add another INR 500 crores to the kitty. Number four, health segment, which is today at INR 20 crores, INR 25 crores should go up to INR 500 crores in the next 5 years. And there are a lot of products in pipeline relating to this segment. If you total all these, it will come to around INR 3,500 crores. And we are practically at INR 4,500 crores, which makes it INR 8,000 crores. This is our program to do in next 1 or 2 years as far as capital investment is concerned.
You mean to say, in next 3 to 4 years, you would be able to achieve this? Is it?
Yes, I said 4 to 5 years, but 1 year has already been wasted. So I should say from now.
Okay. And secondly, I just want to ask you, are you conserving cash? Do you have any acquisition in your mind?
I told previously also to Varun also liquidity is the key for a basmati exporter. Even for non-basmati, which they are trying for eating, liquidity is the key. We won't want to -- we would not like to spoil that. But definitely, what I said regarding buyback or other things, that is in the pipeline and we'll let you know whenever it will materialize.
No. No, I'm not talking about buyback. I'm talking about any acquisition in the -- any corporate acquisition.
We are open to it, Jaspreet (sic) [ Gurpreet. ] Any opportunity comes and we have cash, lot of cash in the books, so why not.
Are your banking limits affected due to this ongoing cases or would you be trying to rely less on the banks going forward?
No limits are not at all affected, but we don't want to too much dependent on the bank. If you say, as on date, Jaspreet (sic) [ Gurpreet ] we have got around INR 400 crores lying in the bank. So there is no question of borrowing. So dependency on the bank is really too much. And as I told you previously also, today, if I don't borrow I can manage my top line.
Okay. It will not affect you during the peak season, is it?
Peak season also and while negotiating with the banks, we get minimum benefit of 200 to 250 basis points, when we say we'll give a margin of 60% on the stocks; naturally, the interest rate goes down.
Okay. But the limits are not affected. This is what you're telling?
Not at all. They are all in place.
Okay. My last question is, due to this Iran market, the problem which is going on, do you feel there is a glut in the market, Indian market or next year also we'll face a similar kind of a glut?
Anilji would like to answer.
Jaspreet (sic) [ Gurpreet, ] actually, if Iran business would have continued, the market price what are today of basmati rise would have jumped up by minimum INR 10 to INR 15 a kilo. These prices could not jump to that level because the demand from Iran was subdued and still, I'm not saying it is not growing. Let us say, we exported 1.4 million tonnes in ending '20, '21, it came down to around 1.1 million. And this year, the way it is going, it is coming down. And that is the reason, looking to the crop, looking to the prices, but I'm quite confident because their staple food is basmati rice, Indian government and Iranian government, both are desperately trying to find out a via media whereby they can import Indian basmati rice.
The next question is from the line of Mr. Himanshu Upadhyay from PGIM India Mutual Fund.
Congratulations. And I really appreciate the openness with which you replied to the questions of the investors. My first question was, if we see or what we are hearing about the inflation, okay, and many food products also the inflation is quite high. So will it be significantly beneficial to us, means over next 1 or 2 years if the price of food products increased because we generally have a 2 years' inventory? So can you elaborate on that?
Yes. You see, today, as on 31st March, I had roughly INR 2,900 crores inventory. And basically, the price was INR 27,000 a tonne of paddy. And today, we are expecting the new crop at mandi level to be around INR 33,000, INR 34,000 a tonne. So already, there is a gain of at least 20%, 25% on the inventory which we are holding. This is my expectation because Government of India, as Mr. Mittal has told already that has increased the MSP of non-basmati rice to INR 1,940 a quintal, which in turn gives to the farmers INR 66,000 an acre. So if farmer has to grow basmati, he should get minimum INR 65,000, INR 66,000. Otherwise, he will start -- he will stop growing basmati.So with this in the interest of the basmati milling community, exporting community, that farmers should always grow basmati, and he should get a good price. When farmers will get a good price, definitely, the price to the consumer will also go up. And basmati eating consumer, especially the premium quality, if the price goes up by 15%, 20%, really, it doesn't matter. So it is always profitable. Your question is it is always profitable for company like KRBL, who are holding huge stocks, any type of inflation will always benefit us.
Okay. Okay. And what we also hear and last year also you stated that the price of paddy were very low or basmati, and hence, you wanted to accumulate as much as you can get in the market. And what we hear from farmer community, especially in some states that the paddy sowing will be lesser this year on basmati. Is it the case or what is your sense?
As far as stock is concerned and what I told you last year, we are holding stocks all-time high, as far as history of KRBL is concerned because we find the prices too low.
No, my question was that sowing of this year's paddy or basmati, how is it?
Yes. Sowing because this MSP, where farmer is getting INR 66,000 per acre, we are expecting a downfall of minimum 15% in the crop this year.
Okay. Okay. And one last thing. You said about the new varieties of rice where some pesticides may not be required, okay? So how quick can the adoption of that be? And how successful are that? And one more thing. So when the farmer tries a new basmati or any crop, so would -- do you think that he will start with the whole crop or it would be in small portions and the scaling up will take how much time? So just some thoughts of yours. And can it be as quick as Pusa 1121 and where we did a lot of work and we benefited also? So what new varieties are coming where some of these pesticides may not be required. So how soon can be the adoption of the new those -- varieties?
Let me tell you, whenever a research is done, it is not overnight. They do the research for 3 years, 4 years before they prepare commercial samples and we are one of the most luckiest company that we are so much associated with Pusa Institute. If you recall, that 1121, they gave to KRBL the first 1 kilo seed, which has multiplied into 5 million tonnes today. Similarly, they gave us 1509, similarly. What I mentioned to you today was that they have prepared a commercial crop. They sent us the sample -- they sent us 16 sample, out of which we cleared only 6 samples that they're good in cooking, good in taste. And now the commercial production will start -- the seed production will start this year, and commercial production will start next year. It will not come this year. It will come next year because we have already given our approval, and they have received the approval from 10 very promising farmers also. So I think so this year, it will go into multiplying -- seed multiplication.
So sizable thing will be something in FY '24 type of thing? Means sizeable bulk of the...
Yes, it will come in FY '22 crop. By '22 -- it will come in October, November '22.
But that would be majorly seed, means for the next season. It won't be that big, a million tonnes or...
But I tell you, no, see, already, we are doing pesticide control. So already, we will receive this year quite a good big chunk where it is approved by the European Union for pesticide-free price. Already that we are working. And as far as [ Pusa ] Institute is concerned, the crop will start coming, commercial crop, by end of -- during October '22.
[Foreign Language]
[Foreign Language] '23, you're right. '23.
The next question is from the line of Mr. Sarvesh Gupta from Maximal Capital. Sarvesh, sorry to interrupt you, can you speak a bit louder, you're not audible.
First question, sir, last 2, 3 years, growth-wise, we haven't been able to do much. So what gives you confidence on this INR 8,000 crore sort of a target, which has also been postponed. We -- I mean that means like you're talking about 13%, 14% growth. But last 2, 3 years does not give us any confidence that the company can sustainably grow at 14%, assuming no commodity price hike. What are the drivers of a 14%, 15% growth rate compared to what we have achieved in the last 2, 3 years?
See, I've already told our plans and our plans what are hit due to COVID, especially the plan to put processing, packaging and warehousing in the South districts and the West Bengal, it got a big hit and it was delayed by a year or maybe it may go after third wave. And basmati is concerned, yes, COVID is one of the reason, but now we are increasing. And as I told, today, we have a share of 9%, 9.5% of the annual production of basmati in India. We are planning to reach that 12.5% in 4, 5 years, and health segment is also going up and non-basmati to the export sector will also go up. So all these combined together, we are confident that in the next 5 years, we'll reach INR 8,000 crores.
But you may plan for anything, but what is -- what are you getting from the market that 10% will increase to 12.5%. You can plan for 15% also, 20% also. But are there any clear quantitative signals that you are getting from the market, which develops confidence that you will be able to achieve your plan?
See, you have to understand the dynamics of rice. Every year, about 10%, there is an increase in MSP. So MSP of non-basmati will increase. If the MSP increases, this commodity of basmati has to proportionately increase, otherwise, farmer will not have interest to grow basmati over parmal. Next year, again it will be -- this year it is INR 66,000, next year, it will be INR 75,000 or INR 80,000. Now with INR 66,000 earning, every farmer would like that who grows basmati that at least I should get instead of INR 66,000, INR 68,000 or INR 70,000 per acre. And let us forget INR 70,000, if he wants to get INR 66,000, the price of basmati next year should be minimum INR 34,000, INR 35,000. So 20%, there would be increase in the pricing that is part number one. Part number two, Mr. Anoopji has already communicated to you that there is -- see, in India, what is the consumption of basmati, it is 2.2 million, 2.4 million tonnes, whereas non-basmati consumption in India is about 88 million tonnes to 90 million tonnes. Out of 90 million tonnes, there is about 15 million tonnes to 18 million tonnes is specialty rice, which is known as gobindobhog, sona masoori and all these rices. If we are able -- we are going to enter in these lines, we are not going to do a business of 50, 100 or 1,000 tonnes. This business, we have got a market already in India for about 20 million tonnes or 25 million tonnes compared to basmati of 2.5 million tonnes.We are going to get the revenues from these 3 SKUs, number one. Number two, we are at a very nascent stage as far as health segment is concerned. Anoopji told, today, it might be at INR 20 crore or INR 40 crores. In next 5 years, we want to take this segment to at least INR 300 crores, INR 400 crores minimum. So people plan and we have to take action. Our actions are delayed because of COVID, he told you. We can plan the action. If we do not plan our action and we do not [indiscernible] 8,000 tonnes, how we are going to create a confidence in the consumer -- in the investor.
Understood, sir. Sir, the second question is on the share acquisition, sir. Last -- 2 years back, I think the promoters were buying from the market at approximately maybe the similar prices, right? Now as Mr. Anoopji mentioned earlier that market has discounted us very badly because of all the legal issues. So in the midst of this, I think it would make a lot of sense if the promoters -- if you feel that this is the bottom, and this is the worst, all worst has happened, then why should promoters not come and show confidence in their own stock price by buying it from the open market. When -- 2 years back also we were buying at the same price. Now of course, it is more attractive compared to what it was 2 years back. So I think some actions should be taken along with the buyback as anyways many participants have mentioned. I think we should move in that direction pretty quickly, sir.
Yes. We have taken your suggestion. We'll look into it. Thank you very much.
The next question is from the line of Anuj Sharma from M3 Investment.
My question is when you talk about non-rice brands like quinoa and flaxseed, what are the key variables you look at before deciding to enter a new segment? And what is the scalability you minimum wish to achieve in these few segments?
Your voice is blurring, can you repeat it, please?
Yes. One -- yes, is it better now?
No sir, still not better. May I request you to speak over the handset?
Yes, I am over the handset. Is it better now?
Yes.
Yes.
Yes. So I was just referring to when we are looking at non-rice brands like quinoa or flaxseeds or other segments, which we are planning to enter. What are the key variables we look at before entering a new segment? And what is the scalability we look at before we decide that we plan to enter a new segment?
So hence, I'll share our learnings over the last 6 years when we first entered with quinoa. And with quinoa, the aspiration was if you look at it from a pallet position, so about 30% of the pallet is starches, right, carbohydrates. And so rice becomes that 30% contributor. The next pallet contributor is 22% protein, and we wanted to be -- participate in that. But as a family, we would never ever participate in animal protein. So quinoa was a farmer friendly option because for us, parameters are 2; one, it needs to realize higher to a farmer. And the second is, it needs to net out to a consumer, and it needs to provide health benefits. So for us, we keep these 2 stakeholders in mind.So we looked at quinoa. The third was, of course, rice bran oil, which is -- so 7% of the pallet is fats and now through rice bran oil, we've done that. When we look at GTM for each product, we look at, of course, ROS, rate of sales. We look at adjacencies to the core bank. So for us, the anchor is quinoa. We will look at ROS of the adjacencies. And we would look at the farmer scalability, right? So from an India perspective, because all of the products that we are doing are India led, right? So what are the super foods that India is growing, which we can market abroad and that becomes the driver for introducing those categories.Ayush, do you want to add anything on the domestic side?
Yes. So for domestic, what we look primarily when introducing health category, firstly, is the change in consumption pattern that we are seeing over the years. Also, the evolving channels, modern trade and e-commerce, they were not so prominent as it has become now a couple of years back. So it makes us much more easier and consumer-friendly to promote these products in the market -- in the Indian market. More so, when we look at product expansions and domestic, there are 2 broad categories. One, I would categorize as higher margin value-added products and second would be driving the top line at a compromisable margin. So all the health range of products rarely fall in higher-margin segment, which really contributes handsomely to our bottom line. Whereas we are also looking at non-basmati variants to grow our top line. So that's the mix, and that's how we look at in terms of the future.
Sure. Just 2 questions linked to that. One is what is minimum scale you want to achieve in each of these segments. And second is based on these parameters, how many products would you have in pipeline which you want to aspire or maybe see it in the market in the next 3, 5 years?
So in the export market, we are -- because the base is really small, we are -- for some categories, we are growing 100%. And also, we are seeing that because of pandemic, there are some shot up -- shoot up in demand. From our long-term projection, we look at normalizing those short-term spikes. In terms of pipeline, I think we already have a very rich pipeline. Again, building on the adjacencies, I think it's too early to comment really what is going to go to market because from [ lab to commerce ] there's a lot of consumer insight and research that goes.So while the pipeline might have, let's say, 20 products, only 4 might actually make it to the market. So the pipeline, I can tell you, is very rich. The other thing, I think, which is very unique is we are very market-focused. So it's not necessarily that any new NPD will be launched in India as well as globally. So there might be some markets which would find itself amenable to certain markets, and we would therefore sell them to domestic. The pipeline might be completely different. And I think there it is consumer led and consumer acceptance based, which I think is driving our NPD strategy.
The next question is from the line of Mr. V.P. Rajesh from Banyan Capital.
My question was regarding the U.S. market. I know you mentioned that you don't subscribe to their database over there. But if you can just give our -- your sense of what is our strategy in that market and what is our current market position there?
So in terms of APEDA data, APEDA does not make any distinction between private label and branded business. And clearly, there is -- so I can say so from a retail perspective. There is on the ethnic market side, there is a peer group that appears present. But on the ethnic market, in certain markets, we are at par. And in certain markets, we are a very, very strong #2 brand. On the mainstream side, I'm happy to inform that on the Midwest modern chain, we are present, we are visible and we are in fact more dominant there. But in terms of the opportunity to grow, I would imagine that, that would come from the club business. It would come from the modern trade formats. Those are definitely opportunities that the company is working towards.
The next question is from the line of Shailesh. Due to no response, we move on to the next participant. The next question is from the line of Ekta Sanghvi from Vallum Capital.
Most of my questions have been answered, but could you give me a brand-wise breakup of the brand?
No, this is a confidential data. We never share it with anybody. Sorry, I cannot share.
The next question is from the line of Mr. Shailesh Kumar, an Individual Investor.
Am I audible now?
Yes, you are.
First, I would like to congratulate the company and management for extraordinary resilience that they have shown at extraordinary time. And I would also like to take this opportunity to thank the compliance department of the company for timely disclosure about various events that has taken place.Now coming to the questions. I have got 2 questions for the management. First thing is though times were extraordinary. Our closest competitor has grown the top line by almost 35%, both domestically as well as internationally. International business has grown by 45%, domestic 16%, while our International business has degrown by around 11% and domestic by around 13% sort of thing. So what is the thought process? What is management explanation?Second question. KRBL has always projected itself as a consumer brand, FMCG kind of company. But when I look at the manpower expense of KRBL, it is around 2.2% of the turnover. Why didn't we look at the comparable companies like Dabur, Marico? It is around 10.5% of the sales, 7% of the sales. Even our closer competitor is spending 5.6% of the turnover on manpower. In this competitive environment, manpower -- quality of manpower is very important. So what is the thought process of management?
Yes. Your number one question where you're comparing our top lines with -- I think you're comparing with Daawat or so. I tell you -- if I want to increase my top line with the private label shipping vessels, he's shipping soybean meal, he's shipping so many products, which are not branded. It doesn't have any -- I mean the margin expansion is also not there. Today, KRBL is a company where our top line constitute 80%, 85% of our own brands. What is the reason of EBITDA of LT and EBITDA of KRBL? My cash margin is -- my margin is 31.5%. What is his margin? Because my total top line is branded.And now number two question about the manpower. I thought you must have heard Ayush and Priyanka. We are in a revamp, and we are in last 60 days only, 110 people are hired in the export market as well as domestic market...
Combined.
We are -- it's combined, export and domestic market. So we are revamping our total. You rightly said, my expense is just 2.2%. It will go up. And you will see in the next 2, 3 years, it will go up. And my manpower strength will go up tremendously.
Premium positioning also.
And Priyanka would also like to add something.
So I think the third point is when you compare us to our peers and without getting very specific, I think KRBL's strength is India Gate premium positioning. And with premium positioning, you get the pricing power and you don't want to necessarily discount the product to gain value. And for that reason, we have the mix segment brands and value brands that help us achieve those objectives. And you modulate that mix. So I think while not wanting to comment what our peers are doing because each company has its own strategy, our strategy has been not to discount our premium brands to continue to deepen the penetration of those brands, and fight out those players, which are sort of driving the market down through deep cut promotions or excessive blending to introduce new brands and fight that competition. And that's the fight that we continue to fight every day being in the commodity that we are.
The next question is from the line of Mr. Varun Goenka from Nippon India Asset Management. Varun Goenka, may I request you to unmute your line from your side and go ahead with your question?
Yes, is my voice audible?
Yes.
Yes. Thank you, Anoopji for clarifying in detail the road map to INR 8,000 crores top line or such. My question is on domestic side. We're obviously champions in basmati and now we're trying to build a non-basmati franchise, too. So when we go to the dealer, how do we get more wallet share of the dealer? Are we also looking to create adjacencies like I think [Foreign Language] Idli, the Idli batter. Maybe other things are also getting branded, salt and sugar, et cetera. So eventually, will India Gate build those adjacencies so that we can build our wallet share from the dealer more and more? Does it make sense to remain absolutely focused on our rice, which is our core?
Yes. So Varunji, I'd like to take that, even though the question is directed to Ayush because we've had internal discussion on it. And India Gate from a positioning standpoint stands for premium. It stands for value, it stands for a certain brand promise. India Gate has a brand -- as a brand has certain attributes, and aura, personality. Now from that perspective, it distinguishes itself in the basmati and the moment we try to use that brand and leverage it to other. And I think certain other players who might be dominant in certain commodities such as edible oil have tried to line extend the brand to other commodities, they've not truly succeeded.So whether it's an edible oil player venturing into basmati with the same brand name or an atta player venturing. If you see it out -- if you see it play out in the market, there's not been a clear because the consumer perceives that edible oil brand as a champion of that category. So I think even if we do venture into, let's say, other commodity categories, a, for me, the primary driver would be through my entry, am I enriching the category, am I creating better value for the consumers, am I delivering better value to the trade because gone the days to be another me-too player in the market. It's too expensive and too crowded. That's number one.Then in that -- looking to that, we've actually gotten into category creation with the health products. So I think from an aspiration, we'd like to play at the premium end of the market with India Gate, push the value up and take the share of wallet on the premium side. If we do want to play on the other commodity side, we would most likely launch other brands and then champion them through investment.
Perfect. Perfectly answered. My other question is on the export side only. So today, if I see the APEDA data, around INR 32,000 crores, INR 35,000 crores of basmati is exported. And KRBL market share has risen from some 2% odd to 7%, 8% today. But that's still a meaningful opportunity for us. So during this last 18 months of chaos, have we seen any kind of market structure change, any weaker player going out of the industry or any brand going out of the market, which can help us gain even more dominance, 7% market share to may be much higher? Because the industry itself in the Middle East is not growing, maybe 3%, 4%?
Right. So from a GCC perspective, I think like the strategy of domestic vegan, we have built a secondary brand called Unity. At KRBL, our ambition is to build a secondary brand, Nur Jahan in that market. We've already achieved success in markets like Qatar, where we are the second -- we are presumably #2 in the Qatar market with Nur Jahan. We've launched this product in the region. We've achieved, I would say, moderate success with that. So the idea would be to gain incremental share through addition of newer brands, which are positioned at different products. So that's one.In terms of people going out, Varunji, this is the dynamics of the industry, I can tell you brands come into the market every day. They have a certain lifespan and then they sort of fade out. It will be very boastful of me to say, I mean, brands go out and in. I mean that's the nature of the commodity. Our goal is to identify the opportunities and try to capitalize them and grow them. So there are short-term opportunities and long-term opportunities. The other thing that we are working on is working on the food service side of the business. So we're bringing a lot of structure and scalability and approaching the food service business also through our portfolio of brands. So those are sort of opportunities which we are capitalizing on in a more structured manner.
The next question is from the line of Ashwani Maheshwari from India Resurgence Fund.
So two questions from my side. First is regarding your revenues. So as you earlier told that your volumes have gone up by around 11% over the year, by more than 10%. But if we look at the revenues and amount in rupees terms, then basically, they have gone down by more than 10% year-on-year, for 12 months. So -- what is the basic reason for that? Secondly, if we look at the ethanol fuel policy of the Indian government, so they have recently launched the document in which they have said that apart from sugarcane they are also looking at other crops, other grains including rice for their raw material towards this particular policy. So what is the benefit that we would be getting as a company from that policy maybe from our subordinated products, or let's say, our broken rice or lesser moisture commodity or anything? So yes, that's from my side.
As far as rice is concerned, we are the third cheapest country in the world as far as non-basmati is concerned. And that is why in the year 2021, and currently, we have exported around 13 million tonnes -- 13.1 million tonnes, which is a record quantity. And day by day, with MSP increasing and with our local consumption, the rice prices are going to increase. Therefore, ethanol product can only be made out of the waste. For example, out of the molasses or where there is a waste, if rice prices goes very high, for example, we made glucose also. It's a very small plant. Many a times, we have to stop glucose when corn prices comes down. There is no parity in manufacturing glucose. Similarly, I believe as far as ethanol is concerned, rice, particularly in North India, which is basmati will never be a viable project -- viable commodity. That's number one. And for that, Anoop...
Less revenue, I think you are not listening, I have explained previously also. The volume has increased not by 10%, it has increased by 1% only and the value has been decreased by 11%. And that is due to COGS, the cost of goods sold, the value of the cost of goods sold has reduced by 17% over to last year. So instead of 17%, yes, we have made a less realization of 12%. So that is the reason why it is -- our EBITDA is the highest and the profits are the highest.
Well noted on that front. So if we talk about packaged food, basically like India Gate and Unity, if there is an x number of -- x percentage change in our raw material cost, how significantly does it get passed on to the end customer?
You see our premium products, which are India Gate Classic, India Gate Select, India Gate Super and 3, 4 more SKUs, we never change the price, whatever the market is. It is somewhere when the market is very bad, we do some promotions, but our MRP remains the same. Even in the export market as well as in the domestic market.
So in that case your revenue should be more linked to your volume that you have been -- like you said, that 1% growth is there year-on-year. So your revenue must have also have been grown somewhat by that or must have stayed at par instead of declining by 10% as well?
This is due to China. We have exported around 35,000 metric tons of broken rice at the rate of INR 20. You see the average realization where we are sending INR 80 and INR 20. It has come down, no? But the cost of goods of that sold by INR 20, maybe my cost of goods were INR 15 only.So I mean, you can't compare all these things on a basis of the -- because the cost of goods sold is a very important factor. We are not passing those benefits in the premium products, but then the lower segment, lower SKUs, which are Mini Mogra, Mogra and which are for the poor people, yes, some benefit passes on.
Ladies and gentlemen, due time constraint, that would be the last question for today. I will now hand the conference over to the management for closing comments.
Thank you very much, 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 discussion. We look forward to interacting with you soon. Thank you.
Thank you.
Thank you, everybody.
Thank you.
Thank you very much.