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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 Q4 and FY '22 Earnings Conference Call of KRBL Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.
Thank you. Welcome to KRBL Limited's Q4 and FY '22 Earnings Conference Call for analysts and investors. I'm pleased to introduce to you senior members of the management team on today's call. We will have with us Mr. Anil Kumar Mittal, Chairman and Managing Director; Mr. Anoop Kumar Gupta, Joint Managing Director; Mr. Ayush Gupta, Head Domestic Division; and Mr. Ashish Jain, Chief Financial Officer. We propose to begin with updates from Mr. Mittal with the views on the industry, business and growth strategy. He will be followed by Mr. Ayush Gupta, who will take us through the perspective on the domestic business. Thereafter, we shall have the financial overview presented by Mr. Ashish Jain. After the opening remarks from the management, the forum will be open for question-and-answer session.
A cautionary note. Certain statements on today's call could be forward-looking in nature, and the actual results may vary from these forward-looking statements. A detailed statement in this result is available in KRBL's investor presentation, which is available on the stock exchange website. I would now like to invite our Chairman, Mr. Anil Kumar Mittal, who will share his view. Thank you, and over to you, sir.
Good afternoon, dear investors. India, as a nation, has done exceptionally well in rice exports in FY 2022, particularly in non-basmati segment, as against a total export of 13 million metric tonnes in FY 2021, India has exported 17.2 million metric tonnes of rice in FY 2022, the credit of which mainly goes to non-basmati rice, which has placed India as the largest rice exporting nation in the world.
Countries such as Bangladesh, China, Sri Lanka and Vietnam have emerged as new markets. China has become one of the largest markets for Indian non-basmati rice importing more than 1 million metric tonnes. There are about 15 rice exporters registered with GACC, who are eligible to export rights to China, and KRBL is one of them. We have a decent share of around 12% of the China business.
We have remained opportunistic in the non-basmati trade and have been touting businesses where there are good margins. Otherwise, 80% of non-basmati business in the country is being done with low margin of 3% to 4%. Overall, India has been able to capture a sizable share of the global non-basmati business because Indian rice prices are most competitive today as compared to global rice prices. Our major competitors like Thailand, Vietnam and Pakistan have increased their prices due to poor crop. Whereas India has been having bumper crops year after year in the last 4 years, creating a good buffer with the government of India and the traders keeping the prices at lower levels. That is the reason the Indian government has started offering now 10 kilo rice per month under the free food distributor system instead of 5 kilo rice and 5 kilo wheat.
As far as exports are concerned, basmati exports, however, has remained marginally lower in FY 2022 at 3.95 million metric tonnes as compared to 4.63 million metric tonnes during 2021. The main reason for the shortfall was due to the lesser imports by regions, such as Yemen, Saudi, Iraq, Iran as well as EU. Moreover, basmati prices increased sharply in the second half of FY 2022, which coupled with a 5x increase in ocean freight rates had a downward pressure on basmati exports.
The impact of Russia and Ukraine war on our business. Agro commodity prices have overall shot up due to the ongoing Russia and Ukraine war especially in areas such as oil, cotton, wheat, et cetera. The most impact has been on crude oil prices, which has spiraled up to USD 120 from USD 70 a year per barrel, which has severely affected the logistics costs and other input costs and had an indirect impact on Basmati rice exports. However, we must understand that there was very limited direct impact on Basmati prices due to this war. As far as Iran is concerned, when we talk of Basmati, we cannot forget Iran market. Rice, since it remains one of the largest markets for Indian basmati. As such, there is no improvement in the payment position due to American sanctions. However, the good news is that Indian continues to explore basmati rice to Iran via third countries.
Logistic problems, as mentioned, about freight rates are very high, but availability of containers have slightly improved as compared to previous quarter, warehouses near the ports are fully congested and storage costs have 3x at Kandla Port due to wheat exports. After the brand on wheat exports, the situation is getting eased out, but it will take another 2, 3 months for it to be normal.
Climatic conditions. As it's being experienced North India is reeling under harsh heat wave conditions and everyone is concerned about sowing of Kharif which is harvested in winter. Here, again, the impact would be limited on Basmati since it will be sown during the rainy season and will be harvested in October, November. Basmati is highly dependent on monsoons. The forecast obviously is looking to be good. We are expecting a very large area under cultivation for basmati this year due to the attractive prices realized by the farmer last year. Most importantly, Basmati prices have remained firm throughout the last year, which would be a great motivating factor for the farmers to show more of Basmati this year.
On R&D front, Pusa Institute has distributed good quantities for seed multiplication as substitute for 1121 now 1885, 1718 now 1849, 1509 variety, now known as 1847, 1401 basmati as 1886 and Pusa basmati rice at 1677. We are confident that this will bring a good revolution in production of chemical residue free basmati because this new era disease and pest resistant besides their yields are also better over the old varieties. Thus the rise will qualify for exports to countries such as Europe, U.S. and many Middle East nations, which have been imposing non-tariff barrier by putting restrictions on imports on the basis of pesticide residue levels, which we all know do not have any harmful effect as such on human beings.
KRBL's strategy and road map for the future businesses. As you all very well know, we had a major setback in Saudi Arabia, where our distributor had gone financially weak, we had been defaulting on payments. We have tried our level best to save the 35-year-old relationship. We have been supporting them for the past 5, 6 years in the hope of reviving that business, but in the process had lost badly in terms of finance and market position. We used to export about 100,000 metric tonnes of basmati annually to the Kingdom of Saudi through our old distributor. But due to the failure out there, we started losing our market share.
Finally, we had to take a hard decision and has appointed a new distributor for Saudi market in the month of January. This new distributor is doing an excellent job, the result of which will be seen in FY 2023. We have very good orders in hand from them and we are confident that very soon, we will recapture this market and will grow beyond our previous levels.
As regard Iran too, the picture is good since we have good buyers and have made all arrangements through third country to ensure that business is done as per the regulations of law. It is crucial to mention here that we have already purchased lands in Kandla, Bhopal and Karnataka and currently setting up operations in these regions. I would like to correct here, myself, if we have purchased in Kandla. We have finalized in Karnataka and Bhopal we have acquisition of 25% to 30% has already been acquired. It will take maximum 2 years' time to start these businesses, which would help us further to secure and increase our top line as well as bottom line.
Towards the end, I'm indeed happy to let you know that our new generation is doing exceptionally good and is working very hard. It would take a little more time for them to rise to their full potential and they are now in the process of gaining professional experience. I'm sure that with our concerted efforts and relentless hard work of our young generation and our professionals, KRBL is set to march ahead in the path of Glory and success. Overall, 2023 will position KRBL in an accelerated position in the arena of rice exports and I'm seeing promising times ahead, thanks to everybody.
Should we open the floor for Q&A, sir?
I think we need to have the next speaker, first. Thank you, and good afternoon, investors. I am Ayush Gupta, and I head the domestic division for KRBL. I'm delighted to share that the domestic rice business recorded yet again a strong quarter performance, with revenue growing by 11% to INR 677 crores.
We have recorded higher leverage sales in FY '22 wherein revenue increased by 32% to close the year at INR 2,648 crores. We continue to lead the branded basmati segment with an annual volume market share of 32.5% in general trade and 41.9% in modern trade. We are sharply focused on our 3-pronged strategy of densifying distribution, increasing brand penetration and augmenting the portfolio.
Let me now share progress on each of these 3 levers. On the distribution front, KRBL already boast off to have best-in-class distribution infrastructure amongst its peers in the rice category. We are proud to say that we have the most loyal, determined and financially sound distributors in the category. We are now expanding our distributor network by more than 30% in the current financial year to further increase our retail reach and grow the category. In the North and west zones, we are now targeting reaching all towns with a 50,000-plus population with a direct distributor. And in South and east zone, we'll be appointing a direct distributor in all 1 lakh-plus population towns.
In the past year, our secondary sales coverage increased from 26% to 31%, an increase of 500 basis points. This is in line with our strategy to drive the category through robust active retailing. Increase in secondary sales coverage has resulted in higher throughputs at retail outlets, improved relationships with trade and better saliency of the brand. We will continue to drive this feature and are targeting to reach 60% secondary sales coverage by financial year 2025. Supply chain continues to remain an area where we can unlock productivity upgrades and enhance cost efficiency. Teams are working relentlessly to explore opportunities and transform processes to make them more technologically driven. Intervention and supply chain, such as implementation of hub-and-spoke model in strategic geographies will further help us reduce our lead times to market and will greatly enhance fill rates. Our technology transformation project on the sales front, Project Disha, is now ready for launch, and we shall start seeing its core benefits from quarter 3 of this financial year. The third strategy on augmenting product portfolio, which Anil-ji has already shared about the non-basmati initiatives. Other than that, I'm happy to share that Unity brand has now officially reached INR 500 crores revenue benchmark. A brand that is targeted for consumers to make the ship from loose to package grew by 42% in volume terms and 50% in revenue terms in the financial year 2022. Further, we continue to push aggressively on modern trade and e-comm platforms. Volume sales from modern trade and e-commerce channels recorded 25% year-over-year growth in financial year 2022. Brand equity and quality of product remain the tough enablers, which consistently allow us to penetrate this highly cluttered market. KRBL continues to invest in its brands with a dominating 60% plus share of voice on media platforms. At KRBL, our outlook for the Basmati category remains progressive. We believe there is immense scope of growth in both the consumer as well as the HoReCa segment of the business. We are constantly evaluating and upgrading our retailing and distribution capabilities to match that to FMCG best practices. I will now hand it over to Ashish, who will take us through the financial performance.
Thanks, Ayush. I will now take you through the performance for the quarter and the year ended March 31, 2022. All figures mentioned by me would refer to consolidated financials of KRBL Limited. Total income for the quarter stood at INR 994 crores, marking a growth of 1.8% over the corresponding quarter last year. Revenue from operations grew by 1.4%, wherein domestic sales, excluding energy sales grew by 11%, while exports degrew by 19%. As Ayush mentioned, domestic rice sales benefited from healthy volumes besides buoyant rice prices. For exports, although the quarter witnessed lower rice volume than the corresponding quarter last year, realization improved led by increasing share of higher price point SKUs and general trend in rice prices. Total exports to Iran and Saudi Arabia were lower by approximately INR 70 crores in the quarter as compared to the corresponding quarter last year. Post appointment of new distributor in Saudi, offtake resumption is in progress, and it should scale up further in the coming quarters. Revenues from operations included a provision write-back of INR 7.8 crores recognized after a favorable court judgment in Andhra Pradesh for electricity units supplied in earlier years. Overall, better sales mix and higher price realization led to higher gross margin as compared to Q3 FY '22, even as rice cost per tonne continued to be higher on account of higher paddy price in the last buying season. This, coupled with higher advertising costs led to EBITDA margin at 17% as against 22% in the corresponding quarter. KRBL's finance costs declined to INR 4 crores for the quarter as against INR 8 crores in corresponding quarter as our reliance on borrowings continues to reduce.
To give an overview of FY '22, the revenue from operations increased by 5%, while total income increased by 6% over the preceding quarter. EBITDA margin was at [ 17% ] as against 32%, while net margin was up 15% as against 19%. The domestic business, like Ayush mentioned, had a record year with both volume and value sales value right sales increasing by 32%, while exports continue to be affected with rice volume sales declining by 10% and value by 24%.
Total exports to Iran and Saudi were lower by approximately INR 850 crores in FY '22 as compared to the preceding year. So these 2 -- this is the single largest impact from a sales perspective. This was made up by exports to other countries. Lower export sales, coupled with higher rice costs were the key drivers of the company's operating performance during the year.
I will now cover some balance sheet highlights. Total inventory as of March 31, 22 was of INR 2,816 crores, comprising around INR 870 crores of paddy and around INR 1,800 crores of price as against INR 2,964 crores in previous year. The inventory this year is lower primarily due to lower paddy purchase in Q3 '22 on account of high paddy prices. In volume terms, as of March 31, '22, paddy stocks were at 256,000 tonnes and rice at 382,000 tonnes.
The company had negative net debt of INR 389 crores, which is net of cash and cash equivalents of INR 390 crores and investments of INR 5 crores. Net debt at the end of March 31, '21, was a positive of INR 53 crores. So this movement that you see is a direct impact of higher net cash flow from operations, which was at INR 561 crores in FY '22 as against INR 384 crores in the preceding year. The company's overall liquidity position continues to be strong. The Board has recommended a final dividend of INR 3.5 per share -- per paid up equity share aggregating to approximately INR 82 crores for the financial year, March 31, '22.
As mentioned by the Chairman, our capacity expansion program is underway where new manufacturing facilities are being set up in 3 states. Gujarat is the first state where a rice to rice capacity of 30 metric tonnes per hour is being set up. Karnataka is the second, where a paddy to rice capacity of 10 metric tonnes per hour is being set up and Madhya Pradesh, with capacities same as that in Karnataka. As the Chairman had mentioned, land for Gujarat product, project was acquired in FY '22 and plant construction is underway. Land acquisition formalities for Karnataka project are under process, while land has been identified for Madhya Pradesh and part of the acquisition has begun.
Gujarat and Karnataka facilities are likely to go live in FY '24, resulting in incremental initial annualized revenue run rate of INR 400 crores per annum together. MP facility is expected to go live in FY '25. Total CapEx before taking the benefit of any government capital subsidies is approximately INR 200 crores. Of this, approximately INR 15 crores was incurred in FY '22 and balance is expected to be incurred in the current financial year.
Karnataka facility is going to be based in the key rice region of Gangavathi and will focus exclusively on the non-basmati opportunity, while the other 2 facilities will focus on basmati and non-basmati. With that, I come to the end of my prepared remarks. I will now like to hand over to the moderator for opening the Q&A session. I will just like to mention that as the [ EU ] matter is sub judice we will not be in a position to respond to queries on this matter. So over to the moderator now.
[Operator Instructions] The first question is from the line of Jayant Mamania from Care Portfolio Managers.
Yes. Congratulations for the better set of numbers this time. Sir, my first question is regarding domestic sales. We grew by 30% this year. So can you bifurcate the sales between -- from new distributors, existing distributors, new geography and what kind of growth we are expecting in the current year?
So frankly, that data is not available at the moment. However, as I told you that we are looking at 30% distributed expansion in the upcoming financial year. So bulk of our growth going forward will come from new distributors. But we don't have that data of how much growth came from new distributors in our gone by.
Sir, what would be your sales from non-basmati segment? And that health-related products like quinoa, flax seed and Chia seeds?
See non-Basmati and the health segment currently contribute less than 3% of our overall top line number. So as we told you that non-basmati are making strategic investments in regional brands in Karnataka, in Gangavathi, in MP and maybe Maharashtra going forward. So we are expecting non-basmati to contribute to a significant 10% to 15% revenue contribution in their initial years. Health segment is a very, very niche category at the moment. And we won't be anticipating more than a 1% overall revenue contribution from that unless until we look into more penetrated health categories, which is not -- which is still under planning, I would say.
So what kind of growth are we expecting in domestic market for the FY '23?
See we generally don't give guidance. But I think from what we see, the rice prices are holding up and the demand is also buoyant. So while we can't give a number, but we're positive about the current year.
Sir, can you tell us what kind of price rise we have taken during this Q4? The average realization in Q4 and -- as compared to corresponding quarter.
We've increased our prices by 7% to 8% in quarter 4, and purely basis increase in commodity prices and input costs. These price increments have been taken.
The last question, last year, we lost sales of around INR 850 crores by not exporting to Saudi Arabia and Iran. So how much time will it take to recoup that?
See, as far as Saudi is concerned, I think so whatever is our target this year, we will be able to complete 50%. When we say 100,000, 120,000 a year this year, we should be -- in FY '23 should be doing about 60,000 tonnes out of 120,000 and 120,000 will complete in FY '24. Because it's a new distributor doing very and we have yet to appoint a distributor for HoReCa segment that we are not able to locate a good distributor. And I'm quite sure within next 1 month, we will be able to locate the HoReCa segment distributor in Saudi. So the total export to Saudi will be around 125,000 under 130,000.
As far as Iran is concerned, for the last 8, 9 months, we were keeping silent because we were much worried about the government and bank's regulations. Now we are able to conclude certain businesses with Iran because under the guidance of State Bank and other financial institutions where our guideline for the payment is crystal clear and so we have decided to do that business. And we have got some orders.
Sir, with the increased sales from Saudi Arabia in the current year and opening up of Iran, can we expect better margins this year?
Yes, margins would be better also in the top line, I am expecting a top line of minimum INR 700 crores, INR 600 crores to INR 700 crores -- INR 600 crores only from Iran and Saudi.
The next question is from the line of Mohit Khanna from Banyan Capital.
Yes, sir. Am I audible, right?
Yes, we can hear you. Yes.
Yes, yes. Sir, my question was pertaining to the inventory valuation, how -- this number for inventory because we have had less purchases during the third quarter, the inventory number has gone down. How is that valuation compared to as of today, in terms of the current paddy pricing -- paddy and rice? That will be my first and I will come back.
Yes. What we are holding today is the stock inventory of INR 2,800 crores, if we compare with the market value is the differences -- it is just 80% of the market value. I mean there is the incremental value of INR 500 crores in the stock.
Fair enough. Fair enough. Also, sir, the other expenses in this quarter seems to have increased as compared to the previous quarter. So what is the reason for that? And how should we look for it going forward?
Yes. So the largest chunk of the increase that you see is on account of freight on sales. And the biggest chunk of that is on account of freight on exports. But that, as you know, we pass on in our sales price. So while it comes as an expense and bloats up other expenses, but it is actually factored in the realization. Now like the Chairman said, the situation is improving. So with that, you should see this head coming down in the future.
Because I was asking this because as the gross margins have gone down a little bit as compared to the EBITDA margins, which is down by around 5%, year-over-year.
Yes. So one is freight, and the other is also there is a quarter-on-quarter and year-on-year increase in advertising, which is primarily on the domestic side. So these are the 2 reasons why you see other expenses also.
So should we expect the ad expenses to be at the same level or should we -- any target number on the percentage of sales that you have for advertisement, brand building for FY '23, sir?
Sure. So ad expenses will remain same proportionately. And while the freight costs will depend upon how the freight rates pan out, but generally, we should see benefits there.
The next question is from the line of Pritesh Chheda from Lucky Investment.
Sir, what is the total basmati volumes that we would have done or rice volumes that you would have done for '22?
See we are not disclosing sales volume because it tends to be sensitive from a realization point of view. I had shared the total -- and it is there in the deck also, we've given out the total value sales for domestic and export. But that's not split into basmati or non-basmati.
So you won't be even comfortable to share the total volume?
No.
It's required. Okay. And the other question was, and did I hear it correctly that we will recoup the INR 600 cores to INR 700 crores sale of Saudi plus Iran this year, where we have lost about INR 800 crores, INR 850 crores of sales. This INR 800 crores, INR 850 crores of sales would have been lost over a couple of years, right, from whatever INR 4,400 crores that we did 2 years back?
Yes. So let me explain what INR 850 crores is. This is the difference in sales to the 2 countries between FY '21 and '22. So the sales in FY '22 in these 2 countries were lower by INR 850 crores.
And we are confident that we will recoup this because we have orders in hand. New distributor in Saudi is doing very well, and we are quite confident that he will be able to do a turnover -- top line of not less than INR 350 crores to INR 400 crores. And we are in the process of finalizing another distributor in Saudi who will be exclusively dealing with HoReCa segments. So these are the 2 -- when that also comes into when we finalize and decide on that distributor, the total sales alone to Saudi Arabia would be about INR 700 crores. And Iran would be another INR 500 crores -- INR 400 crores to INR 500 crores.
Okay. And sir, what is the difference to gross margins in export business, vis-a-vis, domestic business?
So I think Anoop-ji had answered in one of the calls. Typically, in export, the realization tends to be about 5% higher than the domestic realization.
Okay. Okay. 5%? Okay.
Yes.
The next question is from the line of Darshan Deora from Indvest Capital.
Two questions. The first question was what percentage of our sales would be non-basmati rice export sales?
I would say it is roughly about 18% to 20% -- 18% because we have done a quite business 12% alone to China. And other than China, also, we have done certain businesses with Bangladesh and all other countries. So overall, it would be about 20% business.
Is there concern regarding a potential ban on exports of non-basmati rice?
See let me tell you, as far as my information is concerned, I was on Friday, I had gone to the Ministry of Commerce. They have got no plan as far as non-basmati ban is concerned. And the reason is that government has surplus stocks of rice. They are depleting stocks of wheat, so they have banned wheat exports. But non-basmati, they are sufficient stocks but you don't -- you can't get anything from the government, anything can happen. But at least for 3, 4 months, I don't see any -- no future of that in the exports of rice.
Okay. Sir, second question I had was regarding the gross margins. Generally speaking, the aged rice and the prices of rice were obviously lower a couple of years back versus what the current market prices are. So should we be having -- shouldn't our gross margins be expanding, and we should be having inventory gains from the fact that we hold inventory from -- which is lower price inventory from a couple of years ago?
See that is why our -- if you see quarter 1, quarter 2 and quarter 4, the margins are to the tune of '17, '18 -- I mean the EBITDA only our quarter 3 got hurt and it was only, I think, 11%. That is the reason why the whole year EBITDA is about 17%. Otherwise, the 17% EBITDA as far as rice industry is concerned, is quite good. And it is due to the division of only aging rice and we had a cheaper stock. Naturally, today, if I say our holding stocks of INR 2,800 crores, where the market value of that stock is INR 3,300 crores. That is only because we are holding cheaper stocks of previous years. And this gain of INR 500 crores will come in financial year '23 or maybe some part in '24.
The next question is from the line of Nikhil from SIMPL.
My first question is on port business -- so I'm unable to join the dot. Now if I look at in FY '20, our total export sales was INR 2,100 crores. which this year has come to around INR 1,500 crores. And you said that -- in the opening comment that we lost INR 850 crores of sales from Saudi and Iran. So that INR 1,200 crores has become INR 1,500 crores because INR 200 crore, INR 300 crore is the sale of non-basmati rice, which we did to China, Bangladesh. That is how the math adds up?
Yes, that is correct.
Okay. And if we look at it, so in this INR 2,100 crores in FY '20, what was the share of Saudi and Iran, if you can give ballpark number, not an exact number.
I don't have the FY '20 data with me. I can share -- I can tell you the numbers for FY '21.
Yes, that will also be fine, sir. So of the INR 1,900 crore, what was Saudi and Iran?
Yes, I will just tell you. Roughly about INR 1,100 crores.
So that became almost INR 300 crores this year.
That's right. Yes.
Okay. Secondly, sir, between -- so if we -- on -- so my second question is on the domestic business. Now you said we've increased the realization by 7% to 8%. In the presentation, you have mentioned the realizations improved by 22%. Now if I even if I consider a base of 10%, 11% increase in realization, it means that volumes have dropped in fourth quarter '22 versus fourth quarter '21 in the domestic business. So where has the drop been? Is it more in the HoReCa segment or is it the branded business? If you can share some light over here?
See, as far as I know, there hasn't been any drop in quarter 4 compared to financial year '21. We've actually grown by about a low single digit, maybe 3% in quarter 4 financial year '22 compared to '21.
Okay. So the realization growth in domestic business would also be low single?
So 7% to 8% realization growth that we mentioned was purely on quarter 4. However, realizations have increased throughout the year and probably the consolidated realization increase would have been significant throughout the year because quarter 3 also saw really high realizations increased. So the double-digit realization growth that you're talking about would be a consolidated number for the full financial year. .
Yes. And also, the number is not just for domestic. It is an overall increase in realization.
Okay. So would it be right to say that if we compare year-on-year growth in the fourth quarter for domestic single-digit volume growth and single-digit realization growth. That will make the 11% overall top line growth?
Yes, that's correct.
Okay. And what would be the percentage of ore in this the HoReCa segment in -- so for the full year or only for 4Q, if you can share.
Frankly, we don't share that information, and we will not have very accurate data on the HoReCa business. [ 25 Kg bag ] sales are used multiple in multiple ways in the Indian market. So any estimate that we give will not be accurate, and we do not share it now explicitly.
Okay. Last question, sir. Now I'm trying to understand what happened in third quarter results versus fourth quarter results because -- so this is sequentially. So in third quarter, our export business was something like INR 380 crores, but our gross margin went down to 20%. In fourth quarter, the export business is INR 280 crores, but gross margin improved to 30%. If you can help us understand what exactly happened in third quarter numbers that there was significant hit on gross margin and what exactly changed in fourth quarter that even though export sales was lower, gross margins improved.
Yes. I'll explain that. See, I think 2 aspects really. One is that the profile of export sales essentially export sales mix has improved significantly in quarter 4. Even though you see the revenue is lower than quarter 3, however, the average realization in export is far better than in quarter 3, right? And similarly, the realization has also improved on the domestic side. So one, increase in gross margin that you see, even with comparable rice input cost is coming through realization, which is flowing straight to gross margin.
Okay. So we had better realization sales in export market in fourth quarters that supported the gross margin improved?
Right.
The next question is from the line of Anuj Sharma from M3 Investment.
Yes. Just a few questions. One is, you just mentioned that non-basmati is 20% in export markets and realization was significantly improved in Q3 -- sorry, Q4. So if I compare Q-o-Q, then that -- and Q3 did not have Iran and Saudi Arabia as a significant part. So have we lost significant volumes in the non-Iran and non-Saudi market in Q4 because the statements do indicate that? So what's happening there?
Actually, there was a big confusion due to freight rates. And the customers were not too much ready to bear that loss because our prices of India Gate is already quite high because we are into a branded segment. So there was a little bit confusion, which was cleared after the third quarter. That was the main freight rate. You know the freight rate have gone 5x. We were paying to America about $1,500 to $1,800 a container. Today, we are paying $10,000 a container. For whole of the Middle East, our average freight rate outgoing was about $400 a container, $450 a container. Today, we are paying $2,000 a container. Same way Australia, Singapore even to Japan, even to Singapore, we used to pay only $50 per container. Today, we are paying $1,500 per container. So the container trade has really -- not only we lost the business, but it became late in finalizing with our distributors.
All right. So if you could just give some outlook on the non-Iran and non-Saudi market going forward? Because how would they shape up? You have given outlook on the Iran and Saudi, just some outlook on these markets?
No, they're all positive markets now. And let me tell you, it will not be exaggerating if I say, at least as far as realization and business is concerned, we might be able to increase that area also by 10%.
All right. My second question is again on the other expenses. You see our exports have fallen by roughly 26%, 27% Q-o-Q, and the other expenses have risen by 10% again Q-o-Q. And I presume that the freight rate would have softened in quarter 4. So what led to a significant rise in other expenses? And what is the outlook there?
See, as far as freight rates are concerned, they have not come down only the availability of container eased out, number one. And that when you talk of the expenses, and the even the domestic freight rate from here to Kandla, we used to pay INR 90, INR 80. Now it is INR 150, INR 160. It has become higher by 70%, 80%. Same way the labor cost, everything has increased proportionately in the last 1 year. So that is why the things are looking a little bit on a costlier side.
All right. And my last question is, again, somebody asked on gross margin expansion. And if I look at it, as our procurement is one of our core competency and we have generally procured the inventory at a lower cost. Shouldn't -- so shouldn't the gross margin expand over a period of time because we are into branded and we are procuring at a lower cost and realizations are rising. So over a, let's suppose, medium-term or short-term outlook, do we expand -- do we foresee gross margins to be expanding or 30% is where we believe we'll be happy with?
See, first of all, if you look at KRBL, every 2 years, 1 year, we buy heavy stocks when the prices come down. This year, we are going to buy just 50% more what we procured this year because we feel that the crop size would be quite a large crop size by 25% to 20% -- 20% to 25%. And we are going to procure which will help us as far as our gross margins are concerned for the next 2 years because we aged the rice for 2 years, partly will come in '23, partly will come in '24. So for example, whatever stock Anoop-ji just now told you, we are having certain stock, which is 2 years old. And that INR 500 crore difference we are going to build up in '23 and partly in '24.
Margins would be better, yes.
Margins would be better.
The next question is from the line of Amit from Care PMS.
Sir, initially, in the opening remarks, you mentioned about INR 400 crores of top line. So is that from Gujarat plant alone or the all 3 plants put together?
No, this is from 2 plants, which is Gujarat and Karnataka together.
Gujarat and Karnataka both. Okay.
This is the initial top line we are saying. Ultimately, this INR 400 crores in next 3, 4 years, it should go up to INR 1,000 crores.
All 3 put together?
Yes. It should be -- I mean, even if you take Bhopal, and if you talk of 3-, 4-year line, then the revenue can go up to INR 1,300 crores, INR 1,400 crores also, we are starting with INR 400 crores. We are just saying we are starting with INR 400 crores.
Yes. But that all will come in the next year, FY '24 because that's where I mean -- in fact, my question was like in Gujarat plant, we have already acquired and we had the plant process is in place. is in process. So why do you think it takes so long for us to set up this Gujarat plant and where we are expecting revenue in FY '24?
No. Some revenue will come in the quarter 4 of '23 and then quarter 4 of '23, then it will be our annual target. Quarter 4, '23, we can expect a revenue of INR 70 crores, INR 80 crores.
Okay. Okay. Okay. And for this regional rice, so we have -- we are planning to do all under this Unity or India Gate or we are planning to acquire a local brands? Anything that you can share on that?
We have not decided. We have to look at it. First, we are now putting up plants now we will decide. We can acquire brands also. That's not a big issue.
Okay. Okay. Okay. And you mentioned that inventory, we have kept it on lower side of around INR 2,800 crores. On the other side, we are targeting to complete or kind of recoup our exports loss of INR 600 crores, INR 700 crore. So with this inventory, we would be able to achieve that target of FY '23 because then it should have been -- I mean, inventory could probably be short or do you think it's easy...?
No. We have a good inventory of INR 2,800 crores. And as Anil-ji said, we will be very aggressive in the new season. If any way, we are short of any old inventory, we can always buy in the market where margins would be less. We won't lose the business.
The next question is from the line of Manoj Dua from Geometric.
Sir, congratulations on a good set of number in this very difficult environment. I joined the call late, so pardon me for if it is a repeat question. You told that INR 1,100 crores sales of Saudi and Iran on down to INR 300 crores. What is the outlook for that going forward in 1 or 2 years?
See, as far as FY '23 is concerned, I'm quite confident both Iran and Saudi will bring us an additional revenue over last year by a minimum INR 700 crores to INR 800 crores. INR 700 crores minimum to INR 800 crores.
Okay. So container prices was a shock for everyone. Nobody expected that kind of rise. Now it has become -- we know the reality of what it is. So now this can be passed on to the customer?
Yes, yes. We have already finalized the contracts and whatever would be the increase in freight or decrease in freight, it will be part on to the customer.
Okay. What is the outlook? And what are the present day prices are going down or stable there even at the elevated level? We are stable or...?
At the moment, there is a false rumor being spread throughout the globe that India might ban the rice exports. And because of that panic, the prices are at higher prices, though the demand is a little -- because of the high prices, the demand is a little less, but we are concluding business at a very good price. Because of this false -- according to me it's a false rumor. Nothing is going to be banned at the moment because we have sufficient rice stocks and it will continue like this only. At the moment, the prices are good at high prices.
Okay. And that is for non-basmati this rumor only specifically for non-basmati?
Yes, I'm talking about basmati non-Basmati, both.
Okay, okay. Meaning, this banning of rice basmati non-basmati both this is rumor or only on one on market?
No. No, it was banning of only non-basmati rice, but the panic throughout the world is -- and the rumor says that they are going to completely ban the rice. So even the importers of basmati rice are also in panic.
The next question is from the line of Pritesh Chheda from Lucky Investment.
Sir, just can you give the color in terms of volume growth and price growth in our total revenue growth, at least that color you can share?
Yes. For financial year '22, I can share.
Yes.
Just one minute. So total rice volume sales increased by 14% in FY '22.
And balance will be priced, right? That will be reduction.
Yes, right, and the balance trades you already have.
Yes. And same do you have for '21?
No, I don't have the data right now I can share it.
And what is the energy revenue in this?
Energy is power -- you want the number or you want...?
Yes, I want a number, I want a number what is the power revenue?
It's about INR 110 crores.
Okay. It was INR 200 crores 2 years back. So it's about INR 110 crores, right?
No, it was never INR 200 crores.
Okay.
The next question is from the line of Nikhil from SIMPL.
Yes. Just one question. In the market of Saudi and all where we had launched up -- so where we were not able to supply the product. So have you seen a lot -- so I know because the product is not available in the -- on the shelf, we would have lost market share but in terms of demand, how is the demand panning out? Like is the brand still relatively strong? Or if you can just help us understand because I think we sell at a branded level there. So just to get a sense of how is the demand for our brand shaping up or...?
As far as South as concerned, India Gate as a brand is the strongest brand, even we were absent for more than 2 years, 3 years, not absent, but the imports were quite lesser compared to 5, 7 years back. But even then when our new distributor got the product, he could not imagine, he distributes about 30, 40 products and his reply was something unimaginable that he said that the goods are coming and they are on the shelves. The goods are coming and they are on the shelf, the brand is so strong.
Okay. So effectively, at the demand level, you don't see any pressure. It's only the ability to meet shelf space is where probably we should be able to achieve the sales back.
Right. Right. Right.
Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to the management for their closing comments. Over to you.
We are thankful to all the investors. And let me again reiterate that we are all set to march ahead in the path of glory and success. Overall, FY '23 will be positioned for KRBL as relative position in the arena of rice exports, and I see very promising results. Thank you to everybody.
Thank you.
Thank you.
Ladies and gentlemen, on behalf of KRBL Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.