Chaman Lal Setia Exports Ltd. (530307) Earnings Call Transcript & Summary

So on behalf of Anand Rathi Shares and Stock Brokers, I welcome all the participants to Chaman Lal Setia Exports Ltd. Q1 FY '24 Earnings Conference Call. Today, we have with us from the company side Mr. Rajeev Setia, who is Joint Managing Director. We also have Mr. Ankit Setia, the Executive Director; and Mr. Sankesh Setia, who is also Executive Director. Without investing much of the time, I would like to hand over the floor to Mr. Rajeev Setia for his opening comment and followed by a Q&A session. Over to you, sir.

Good morning, everybody. I welcome and thank everyone for joining us on Q1 FY '24 earnings call. And I know the biggest million dollar question in everybody's mind is the fall of revenue in this particular quarter. And at outset, I would like to explain that. There has been 2 factors for this issue. The first and foremost is this flooding and weather conditions which happened. It did not -- it not only hit our own states, Haryana, Punjab, UP and other parts of Uttarakhand and [indiscernible] where basmati is grown. More Gujarat in particular because of Biparjoy, affected all our shipments, but almost -- I can say almost our last month of the quarter was almost washed out. Whatever we achieved in that quarter was dispatches of second month, May. They formed the part of last quarter sales. So it was like, I can say, almost 2-month sale or 2.5 months sale, whatever we define it. This is one of the major reason. Apart from that, there was some commercial reason also. The prices of basmati which I indicated in last year earnings call also, the prices had suddenly come down, and it is natural for any business, when the prices start coming down, people wait for the bottom down of the prices to come further down. And that's why there was a bit slow, lukewarm attitude from the customers also. Yes, but it helped us other way. The low prices was kind of an opportunity for us. The company procured a lot of material at low price, which added to the very high profitability -- highest level profitability of the company in this particular quarter. So this is a blessing in disguise for us. So this is how it happened. Now I'll come about the crop. The paddy crop in the state of Haryana and Punjab, UP and Uttarakhand is victim of floods and very heavy downpour. We are not yet sure about -- there is no identification of non-basmati area under paddy and basmati area under paddy. There is no correct pictures available. But one thing is there. I checked with the BEDF, APEDA. The basmati rice can be grown till 15th of August. There is a possibility that can be grown till that period. And as regard non-basmati, which is [ MSP ] kind of rice, that is not possible to grow because that is grown in the month of June, till 15th June, and basmati is grown in the month of July, up to mid July it is sown and the climate is conducive, it can be grown as per the BEDF. As regard the present scenario, which you must be questioning that ban by the government. The Government of India has banned non-basmati varieties, and non-basmati varieties apart from [ MSP ] varieties [indiscernible] grain. It includes high-value non-basmati varieties also, which includes Sona Masoori, which is very important and famous for South Indian people living abroad. Apart from that, Swarna rice is there, Ponni rice is there, black rice is there, Kalanamak rice is there. These all kind of -- they fall under non-basmati category, so are prohibits. And this is going to be, again, unfortunately or fortunately, a boon for basmati rice because basmati rice is likely to become a substitute for all these varieties. So we feel because of this reason, and it depends how much the crop comes. These 2 factors will matter. The [indiscernible] crop and this, in particular, substitution by basmati. This is how we feel the prices will remain either high or stable at the present elevated levels. Now let me address highlights of the first quarter. I'm delighted to share that we reported strong margin profile because of the opportunity of procuring at the lower prices in the beginning of the current financial year, which I said earlier also. It was also highlighted in my previous earning call. Our value -- the very positive factor which came for the company, not for this quarter for future also, the rice suites well for diabetics, which is the robust in this quarter, surpassing the total sales, the entire sale of FY '23, which was 7% to 8%. And this particular quarter, in this particular quarter, we have 17% sale of rice suitable for diabetics, which is a dynamic achievement, and it's a very good decision of Sankesh and his team. They participated in one exhibition in such part of the world where they got very good response and very good distributors were set up. And this rice admittedly gives us a better profitability, and it will help in sustaining our profitability in rest of the year too. Yes, there is another factor, which I not totally explained, regarding the fall of exports, 16% year-on-year, there is -- in the preceding -- corresponding period, we have been exporting broken rice to China. The fall of revenue is about 16% because the broken rice has been prohibited by the government. And the other factor, I have already explained, is Biparjoy which affected our sales for this quarter. And however, the profitability is all-time best for this quarter. In my opinion, I have said it in the past also, the real and true marker of the business is profitability, not only turnover. And now I will turn over the call to Mr. Sankesh Setia to take you through the key highlights of Q1 '24. Sankesh?

Hello, everyone. Good morning. I hope I am audible, I'm clear enough.

Yes, you are clear.

Perfect. I would like to first inform Biparjoy is name of the cyclone. So it wasn't mentioned by you. So anyhow, coming to the key highlights of Q1 FY '24. First, I would like to welcome everyone, and thank you for attending this meeting on the call on Zoom. So Q1 FY '24, our operating revenue has been declined by 36% year-on-year and 26% Q-o-Q to INR 263 crores due to the reasons explained by Mr. Rajeev Setia. With our more than 4 decades of experience and constant focus on operational efficiencies have resulted in the expansions of our margin profile. The gross profit for Q1 FY '24 is at INR 66.5 crores, down 28% year-on-year and up by 3% Q-on-Q. Gross margins expanded by 285 bps year-on-year and 722 bps Q-o-Q to 25.3% in Q1 FY '24. EBITDA was up by 17% year-on-year and declined 20% Q-on-Q to INR 38.7 crores. The EBITDA margin has been improved by healthy 664 bps year-on-year, and 109 bps Q-o-Q to 14.7% in Q1 FY '24. Profit after tax was at INR 27.5 crores in Q1 FY '24, up by 23% year-on-year and down 27% Q-o-Q. EPS for the quarter stood at INR 5.3. For the quarter, our export sales volume, excluding China, declined by 20% year-on-year. And export sale value, excluding China, declined by 13% year-on-year. China included 34,735 metric ton non-basmati exports in Q1 FY '23, post which Government of India prohibited export of non-basmati rice in September 2022. In the current quarter, Asia Pacific region contributed 35% Middle East and Africa region contributed 50%. America -- American and Europe region collectively contributed 15% to the overall sales. Average export realization for the quarter stood at INR 92.8 per kg for the whole quarter. Our flagship brand, Maharani, sales has a robust quarter, contributing around 17% to the overall sales. The branded sales grew by 83% year-on-year. Our focus now turns our brand and a new performer like rice suitable for diabetes and brown rice segment to sustain the growth of this momentum. Rice suitable for diabetics has contributed 8% to overall sales in Q1 FY '24. These products continue to be well received by consumers, providing us the confidence that these products will fuel the company's next leg for growth. The company is growing the export market and has made a remarkable progress in countries like Yemen, Israel, Mauritius, Egypt and Canada. Overall, we are encouraged by our start and remain confident about delivering good performance this year. With our robust on-ground execution capabilities, strong customer relation and increasing distribution reach through exhibitions and a lot of traveling, we believe we are well-positioned to achieve sustainable growth in the medium to the long term. With this, I would like to open the floor to the questions and answers, and thank you very much for listening to me.

Before opening the house, I would introduce my nephew and ED of the company, Mr. Ankit Setia, who -- our company sales were around INR 300 crores when he joined as a director, and he is the key factor of improving sales to thousands crores. He is very dynamic in sales and very disciplined in handling the affair of the rice milling. And I would like him to speak for a few minutes and then we'll immediately open the house for question and answer. Over to Ankit.

Hello, everybody. My voice is audible?

Yes, sure.

Okay. So I see very good quarters. The last quarter, if you see, the ending quarter, January, February, March 2023, was a very strong quarter. And even June, July, August quarter, if you see, the difference in revenue has come only because of the broken ban -- the difference which came because we could not supply broken rice. Otherwise, the quarter is absolutely the same what it was in terms of revenue. The difference you can see, the percentage of profit has gone up. It is around 14%. Like my [Foreign Language] said, we were able to procure the rice at a very low point and that has helped us. You can see the entire year, the revenue and the margin on profit was extremely good. Regarding this quarter, which has just ended, margins were very good, which is visible. And even the next quarter, the coming quarter, we have the stocks. The stock value is low, and we are doing good revenue even in the next quarter, and I think you will see very good results. About the next year also, because there is a ban now on white rice, so the only focus of the buyer is basmati rice, which is our key area. And -- because I think the -- next year also is going to be bullish. I see very strong results, even for the future for the company. Like Sankesh said, now our focus is to increase the sales of brands. So this is a challenge we have taken up. And I think within a few years, you will see the percentage of revenue will be coming maximum from branded sales. So that is all what I wanted to say. Thank you.

The floor is open for question and answers.

[Operator Instructions] We have a question from Yogansh Jeswani.

Sir, Yogansh here. Am I audible?

Sure.

Firstly, sir, congratulations on a good set of results and in a difficult environment. So sir, like you were mentioning about the inventory pricing that it is at a lower level, and then we saw this ban coming in. So it might have affected price and the prices would have been very volatile. So if you could talk a little more about at least on the inventory and cash situation? [Foreign Language]?

Yes, I would like to answer. The prices of rice had gone around INR 107, INR 108 prior to year-end, 31st, around that period. Of course, we had factored these prices while selling our commitment with reasonable profits. But as I mentioned in last earning call, the prices are coming down. This was questioned by a couple of investors and they knew the prices are coming down, and I admitted the prices are coming down. How they are going to affect us was also a question. You never know the future. But the moment this ban was declared or it was in offing, I mean sometimes [indiscernible] the news channels start speaking, the prices started going up. Now the price, which was INR 106, INR 107, I'm talking of 1121 basmati raw rice, had gone to INR 110, INR 108 suddenly. And the lowest price had come to INR 90. It came to INR 90 and from INR 90, it is INR 110. So it's a considerable increase. Of course, company is maintaining very good stocks.

Can I add something? Hello? [Foreign Language], can I add something?

Yes, sure. Go ahead, Ankit.

What is your name? I'm sorry, I didn't catch your name.

Yogansh.

Yogansh?

Yes.

Okay. So Yogansh, if you understand the rice business, there is 1 crop in 1 year, okay? So the next crop has started to come in. It is in the early phases, less crop is coming, more mature crop will come in September. October, it will pick up and it will peak in November. So if you read any law of manufacturing, it says that you should be just in time for your raw material. So the raw material should come in the morning, you should process it, you should sell it on cash by night time, right? Raw material should get on credit and you should sell it on cash. This is the law of manufacturing. But in our business, because crop comes only once in a year -- crop comes once in a year, you get the best prices when it is October, November. Because then after that, for the next, let's say, 7, 8 months, you will not get the raw material. So by the time new crop is coming, it is better to finish your old stocks. This is common sense, that when the flood of crop will be coming, the prices will be lower, so no point holding the old crop, which will be carrying the interest cost, which will be carrying so many other cost, warehousing costs. So now is the time, now is the quarter, you should get rid of all the stock you have. You should be cash-rich and you should buy the new raw material at the lowest level. So you asked what is the current stock level. We have sufficient stock level to last the next quarter. We have sufficient stock level to last the branded business, which requires old rice. And moment we will touch the next quarter, we will be ready with our money, with our cash flows to jump on the raw material at the lowest pricing. So we'll -- that is why you can see the interest rate of the company is also very low. And we have fixed deposits for the company, which is only possible because we are getting rid of the expensive old raw material we have, and we are jumping on to buy the new raw material at lower prices. I hope I answered your question.

Absolutely. Sir, I think you are fairly right on every single aspect that you touched upon. And in fact, I have been invested in this company and tracking it for almost 6, 7 years now. So I have seen the entire journey of how we have come in to become a cash-rich company. I have seen that every year, half year, we have place -- we have sufficient cash. I think instead of paying interest, we are getting interest from...

So you can see yourself. Let's say, I picked up raw material average price about INR 40 last year in November, for example. If I keep it for 8 months, that raw material will become at least INR 48, because interest part is one part. There is warehousing part, the paddy itself, there is wage shortages. There are various issues. So INR 40 will become INR 48. And by the time it is October next year, same thing I will get at INR 35, INR 40. So if I'm carrying a big inventory, it is very difficult to make profit on that.

Right. So the intention was not to ask you how big an inventory you are keeping. So it's not keeping in mind the KRBLs or the LT Foods of the world are having thousands of crores of inventory. In fact, what we like about Chaman Lal is the lean inventory system that we have, the lean balance sheet that we have. So the concern was not to -- basically, the concern was will we get bit by any inventory losses this quarter because the prices have been so little? Or do you still have that lean inventory in the system? That was the intention for asking.

Like I mentioned, for the quarter, we have sufficient amount of...

I think, yes, you touched upon it...

For the branded sale where old rice is required, even after this quarter, we have raw material. If some quantity is short, that can be easily bought, so we are again light. We don't have to -- we're not a fat company sitting on too much stock. And moment the new crop comes in, the mature one, we'll be jumping on it at the lower price.

Right. Sir, if we move away from the inventory discussion on and I just take you to suppose say the trajectory that the company is on. So I think for last -- I think if we go back 6, 7 years, we were at INR 400 crores, INR 500 crores region. There were 3, 4 years wherein we were at INR 700 crores, INR 800 crores region. Now this year onwards, we have crossed INR 1,000 crores -- INR 1,300 crores, 1,200 crores. So going forward, say, next 2, 3 years, like you mentioned, you want to take branded as a challenge, and you want to take up diabetes as another product line. So going forward, next 2, 3 years, where are your efforts towards? And what is the kind of trajectory that you want to take on growth?

Yogansh, my idea is just the bottom line. I follow the bottom line. I never follow the top line. I'm more concerned that I don't pay any bank interest. I buy my raw material at the lowest level, I get the best quality, I manage my bottom line. Top line will manage itself, like you can see in the past. I don't want to give you any false hopes. I don't want to say I'll become a INR 2,000 crores, INR 3,000 crore company. It will follow. My intention is to buy raw material at the lowest price, best quality, and I want to manage the best bottom line for my company. Top line is not the issue.

Fantastic. So that's a great way to drive business. And I think that shows in your return metrics and your profitability cash flow. Just pick up any single metric and you guys have done really, really well. Sir, if you can just touch upon the branded business, how you are planning to scale it? Because branded is not a very easy thing to do. And historically, Chaman Lal has been a strong player in rice shipment. I think today, if I'm not wrong, must be less than 5% in our overall business. So it's not easy. It might require you to burn a lot of cash. It might require you to do something differentially from what you have been doing. Is there some broad thought process on how you want to do it, how you want to take it up as well?

Ankit, let me answer, and you can carry on when I stop. If you see the first quarter, the rice suitable for diabetics, it is one of the premium rice. It has more margins as compared to conventional rice. The sale in the first quarter itself is more than the entire year of last year. So it is a very remarkable achievement toward our own brand, one. Secondly, we are set up a team for domestic sales also. And as I said in the last call, to begin with, we will go with the strong distributor instead of burning money to go into the retail market, high advertisement, all that. That will follow when the conducive time will come, not immediately. And as regard export is concerned, Maharani is already in 38, 39 countries, which Sankesh and Ankit are handling. And I'll ask Sankesh as well as Ankit to 2-minute reply on this issue, how they wish to expand branding sales outside India. Of course, the domestic, I've already told you. Ankit, please.

Okay. I think Sankesh can give figures, what is the percentage of branded business we are doing. I think he will share the percentage figures with you. See, branded business is like raising a baby. It cannot happen overnight. So we are trying our best. And my target is, within a few years, to increase the percentage level to at least 55%, 60% of our entire revenue. I think this is what my competitors also have achieved. This is the maximum you can do. And I think in a few years, we would manage that.

Next question we have from the line of Mr. [ Meherwan ].

Good morning, and thank you for taking my question. So basically, I was just looking at the loss in production or the loss in sales that we had during the first quarter. Do we expect to meet this up in Q2? Or is lost sales just lost sales?

I would answer. It is a very peculiar period. You see when this Biparjoy signs were announced in the beginning of June, beginning of June, end of May, the news was coming, a very strong cyclone is likely to come. Then I talked to my clearing agents who were sitting in [indiscernible], and one of my clearing agent he is from Odisha direction and he has in all life seen the cyclones and he was telling me, "Mr. Setia, this year, they will be very hard on us, cyclone." And a lot of cargo of many people have been destructed and the warehouses. Luckily, for our warehouse, we have not a single loss. Many sheds were off of many people. It was -- and the entire system was [indiscernible]. Truly speaking, it's like washing out of 1-month sale approx. So it will come back. It's just happening which happens once in a while. I saw the cyclone of '79 also. I went myself in [ Kerala ]. I saw how many people, dead bodies -- so many dead bodies on the streets. I saw obnoxious smell and tough time, no water, no electricity, nothing. So these things -- because sea area is prone to these things and the export will happen through sea route only. We have no other option. So it's just a matter of chance. And I guess this corresponding quarter of China sales were coming, we know that they are -- they were projected in September. And we had already stopped our own sales to China at one point of time because it was giving hardly any margins to us. We go -- as Ankit said, we care for our bottom line. And also, I also said it earlier in past meetings and today also, the true marker of any business is profitability, and that has to be there for sustainability and long growth. And it will very easily come, we are confident, in the next months [indiscernible] because as a business person, we personally don't see the quarters, we always target our annual performance.

If I were to look at your other expenses, moved up by about INR 10 crore on a Q-on-Q basis. I thought they'd be lower since we've had less export shipped out, et cetera. So I was wondering what was the reason for that?

One second. Yes.

Okay. [ Meherwan ], I'd like to add what my uncle just said. See, understand a little bit about rice business, right? It's a game of demand and supply, okay? You put a ban on white rice, there is chaos in U.S. You must have seen the news also.

Yes. We've seen the clips.

Right. So what will happen when there is a chaos in U.S.? All your U.S. customers will be after your life to ship them rice.

Correct.

Right? So you will see a quarter where too much rice will go to USA. And then, let's say, somebody with -- let's say, someone who can absorb 1 container, he will absorb 3 containers, and then he will be silent for the next 1 or 2 months. So what I'm trying to say is rice business, the way we are doing it, it is not possible to have like quarters where your revenue is almost similar. You will see some quarters where the revenue is going to go up. There will be some quarters where revenue is going to come down because this business is demand based. Right now, there is a transition from higher price to lower price. So the intelligent customer will only buy what is required because everybody knows that in November, the prices of raw material are going to go down. So if you know that, for example, tomato prices are up right now. If you know that next month tomato prices are going to go down, maybe you will start buying less. So similar is rice business, it's a commodity business. The intelligent buyer will reduce his buying in this quarter. But having said that, exceptionally, because of the ban of white rice, even in this quarter, there is too much demand. So if you compare it with last year quarter, you will see this quarter is going to be very...

And your question about...

[Foreign Language] will tell you about expenses.

Yes. Quarter-on-quarter, it is less by 27% in totality. I don't know you are asking for some particular expense, maybe that if you can point it out...

No. See, other expenses are INR 24 crores versus INR 10 crore, if I were to look at it on a quarter-on-quarter basis.

But I'm counting the total. It's 20% less, 27% that's negative. This is what my calculation is in my front. I'll ask my team to look at, if there is anything.

Sure, sir, because other expenses, I thought the cost of transportation would have come down. They are down sharply. They are down from INR 55 crores to INR 24 crores, but I wasn't seeing on a quarter-on-quarter basis, there was like an increase.

Quarter-on-quarter expenses are less.

Other expenses, just other expenses.

Okay. I'll look into it.

Sure, sure. Sir, do we have kind of annual target for volumes in basmati, which you could share? Or a growth target?

Annual volume and annual revenue, it's one and the same thing. If that will grow, that will also grow. Of course, you see, nothing at the cost of loss. We know the people in the industry, they are working at the breakeven with INR 400 crores, INR 300 crores. I'm not talking about listed, even unlisted companies also. That is not our way of business. Every single container going out of the factory, we calculate we earned or we lost. Every transaction, that is the way of business. Because we -- Mr. [ Meherwan ], I'm not sure if you have more acquaintance about our industry. In this industry, a lot of people lost money, a lot of people. There was blood bath in this industry, but we sustained because of our principles. We are one of the oldest. Since 1974, we are into rice business. And from '77, we started selling in the domestic market; at '82, we started export; at '89, we became exporters; '95, put up a new unit in Karnal. We had to move from Punjab. So and so forth, it's a step-wise, slow and steady wins the race story.

Before we take the next question, I have a question on the chatbox from the line of Mr. [ Vishesh ]. He wants to understand what is branded sales as a percentage of revenue in Q1 FY '24, and what branded sales target do we have for FY '24 and '25?

Who will answer? Yes, let me answer. If we compare quarter-on-quarter, preceding last year, even the annual sales of brand are 7% to 8% in the entire year. And in this particular quarter, we have achieved 17% of our flagship brand, Maharani rice. So this is the beginning of the trend, and if it went on, and it will definitely go on because of the few new distributors who have shown a lot of interest in Maharani and they bought. Even the Russia also has started for our brand recently. So we -- the brand will grow. Domestic, we are going to grow. Ankit has said around 50% sales as a target. This target, at least to some extent, we'll definitely achieve. Because even the investors like you have encouraged us that we have to go for brands. And we have made it a target. We have prepared a team for domestic sales and international business. These 2 boys, Ankit and Sankesh, are working hard on that.

The next question from the line of Mr. [ Rishikesh ] is, what are the EBITDA margin for -- what is the EBITDA margin for the branded products?

Specifically, for any brand, EBITDA is the [Technical Difficulty] because in this particular quarter, the sales of brand are up, obviously, EBITDA must be fine. But specifically for brands in the entire performance, [Technical Difficulty]. And this particularly suitable for diabetics is high-price rice as compared to conventional.

[Operator Instructions] The next question is from the line of Richa.

Am I audible?

Yes, ma'am.

My question is, I just wanted to get a bit more understanding about this rice ban because most of the procurement happens in -- by the peak is November, as you said. Now knowing the situation, do we expect the paddy prices also to go up and considering that the liquidation will happen over a period of months. And by then, we don't know what the end prices would be, maybe the ban would be lifted. So what is your confidence on maintaining the gross margin at 25% level?

Look -- you see, it still matters. The satellite data of the entire basmati crop is yet to come. It is yet to be correctly seen how much is destructed with the flooding. And how much -- because as I said earlier, that non-basmati is not likely to be grown. But yes, basmati variety like 1509 or anyone, can be grown till 15th of August, that can be -- plantation can take place. Now it's a commodity business. It is 1 product once in a year, basmati comes. It depends upon the entire size of the crop how prices will come. That cannot be -- that can be visualized, of course, but that cannot be -- some determination cannot be said that what will be the prices. Now it depends, if the prices are high at the point of buying, it is not in our favor. If the prices are lower at the time of any business, at the time of procurement, the prices are low, they help. And sometimes what happens, the prices are high and they are absorbed by the foreign customer, again, it gives money. So it's a very subjective question. But we -- with our experience of so many years, we know we will perform better. We'll buy at the right time, we will sell right time. And we are not into paddy buying and manufacturing and exporting. We buy a lot of rice from the market. It's traded goods and we recondition that and export. A lot of new rice mills have come and they are newcomers. We are their customers. We know we'll get a lot of rice also. So we can maintain our performance.

Okay. And sir, in the recent quarters, you have spoken about some of the innovative varieties which can be cooked very fast within a few minutes. So any kind of progress or development updates you would like to share on that?

Ankit, you are there? Ankit, you better answer.

So Richa, can you repeat your question, please? You are asking about...

My question was about the innovative variety for which I think you were also looking for patents, which can be cooked in 2 minutes, rice that can be cooked in 2 minutes or vitamin-fortified rice.

Right. Like diabetic rice. Like you just experimenting on smoked rice. We keep on doing these kind of things. Yes.

Okay. So -- but do you expect this to be launched in this year or some time lines, if you could get insights on?

We keep on launching new products, which we are innovating. We have a very strong R&D team. And you can see the -- you can see what we've achieved with diabetic rice. Like Mr. Sankesh said, the sales are going up. Revenue is very good. The bottom line also very good with demand.

Richa, I would like to add. We have come out with our unpolished brown rice, which is quick cooking. Because normally, the natural brown rice takes 30 to 40 minutes, 35 minutes to cook. And nobody has patience to cook that so long, and it takes more fire and it even destroys some of the vitamins with overcooking. And my brother, Vijay, has worked so hard on this rice and our rice cooks in 12, 13 minutes. Ankit, am I right?

Absolutely right. We're trying to reduce it to 6 minutes.

We are trying to reduce it. But right now, we have already achieved 10 to 12 minutes, which is a normal time for conventional rice also cooks in this time. So this brown sales, we are quite confident that will sell, that would increase our sales and rice suitable for diabetics has always taken off. So -- and the other quick cooking and all that, they're in lab experiments as yet. And for commercial production, let's see when it will come. Right now, that cannot be predicted, maybe 1 year, 1.5 year max, but that will be there.

Okay. All the best for that. And sir, please correct me if I'm wrong. But as per my understanding, in FY '21, the overall share of branded rice, all the brands combined, was around 21%. Is that understanding correct?

No, no, not 21% in this particular -- repeat?

So I was just going through some notes on the company from different sources and one-off piece suggested that in FY '21, the share -- overall branded share, all the brands, not just Maharani, was around 21%. So I just wanted to know -- confirm if that is correct? And if yes, then what is the combined share of all the brands, let's say, in FY '23?

This -- in FY '21, branded sales, including all brands, was 8% to 10%. And in this particular year, I have specifically calculated this Maharani, which is flagship, which we are targeting always, is 17%. And of course, 2%, 3% would be the other brands also. What you say 20%, 21% is right.

Next question we have from the line of Mr. [ Siddharth ].

Am I audible?

You are, [ Siddharth ].

My sincere gratitude towards like how you grown this company to this point. So my question is about our international business. So currently, if you see, we are going -- getting into new geographies, and we are getting new businesses, right? So if I see LT Foods and KRBL, also, they are able to grow their international business. So it's more or less kind of a pattern, at least in the listed space. But if I see the basmati exports for last 5 years, which you presented in your investor presentation, volume-wise, it's more or less flat for last 5 years. So my question is from where we are getting these new businesses? Is it something like other weaker players are getting out and you are getting their share from the market? Or is it that market is really growing and you are getting those share? From where we are getting this? And like is this a sustainable growth or what? Basmati is more or less kind of a matured market. And hereafter, you have to get share from other players instead of the market [indiscernible].

With whom I am talking to you, Mr.?

[ Siddharth ].

[ Siddharth ], okay. Ankit, I will reply and you will add on to it. Look, we -- if we want to increase the sales, it's a 1-minute job. There are customers, those who are ready to buy 5,000 tonnes, 10,000 tonnes. They are sitting in Saudi, Iraq, these kind of countries. But they won't let us learn at all. If you earn just 1%, 0.5%, 2%, you never know, even by volatility of currency, you may end up losing money. Increase of volume and increase of revenue is not difficult at all in our industry. You can sell instantly. But that is not way of our company. We have a very separate business right now in 92 countries, small consignment, maximum 10, 15, 20 containers, not beyond as we -- even we entertain 1 container order also, 2, 5, 10. It's -- as regard risk is concerned, it's a separate risk. If we lose 1 country, for example, we were exporting reasonably good quantity to Ukraine also every month. But that country is no longer existing for export. So it did not hurt us. Had we been exporting to Iraq, Iran and Saudi Arabia, the big players, and one goes out of that and your business is dead behind.

Rajeev, sorry to cut you, sir. Like isn't this more about [indiscernible] more about industry. Yes, I understand our company [indiscernible] focus on just a top line, right? So yes, I could see this in results, but I'm more interested in how is the trend? Because if you see, right, the export remains -- if you see Indian export data, it remains flat, right? So it's my question is like this market is really growing for basmati or every player is -- bigger players are going out and [indiscernible]?

Actually I can, I can -- I understood your question. This is Sankesh Setia. I'll just answer your question very quickly. Your major -- your basic question is, either we are getting sales by killing our competitor or are we getting the sales high because basmati share is growing? Am I right?

Yes.

So the basic thing is they both go hand in hand. First of all, yes, basmati share is increasing. Basmati, wherever it goes, to whichever geography, whichever country it enters, people get a very quick habit of basmati. And if you look at last 10 years, I've seen myself where countries were buying about 5,000 to 6,000 tonnes of basmati, and today, they are buying about 50,000 to 60,000 tonnes of basmati, which is almost 10x. So yes, basmati share generally is also growing every year. But also, yes, since we are one of the largest private labeler from India for basmati, and then we also supply our brand, so a lot of competitors are not able to compete in our kind of service what we provide to our customers, they are not able to provide. So automatically, a lot of business, in all the geographies where we are present, does come to us. It's because of the packaging, because of a lot of aspects, because of a lot of [indiscernible] and everything. So we do get business. We try to capture how much we can, and there is no overcommitment because a lot of competitors do a lot of overcommitment in terms of basmati rice business. And we are very loyal, straightforward without any wrong commitments. So whoever works with us is always with us, and we take care of their brands in terms of OEM. And yes -- so it's both. It goes both ways. So we do get business of our competitors, yes. And we -- of course, the basmati rice share is also growing. So it's both ways. It's not one of the things.

No. But it was a little different question. Sankesh, let me explain the gentleman. The export -- Indian entire export is 4 million to 4.5 million tonnes. That is the issue. Does it expand to 5 million, 5.5 million, 6 million tonnes? Out of the 8 million tonnes, 6 million to 7 million tonne is the crop size [indiscernible] we did 8 million tonne. If the entire -- the buy increases, means if it goes to 6 million tonnes, then everyone has a scope. This kind of a -- right now, it is 4.5 million or 4 million tonnes we are snatching from each other, but the overall country export remains the same. I think that's the question. Am I right?

Yes, yes.

That was your question, Mr. [ Siddharth ]?

Yes, kind of yes.

Yes. But one thing I would add here, it is gradually growing. Gradually, it's growing. And Pakistan, I believe, is no longer a competitor, and it will grow in the coming years.

Yes. I could see the passion and commitment of your family towards this business. So yes.

The next question is from the line of [ Dheeraj Shah ].

Sir, as you are looking to increase your branded retail business. So my question is, sir, there are already other brands who are there into the market. So what differentiation we are trying to bring into this?

Ankit and Sankesh, you both answer this. Ankit, you first.

Okay. So you're saying there's already competition in the market, there are already too many brands in the market, what can we do to increase?

Exactly, exactly, sir.

So I think in India, maybe there are only 2 brands. One would be India Gate and other one will be Dawat. Still, there is a lot of scope. There is a lot of gap. There's a lot of void to be filled. This is my first point. Second point is the good thing about India is the demand for basmati rice is growing. And it's a big country. There is still a big scope for us to grow. So I don't feel there is any competition. This is what I feel. Number one. Number two, if you see Chaman Lal Setia, we are a light company. We are not heavy weights like our competitors. So in terms of pricing, in terms of service, in terms of relationship, I feel we can do better than them.

Okay. So what sort of investment you will be required to set up like a marketing team or a distribution network for increasing our branded retail sales?

I'll give you an example. We have a distributor in Saudi Arabia. We are distributing Mithas brand through him, and we are distributing last, I think, 7 years, and sales are growing. I said before also, branded sale is like raising a baby. You cannot just escalate the process. It is a slow process, and my target is, in the next few years, we will try to achieve 50% of our revenue as branded sales.

What kind of investment this will be required?

There is no investment required. It is just the time which is required. The infrastructure is ready. We are already doing nonbranded business through that infrastructure. Same infrastructure will be used to pack branded rice.

Okay. Okay. And sir, one question. Once we reach 50% of the sales from the branded retail, so how this will improve our margin overall?

If you look at the branded business we are doing, we do good margins through it. So of course, if the percentage of that goes up, of course, the profitability will go up. You can see, we are doing branded business, what kind of profits we are doing. Those are -- I mean those are achievable once we are also branded -- more branded, I would say.

Okay. Sure. And sir, last one thing, sir. We have seen that we have increased our gross block substantially from FY '22 to FY '23. So if you can give the details on where we've actually increased our capacity or what we have done by increasing our gross block?

I will answer. We have 2 kind of capacities, I've explained in the past also. One is paddy to rice manufacturing. We have 4 plants. With the -- because in the existing plant, there is improvisation and the capacity is very high. Each plant can mill about 60 to 70 tonne rice day. And in all 4, it's a reasonably good quantity. Apart from that, we have packing processing capacity. We buy a lot of rice from supporting mills or small mills. Those who are with a limited cash flow, they manufacture the rice and next day they will sell. They don't export, they don't market their loose price. So we are buyer for that. We buy as per our own specification, quality checks and all that for our factory. If it is -- rice is good, it's ours. If it's bad, it's his choice. We make the payment in 2 to 3, 4 days by deducting 2% cash discount, get a good margin on that, whereas the interest of preservation from the bank is 4 to 5 days. So if we have more demand, we have hardly any capitalization, we put 2 more short [indiscernible] plants. What do they cost? INR 2 crore -- INR 1.5 crore, INR 2 crore. We can increase the capacity very quickly. So we have enough. We have 28-acre land of the factory. And we can install...

Sir, with this CapEx, how much we will increase our processing capacity?

Sankesh, don't speak. I mean put on mute if you are talking to someone else. Look, we have the best -- the real marker of the capacity is how much outgo per day. We have capacity to send 24, 23, 25 containers aggregate. This is what we have. That's the real capacity. Capacity doesn't matter what it's producing and where -- what we can pack and dispatch is the real capacity in my opinion. Ankit, how many containers highest we did in any day, if you recall?

I'd like to say something before to the number of containers we are doing every day. See, if you look at the profile of Chaman Lal Setia Exports, we have the biggest customer profile. The number of APEDAs. APEDA is something where when you export to 1 buyer, you need to take APEDA from the government. Chaman Lal Setia takes every month, maximum number of APEDAs. There is no company -- rice -- basmati company in India which takes so many APEDAs, because the customer base is so big. We have customers starting from 1 container, and we have customers taking 10 containers, 20 containers like that. So when you're dealing with too many people, when you're dealing with too many customers, when you're dealing with too many SKUs, you need bigger, more number of production lines because there will be wastages because you're going to change the raw material, you're going to change the packagings too frequently. If you compare it with another company who is dealing only with Iran or Saudi Arabia, maybe they are running 1 brand for 10 days. Maybe they are -- the bag size is very big. They're running 3,000 tonnes, 4,000 tonnes, 1 brand. In our case, 1 brand can be 50 tonnes. Moment 50 tonnes finishes, we have to start with the second brand. So there are some losses. Because of that, we have more number of lines. We are running 18 color sorters. So with this kind of setup, still we manage 20, 25 containers every day.

Okay. So with this CapEx, sir, how much additional lines we have put up? Just wanted to ask that. But how much additional lines we have put up and how much this will increase our turnover?

See, we are running 18 lines. I don't know how much CapEx is involved in it, but these lines are not expensive. There is not money which goes in to install them.

Okay. No issue, sir, I'll take this offline. Just to understand the detail of this CapEx. No issue, sir.

The machinery part is not expensive to increase your packaging.

But our CapEx is huge, right? We have almost doubled our CapEx. So INR 50 crore of gross block is now went to about almost INR 110 crores.

So you are doing a turnover of INR 1,300 crores. And -- I mean how do you expect [indiscernible] INR 1,300 crores? And you want me to grow also, you want me to become INR 2,000 crore company...

No, no, sir, exactly. So that's what I was asking, sir, how much incremental revenue we can generate from the CapEx that we have done? So my question was that only, please.

See, a lot of CapEx goes into -- a lot of CapEx goes in improvisation of things also, not only, what you call, increasing the production or the revenue. I'll give you an example. We've recently started investing into silos. Now this is better storage of raw material, and this is where a lot of money goes in. We've, I think, installed around 8 or 9 new silos. It is going to overall benefit us because we will be reducing our cost in crates -- wooden crates, which were used to store the raw material. So once we put the paddy into silos, we don't need the wooden crates. These wooden crates are very expensive. We don't need jute bags. Jute bags is very expensive. One jute bag is like INR 100. So imagine 1 million bags, how much can be the savings? But this saving will come maybe in the next 2 years, 3 years, you will see in the balance sheet.

The next question is from the line of [ Harsh Vaidya ].

I have a question for Ankit. So the first question that I have is about our diabetic rice segment. So is this being only sold under our own brand? Or are we also doing packaging for other brands?

Diabetic is strictly under Maharani brand, or we have one more brand called Rice Plus, that is also owned by us. We don't do private label in diabetic and we don't intend to do that anytime.

And are we also seeing traction in India itself from this segment?

Say that again, please? I didn't get you, we're seeing what?

Are we seeing traction in domestic sales as well from our diabetic rice? Or is it largely for export markets?

As far as now, we are only promoting it in exports.

Okay. My next question is a bit more strategic in nature. Like I've been following the company for quite a long time. And only in this call, I realize that our focus has kind of shifted towards doing more business in our branded segment. Earlier, we were very happy co-packaging for other OEMs or other brands, whereas now it seems that the company's direction has kind of shifted towards manufacturing in our own brand. Do you maybe want to talk more about this and why the strategic shift has happened? And is this observation correct?

Your observation is correct. The reason I can share what I feel is, I look at companies with lower profitability than us. They are doing lower turnovers, lower profitabilities, I don't want to name any one, and their market caps are higher than us. So the difference what I see is that they are into -- more into branding and we are less into branding. So we also want to become like them. We can achieve, it's not difficult. It's a matter of time. Our team is young. My brother is working very hard. And moment we are 50%, 60% branded, then maybe the market cap goes higher. We will get a maximum valuation for our company. You look at the PB ratio, it is too low. The company itself is very rich.

I fully agree, also the way Chaman Lal has executed in this industry without having a lot of debt on the balance sheet, without raising equity for a very long period of time. So on a very low capital base, the company has achieved a lot. INR 100 crore, that is not a mean feat by any imagination. And I feel the company is definitely undervalued and I value this strategic pivot which we have taken. Maybe can you also talk a little bit more about our branded sales distribution? Like what is the kind of team we have set up for improving our own marketing?

Ankit, let me answer and you will add to it. Actually, you see, there is one part online sale that is going, but not considerably high to talk about. But yes, we are adding into or taking into consideration consultancy [indiscernible] that -- how to increase the sales more. Secondly, I said in the past also, in India itself, there are many vacant markets where our rice is not available, even with the distributors, not to talk about mom-and-pop store and small shops, because that's -- we are yet to set up new distributors in many parts of India, which we are about to do. And the way of sales, we will be not burning the money immediately. We'll sell to the distributor, let him sell to more places. Our money is also safe with the strong distributor. And the stage for advertising, to make it a household name, is a secondary aspect. We don't want to burn money now and not to get any result. First, we have to have a distributor in every single big town of the country. Then they will be selling to marketing all around. Then the time of marketing and time of reaching each kitchen will come. That LT people, Dawat and KRBL had wonderfully done and there are just 2 brands. And India is a very vast market. A lot of vacuum is there. And the income of the people is coming up in this country. And as regards food is concerned, taste is concerned, quality is concerned, people don't mind paying high price and they show loyalty of the brand also when it goes. I'm watching it in the online sales. There is reputation always. One who buys 5 kg bag comes with a 20 kg packaging also, size, buying 4 packings. So this is gradually developing. We want to dwell without taking risk and without spending money. We don't want to waste money. We want to achieve and gradually whenever the state will be conducive, we'll go for advertising in a big way. Ankit, you'll add to it.

I'm sorry, I could not understand your question. Can you repeat it, please?

No, no. Ankit, the question, I want you to speak next. How to increase domestic market? This is the question. Branded sales, how to increase. What is your vision to increase branded sales? This is the question. I have answered, I think you heard that.

I think you covered my point of increasing the number of distributors. That is the right way to do it.

Yes.

We shall take the last question from the line of Aman Madrecha.

Ankit, I have a question for you. So I'm just trying to understand the strategy over here. As we have mentioned that we are going to focus on the branded sales and going to increase the contribution from current 15% to around 55% to 60%. And if you look at the likes of the largest players, like -- so the strategy that they are deploying is that they will hold the inventory, they will age the rice and then they will sell it so that, that will fetch higher realization. And as you know, the export market [indiscernible] et cetera, they have a higher recall for the aged rice, the likes of KRBL and LT Foods, if I name the players. So am I understanding it correctly that as you mentioned that we will replenish the -- we will sell the inventory before the new season arise, and we'll try to replenish the inventory and buy at a cheaper cost? So where are we? Like are we -- where are we in the value? Like are we selling the aged rice or are we just trying to sell the rice so that -- because there will be obviously a differentiation in realization between like [indiscernible] 5 kg bag is sold for, let's say, Maharani brand, if a 5 kg bag is sold for India Gate brand. So I'm just trying to understand the strategy. Like we are not focusing on the aged rice under the branded segment? Or where are we going? Some light on that would help a lot.

What I understand is your concern that without aged rice, how can we do branded business, how can we make money? Is that right?

Not that thing. I'm just trying to understand like where is the market place, like the export market is more concerned towards the aged rice thing or the export market is more towards -- like how is the market place in both the terms? Obviously, we'll be able to do the business on both the things. But what is more lucrative? Like are you not looking to go for the aged rice thing and you're looking to stay in this segment only going forward?

See, let's say, India does in 1 year 5 million tonnes of basmati rice. This is the total size of the sales, okay? I don't think aged rice would be more than 100,000 tonnes.

Okay. In the total pie of 5 million tonnes, you're saying that it won't be more than 100,000 tonnes?

I think it would be maybe 75,000 tonnes. It is not more than that, maybe 100,000 tonnes, maximum, right? So it is not difficult to achieve. We have the brands, the sales are picking up. It is not difficult for us to age the rice. When they are required, we will have the raw material.

Ankit, you're skipping one thing, which I had discussion with Vijay. The rice -- dry heat rice in raw form would be a big game changer for us. That can compete even the aged rice, any top variety rice, any branded rice. This is what Vijay is going to do in the next season. I think we forget to check. That is the game changer. This is what I've said in the past meetings also, and Vijay said in the ensuing season, I will totally fit for that rice.

So what I'm trying to say is it is manageable, what you're asking. I would like to add, I mean from the past questions, some reevaluation of our land -- factory land was done, and during that revaluation, I mean it has been put on the company notice that I think the price of land from INR 25 crores, INR 30 crores, it has gone up to INR 85 crores. The land prices have gone up. I mean it has been put -- that can be seen on the PB ratio also. I don't know the exact figure, but it has gone up 4x. The land which is owned by Chaman Lal Setia Exports.

Thanks, everyone, for the participation. On behalf of Anand Rathi and Chaman Lal Setia, I will take that as the last question. [Operator Instructions] I will like to hand over the call to Mr. Rajeev Setia for his closing comments. Sir, you can close -- you can take the closing comment and then close the call.

Yes. Thank you very much. everyone, who joined. If you have any other questions, you can write mail to us, and we'll be glad to answer. If something remained unanswered from us or some were misappropriated, we apologize for that, and you can write to us. One thing more. If you go to YouTube and write Maharani Rice, you can visit our factory. It's already on the YouTube. Very -- it will also give some idea about the company. That's all. Thank you very much.

You may close the call now. Thank you, everyone.