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

Sorry for the brief delay actually. So just to start with the proceedings, we thank for the management of Chaman Lal Setia to join us for the Q2 FY '24 earnings call of Chaman Lal Setia Exports Limited. We have with us Mr. Rajeev Setia, he's Joint Managing Director and CFO; and Mr. Sankesh Setia, Executive Director. We shall now begin with the proceeding with Mr. Rajeev Setia giving a brief on the company's performance and followed by a Q&A session. So without further delay, I would like to hand over the floor to Mr. Rajeev Setia. Just to inform, I'm joined by my colleague, Priyann Bhatia, and she will also manage the proceeding from here on. Thank you, sir, and over to you, sir, Mr. Rajeev Setia.

Good morning, everyone, on the second Q2 meeting of earning call of the company. Sorry, I will mute myself. Sankesh, you please start.

Good morning, and a warm welcome to all of you for the earnings conference call of Chaman Lal Setia Exports Limited to discuss the business and financial performance of Q2 and H1 FY 2024. I have with me Mr. Rajeev Setia, our Joint Managing Director and CFO. I hope you would have an opportunity to go through earnings presentation uploaded on the stock exchange websites. The past few months indeed have been a period of significant dynamism for the industry. The year began with disruptions caused by a cyclone in June, which was the first quarter, impacting export shipments from Gujarat ports. Subsequently, on August 25, 2023, the Ministry of Commerce imposed restrictions on basmati rice exports, below USD 1,200 per metric ton. While most of our sales exceeded this threshold, the shipments of parboiled rice were affected in September. Furthermore, the unfortunate conflict in Israel added to the challenges. Despite these hurdles, I'm pleased to announce that we have achieved an outstanding performance in terms of both revenues and profitability during this year. Our revenue has increased by 16% year-on-year to reach INR 309 crores for the quarter, while our EBITDA showed a 37% growth year-on-year, reaching to INR 36 crores. This growth is primarily attributed to our aggressive go-to-market strategy, which expanded our distribution network into new regions and deepened our presence in existence -- existing markets. During the current quarter, the Asia Pacific region contributed 39% to our export revenues. The Middle East and Africa region contributed 40%, and America and Europe collectively contributed 20% to our overall export sales. We made significant progress in countries like Yemen, U.S., Mauritius, Egypt and Canada over the past few months, resulting in 20% year-on-year increase in export revenues for the quarter. Notably, our sales in Israel remained stable despite the issues, and we continue to receive orders and payments from our Israeli clients. They have been great and they have been very good with us. In October, the government relaxed the minimum export price restrictions to $950 per ton, which is a positive development for basmati rice exporters, given that our revenue in the sub-USD 950 per metric ton category is minimal. We expect Q3 to be even more favorable for the company. Indeed, we have capitalized on this opportunity by ploughing when prices were lower, which should enhance our profitability in the coming quarter. We also increased our focus on proprietary brands and value-added products, such as rice suitable for diabetics and brown price, which is the quick-cooking brown rice. These products have gained strong consumer acceptance with proprietary brand sales accounting for approximately 11% of our overall sales and growth by 91% year-on-year. Although sales of value-added products are relatively low, they have tripled during this period. Our EBITDA margins expanded by 176 basis points year-on-year, reaching 11.5% for the quarter. This was achieved through a relentless focus on operational efficiency and savings in our freight cost. Our profit after tax for the quarter was INR 26 crores and marking a 30% year-on-year increase. For the half year, our EBITDA and PAT grew by 26%, reaching INR 74 crores and INR 54 crores, respectively. Notably, the first half of the year saw a significant improvement in cash flow from operation, which stood at INR 253 crores during H1 compared to INR 71 crores in corresponding quarter of the previous year. This improvement is attributed to our profit growth and prudent working capital management. As end of the September 2023, our net cash position was INR 196 crores, and our return of capital employed was healthy at 20%, while our return on equity was 17% during the half year period. As we approach the new harvest season now, we have -- we heard reports of 15% increase in the paddy crop, which fills us with confidence in our ability to deliver strong performance this year. With that, I would like to open the floor for the question and answers. Thank you so much.

Sankesh, you just tell everybody about your recent travels and participation in exhibition. And you were in Germany, also a little bit explain that, and then we'll start the question hour, yes?

So in August, I traveled to Dubai, which was a trip to meet all the leading supermarkets, and we have added the biggest names over there. And second trip was in Israel. So that was -- I was there just before the war, but I didn't get stuck. Everything was good. So I went in the beginning of September, and I came back. We also did participate in WorldFood Istanbul, which was a very good success for the company. And also the last trip, which was Europe, of course, Anuga, which comes every alternate year, and it's the biggest food and beverage show in the world. So we added a new distributor for a country in Africa, where we have received a very healthy order of millions of dollars, about -- it's about 30 containers. And we hope that we receive more good buyers, more good people to work with and we keep adding the number of clients for our company and keep getting good buyers for the brand, which is my main focus. But of course, private label is always welcome for our company. And we make sure that whenever we deliver private label, we make something good out of it. And our -- most important, our customer mix, a very good benefit out of it, and we keep delivering. We pack for their brand, we sell our brand and both the companies make good profits.

Thank you, Sankesh. I open the floor for questions and answers now.

Can I come in?

Yes, sure.

And really excellent performance. Congratulations for all that. We know the sincerity with which all of you are working there for the benefit of all stakeholders. Thank you very much, once again, for a fine performance. Sir, actually, one request I want to make, if Sankesh Ji can open his video, we can see him also. We have not seen him as such. So it would be nice, if he has no objection, he can open the video, one. Secondly, sir, our inventory levels have gone down substantially. So I mean, how we are going to then cater to our international needs? In this quarter, it has substantially been down. So can I get answer for this?

I will answer. Your question is the inventory level as on March was very high, around 400 crores. Obviously, there was limited procurement thereafter, and sales were going on. And until September, just by -- and you know the new season is about to begin our various closing. Stocks are mostly at the very minimal levels. That is natural with the industry because one crop. And thereafter, immediately, we have started buying a lot when the crop came. And we got an opportunity also, though it is not a question, but for everybody, I explain, this ban came on 25th of August. And right after 1 month, we had a virtual call with Honorable Commerce Minister, Mr. Piyush Goyal Ji. So in that meeting, he offered that MEP should be $900. He proposed that. But maybe, unfortunately, 1 or 2 people in our industry, they pushed for $850. He halfheartedly agreed with us. And in the recent meeting, he recalled those words also that, that was not right, he himself said. But that $850, when it was said, then we knew this MEP will be shortly removed. If it is not $850, it would be $900 or likewise. So in that period, we bought a lot of material, a lot of paddy and rice, which is going to give gain in the subsequent quarter. Yes, it resolved so many questions about the future.

Right, sir. And sir, one more question regarding export to Africa, which I noted in the presentation. So I mean, to African countries, what we understand from many exporters is that it is difficult to realize money. So are we taking full advance? Or how we are arranging for security of our dispatches?

Your question is absolutely right. What you say is also absolutely correct. You see, the mainly export to Africa happens is for non-basmati rice, which unfortunately for raw form, it is prohibited. Only parboiled rice with 20% duty is permitted, parboiled non-basmati rice with 20% duty is permitted. So it has come down substantially. And we are not into non-basmati business. We are strictly into basmati business. Wherever we sell our brand, our basmati business, we are doing in Africa. We are with South Africa long time, Kenya long time, payments do come. It is either letter of credit or it is advanced always. And once the cargo reaches, we send the scanned copy of bill of lading, and they remit the payment. We surrender the bill here and it gets the delivery. This is the procedure. I mean we play very safe.

We know, sir. But still, when it was mentioned African countries, so we were -- I mean I got excited.

Yes, yes. What you say, caution is always there. There are some countries where we don't touch. We know there, they simply run away with your money. They are that kind of people...

Right, right, sir. Sir, last thing, you have been my teacher as far as rice industry is concerned. So how is the overall scenario in the country? And our procuring centers, that is Himachal, Punjab and Haryana, all these states, how is the crop and how is the scenario of production from the farm, overall rice scenario in the country as well?

Yes. This year, satellite data has been -- satellite survey has been carried out for the crop. Last 2 years -- earlier, it was being done through APEDA. But last year and I think for the last 2 years, it was not being done. Because maybe in one of the year, there was quite contradiction between trade and this mapping company. So they discontinued. But we have been always watching. Whatever our estimates, the authentic data should come. So this time, they have done. The first report is yet to come. But last week, they held the meeting in Karnal about the crop size, and they project 15% approx, higher than the preceding year. So the crop is fine this year.

Sir, that is only in Haryana or rest of the country?

No, no, no, it is the entire GI area. The survey is carried out in the entire GI area. GI area means Punjab full state, Haryana full state, Western UP, some part of Uttarakhand, around Dehradun, Haridwar, Udham Singh Nagar area, and then Himachal, some part of Himachal. How many have counted? Punjab, Haryana, Uttarakhand, UP, Himachal, 5. Delhi is also there. And which one I'm leaving? Jammu, J&K. These 7 states are GI area, and the survey is carried out for these areas only. But basmati grows in MP also now, a lot. And this -- Rajasthan also in Kota Bundi area.

Am I right if I contemplate you that you have totally become a debt-free company as far as September figures are concerned, only working capital loans are left out with the company?

Working capital loans from the banks are not there. As regard bank is concerned, every single year, historically, for last 4 decades, when we were a small firm also, we were borrowing and adjusting account every single year. This is the company policy. My dad used to say, if you gain -- if you earn, then why can't you adjust the bank?

So the next question is from [ Deepak Pawar ].

So my question is regarding the export and domestic mix. What is the percentage of our exports and how much we do sell in domestic?

For last 2, 3 years, our export are 80%, 85%, even went as high as to 90%. And in this particular, the correct figure is 89%, say 90%, and 10% is domestic. And now our endeavor is to increase business in domestic market. In any case, after this MEP episode, we realized that need of the hour is to start domestic business. Also, we are hiring the team, good people who can give us at least good business. Because INR 150 crore -- around INR 150 crores is the domestic business annually, which comes to almost 10% of the entire. So it is need of the hour. India is a big market. People are paying the price for the quality. India is a growing country now. We can't left it out now.

So in this quarter, it is safe to assume that 90% is our export and 10% is the domestic sales?

Yes, yes, yes. It is -- annual is almost like this. It's the same.

Okay. So here in, as I see in the presentation, our export growth has been 20%, and our sales growth has been 17%. Does that mean that the domestic sales have not increased?

Yes, because we have learned that we have to, I mean, go in the domestic market also. We have hired the teams, and they will be out in the market to sell to the good distributor, good buyer. For the last couple of quarters, I have been saying that, but now this was a jolt, broadly speaking, MEP. Because this parboiled category rice, which was costing somewhere around $850 to $900 or $950, how could we sell at $1,200? So suddenly, a big portion of the business was difficult, but we knew there was a misconception with the government to bring it at $1,200. They thought it is an average price. Some wrong figure was given and that -- but rectification takes time here. So they're not going to do like this ever. They said it will always be -- market will have to be seen, paddy prices, rice prices before taking a decision, this APEDA people have told us.

Right. So second question would be, sir, that the average realization. So what is the average realization for the Q2?

It is INR 90 a kg.

INR 90?

Yes.

Okay. So is it safe to assume that INR 90, that means the average realization of INR 90 last quarter, it was INR 83?

Yes.

Right, INR 83 to INR 90. So there has been around 8% to 9% increase in average realization.

No, it was INR 85, I believe, INR 85 to -- 5%, it could be.

No, it's INR 83, if I'm not wrong, I saw in the presentation last quarter.

Anyway, I will have to look. I recall it was INR 85. Anyway, it is 5%, 6%.

So 5%, 6% increase in average realization, 20% increase in export, I think the number should have been better in terms of sales growth.

For this quarter, truly speaking, I was not expecting what we have achieved. Truly speaking, the way -- I am very candid with you. This $1,200 was a big jolt to us. Because initially, we decide -- we assumed that it is not going to affect us at all because we got the permissions for number of days immediately in advance. We were expecting something is coming, and we took all the permissions, paid to the APEDA. But if it would have prolonged more period than -- of course, then it's the total entire basmati story would have been different. So of course, government cannot lose everything to Pakistan. Pakistan gained a lot in this period. Now it's coming back everything. Yes, some ratio maybe because of the -- we are -- if we compare the corresponding quarter, there was China broken export also, which I recall. Yes, in the preceding quarter because it was stopped in September sometime. So that would have some figures effect.

Okay. And we -- so generally, do -- we see this in working capital cycle going down in H1 and then again going up in H2. This is a general phenomenon. Will this continue? Or will there be any positive or negative changes over there?

You see the fundamental principle is we avoid selling on DA, first thing first. Sooner or later, this DA, I mean, [Foreign Language] lands into some kind of problem. This is an experience. So we desist from selling on DA basis, except for very renowned buyers who worked with us for 20, 25 years, long story who have. And yes, otherwise my entire export is insured by ECGC. This year, one Chinese company usurps our money and we got 2 crore 85 lakh claim from ECGC, who tried to India safety.

Right. So working capital will be better than last year's second half? Or will it be same? So what's your view?

Working capital should be better for us.

In the second half too?

All around, working capital is never an issue for the company, truly speaking. Never in any quarter, because we work within our limits and we calculate everything. It's more on the business wisdom, how to go with the business, yes. Not to pay any kind of penalty because we are not aging rice also as to put prolonged storage.

Okay. So what is the typical period when we age rice? I mean we don't do a lot that we know, but how much -- what was the typical period, average period?

Look, we have very limited old rice customer. We buy rice from the market, and that is pre-aged rice. And maybe another month to storage, we sell that rice. We limit -- yes, but we are not buying paddy and storing for -- keeping for more than 2 years or 1 year. We have our own manufacturing, such a good that rice sells easily.

Okay. Sir, another question. Our overall top 5 countries contribute 62% of our business in Q2. Can you name them, which are these 5 countries?

Normally, we desist disclosing the names of a country where we're doing good. Maybe market knows it, but market means our trade people must be knowing it. They chase each other's business, so it's better not to ask. We are doing very good in U.S.A., Canada and Africa. Many parts, we're doing good.

So can you put some light on which countries are giving better growth? Don't give me the percentage, but better growth in this quarter.

The U.S.A. has given very good earnings in this particular quarter. Apart from that, Africa side also, we made good money. Yes, these 2 are in the top.

Right. So one thing I would like to appreciate here when you said that you were not expecting it to go -- now the revenue go beyond INR 300 crores, though we were expecting as an investor that the revenue should go beyond INR 300 crores. But despite all the challenges that you have faced, you were able to clock that. In fact, you have overachieved, I mean, my expectations. But on the other hand, I was expecting EBITDA to be better than what has -- I mean, last quarter, we did better, right? This quarter, we have done good, but not as good as last quarter.

Minor changes keep on coming, which are not under control.

Hello, Chacha. I've just joined in.

You are in India or at airport or where you are now?

I'm not in India now, I'm overseas. So I wanted to say this quarter, September quarter is the hardest quarter because we are transforming from the old crop to the new crop. So common sense says get rid of all your old crop and start buying the new crop at lower prices. And generally, the quarters are not big numbers if you compare it with last year. The quarters are not big numbers, and it's difficult to make money also in this kind of a quarter because it's the quarter end of the season. But you can see the results are exceptional. If you calculate, we did a business of around 35,000 tons. Every kilogram of rice which we sold, we made INR 10 per kilo, which is remarkable, I would say, in this quarter.

[Operator Instructions] So the next question is from [ Chirag Shah ].

Sir, I have actually more than 2 questions. So my first question is a slightly broader one. Can you talk a bit about PUSA 1885? Because if the yields are going to be 15%, 20% higher for that variety, and no one is talking about it, I understand that government -- the effort from the government side has been going on since almost 2 years now.

Okay. Chirag, every year, new varieties come in, and it is premature or it's too early to talk about this particular variety as of now.

Because this is expected to give 15%, 20% higher yields, right, sir?

No. Like I said, every year, new varieties come in. We don't even -- we don't know the future after 3 years if it will exist also or not. Maybe some variety -- okay go ahead, Chacha.

Mr. Chirag, 45 varieties have been defined under the Seeds Act as basmati. It's quite confusing for us also and for the customers also. Like 1509 is almost like 1121. 1718 is also looks like the same. And the new 1800, 1600, 2, 3 varieties have come. Most of them are -- the new ones which are coming are pest resistance, and the advantage about those varieties would be in the coming years. The rice -- Indian rice will be pesticide-free, EU compliant. So the business has a good future for those varieties. Yes, I think if we are permitted by the government to write 11 to every one, because the name is quite famous, 1121. This is what we intend to discuss with the government because 45 varieties.

Yes. But the taste really changes so much between 2 varieties, sir, that is the question because...

No, no, hardly any change in the taste. Hardly -- visibly, it's not recognizable by the common man. We have to apply our mind a lot to identify difference.

It is more advantageous for the farmer.

Yes, it is true because -- yes.

Yes, yes, it is more advantageous for farmer. It is more advantageous for us as a country, as a businessman, et cetera. So that's why I was curious when taste...

Chirag, it's the first year of this particular crop, and it's still immature to say anything about it, whether it will be available also next year also or not. So it all depends on the farmer if they are happy with the yield, how easy was it to take care of this particular crop during when -- I mean, what kind of insects came inside. There are various factors.

Okay. Sir, why I was asking is because in India, U.K. FTA happened, and I presume basmati rice exports is a part of that FTA. U.K. would focus on pesticide-free like other European regions, right? How does U.K. FTA help us -- if you can highlight how the U.K. FTA help us as a country and as Chaman Lal?

No, I just want to understand from you...

They are already looking...

Ankit, one -- just hold a second. Mr. Chirag said that under FTA, basmati rice Indian will enter duty free. Is it so?

Sir, that is one of the part of discussion as that we understand.

Yes, yes.

As of now, nothing.

As of now, it is only the unpolished basmati enters at lower duty. Otherwise, it has EUR 175 duty in Europe, Europe and U.K.

So post FTA, we understand that the rice in general, all varieties of rice are likely to get covered over there?

That's very good for us.

Yes. But then they would refocus on pesticide-free rice and all those kind of...

They already want pesticide-free rice.

So Chirag, what I have done this year is since we started the procurement of new raw material starting from September, and now we are in November, I have basically made a bank of paddy which is pesticide-free. We probably would be having higher stock of pesticide-free raw material with us right now in Karnal. I have already stocked 10,000 tons, which is pesticide-free, ready to be exported to Europe. It can go to the hardest country where they are checking pesticides. So this is the plan for this year.

Okay. This is good helpful. And the second -- one question...

Sorry for interrupting, Chirag, since we have further questions...

Yes, yes, please. Next.

Next question is from [ Aditya Agarwal ].

So like one thing I noticed was that before -- like you already partially answered this, but that your rice is very difficult to acquire in the domestic market. Like I'm in Kolkata and like I tried to buy some for myself, and like I couldn't find it. Even on your website, you wouldn't ship to my pin code. So I guess my question is that like what specific efforts are you planning to make? And like what are your plans to increase distributorship within and availability within India?

Ankit, you go ahead.

Should I answer? Okay. The company is already strongly planning to increase its branded sales in India and abroad, right? So like I said in the last quarter, we are already looking into this. And you will see in future, there will be higher visibility of the brand anywhere you want it in India.

Ankit, your picture is not coming. Can you open it?

I have a slight problem in the Internet, so only my voice would be coming.

It's okay.

So going forward, this Maharani is going to be available everywhere in India. We need time for this. We are already working on it, and we are changing our focus basically.

You can also try buying it on Amazon, Flipkart and JioMart for now.

I had tried that. They would not ship into my pin code. Like that's what I have...

And it's Kolkata?

Yes.

Okay. I'll look into it.

You can text us the address where you want the rice, we'll have it organized.

Okay. Yes, sure. But in general, like I mean...

No, no, like I answered, it is going to get sorted out soon. You will not have these kind of problems. But we need time for this. We are working on it.

Okay. And I guess as a follow-on, like in the future, like long term, what percentage of domestic and export mix do you expect in terms of revenue?

See, currently, we are more focused on exports. But I think now because we want to convert more of the business into brand, the business in domestic market also is going to increase. So currently, maybe the percentage is 90-10. So it is going to happen slowly. It would not happen quick. But I think the percentage will be 70-30 within 1 year. The season has just begun, so we are planning ourselves according to that.

Ankit, the way export is happening fast these days, the possibility maybe the business in domestic is definitely indeed going to increase if export increase, and percentage will be -- would not be 30. But our endeavor is to sell maximum in India also because they help each other.

See, like I said, the season has just started. So we are developing some new products, which are to be focused for domestic sales. So you will see that the percentage is going to increase for domestic sales this year itself.

Yes. The visibility will start coming in a year or so everywhere. Visibility is not there. That's very important.

The next question is from the line of Aman Madrecha.

Sir, could you please highlight how the procurement could be going forward as we are approaching a new season? And we are aware that it was like the end of the season, so my thing was that our gross margins have come down to around 21% for this quarter. And according to our business model is that we procure semifinished rice and then we sell them, as we see that the prices are on the rise. So some highlight on the gross margins going forward, can we expect that this gross margin could remain deflated because the prices are on the rise and our procurement could be on the higher side? So some highlight on that, and how are the prices behaving in the market?

Yes. The gross margin, we know, have come down in this quarter because the old rice, somewhere there was demand for the old rice or this 1121 variety was quite high price. We had to procure and continue our sales. And sometimes it's a business you have to work with limited margin, but the kind which I explained earlier, this $850, which was told on 25th of September. So we went in a big way for buying, and we bought a lot of material at a very, I mean, competitive and very good prices for us. And Ankit has told that we procured a lot of pesticide-free rice during that era, this period. I mean, had that $850 not come, maybe we would not have purchased too much. So that cushion came, though it took another a month almost to get it cleared for $950. I think this was an opportunity to utilize in our [indiscernible]. Thank you.

Sir, can we expect that -- like as we are on the procurement mode currently, so can we expect the gross margins to normalize going forward to around 24%, 25% because -- and going forward maybe in the next couple of quarters?

Definitely, in the coming quarter it will increase. The way we have our purchases and the way there was a halt in the sales also, some of the buyers, we asked them to wait for some time, those who had purchased below $1,200. So there were some deferment also. So that is all coming in this quarter. Very quickly rice is going. And that food security has become paramount all around the world because of the wars in somewhere and bans and all that. So the profitability is likely to go up, business is likely to go up.

So in spite of so many disturbances, like government making minimum export price, $1,200, in spite of transition quarter where we are finishing our old crop and we are starting to buy new crop, you can see the results are good. And next quarter, of course, the results are going to be even better.

And so, sir, you mentioned that we -- initially, we expect that we won't be impacted because of the export ban of around $1,200 per ton, but it impacted us. So can you highlight in some detail like what portion of business got impacted because of the export...

There was hardly any impact. But had this been prolonged for another 3, 4, 6 months, it would have been fatal for every company, not for us. But because since 1980, the basmati export was permitted in 1980, there has not been even one interruption so far. This was the first time, I think it would be the last one. Let's take the next speaker.

So next question is from the line of [ Namit Mehta ].

Just a couple of questions from my side. One is, if I look at the longer-term realization trajectory, pre-COVID, it used to be in the 50s, 60s, 70s. Now we're seeing in the mid-80s, early 90s per kg. Why has there been such a big change in realizations? Should we expect this to be -- to go back over a period of time back to sort of pre-COVID realizations?

Earlier -- what is your question? I have not correctly understood. Can you a little bit repeat?

Sure, sir. So if I look at the realizations pre-COVID on a per kg level, they used to be in the 60s and 70s before COVID. Now they're in the 80s and 90s. Can you just talk a little bit about why that's the case? And should we expect this to go back to 60s and 70s over a period of time?

So you are saying, pre-COVID, we were selling rice INR 60 to INR 70 per kg, and now we are selling INR 80 to INR 90, correct?

Correct. Correct.

Yes, yes. Okay. So Chacha Ji, please.

It all matters on the raw material prices. The paddies were lower prices those days. Accordingly, the cost of rice was coming and accordingly the rice was selling also. So pre-COVID, this was the case. And then after the COVID, the whole scenario changed. Food is suddenly becoming issue in the world. In the COVID -- prior to COVID, a lot of picking in the shelves happened. Recently, when the government banned in U.S.A., the videos were coming. People were in the queue for picking up the rice or other food items. So then Ukraine war came, now Israel issue and other countries is coming, the food is becoming, I mean, more important than luxurious thing. So the prices are going up this year. This year, the prices of paddy are good for the farmer. He's likely to grow more in the coming season. Also, he's going to adopt the crops which give him more yield. So I see good time for our industry.

Got it. And my -- yes?

Since -- yes, go ahead. Go ahead. Go ahead.

No, sir -- sorry, my second question is around this change -- not change, but your shift somewhat in the strategy to even try to push the branded sale a little more. So your current business is very strong, right, earning higher returns on capital. Why change this and try to become a stronger brand where the dynamics are different, investment requirements are higher? Is it a challenge to scale the current business? Or where is this shift coming from?

I feel the change is coming only in the mindset. And it is true that companies which are branded, they command higher market capital. So I mean we want to do that for our company. That's the reason.

But the only catch in between few others and us is we don't want to burn money for earning anything. We will go gradually. We'll -- I have said it already that we'll first fix the distributors in entire India. Sell them -- let them sell to mom-and-pop stores, whatever are in their ledger. And once our brand -- and yes, this online business is already going on, and it's picking up. Gradually, it is picking up. It's no longer the way it used to be 1 year back. It has picked up a lot. We are getting the repeat orders also. We are making a diary data that one who has purchased 5 kg, next time how much he has bought. One who has bought one box, are his orders coming? So this is the -- I mean, the repetition of the sale comes then it grows. That is the right sale. If somebody buys and then never turns up, it's like no business, in our opinion. So all sides, we have tried. But with the -- I mean, suddenly, you run in the cinemas, you advertise a lot, you burn INR 30 crores, INR 40 crores and end up doing nothing, that kind of strategy we don't have. This is our strategy right from the beginning, slowly, steadily going and saving ourselves. Thank you.

As we move further, there's one question in the chat box. Maharani brand, which is 11% now, when will it reach the level of 50%? And secondly, what is the revenue growth and margin guidance for FY '24, FY '25 and FY '26? This is the question from one of the participant, [ Ketan ].

I could not understand it, 11% and 50%. What is 11%?

Ankit, our branded sales have in this quarter is relatively lower than the preceding one. Branded sale, that that's the ratio, is it right?

No, no. I'm not sure what is 11%, 50%.

Yes. Let's just look at that and let us see.

Ma'am, can we do verbal questions? Then we can come to the written questions.

The next question is from [ Rajesh ].

Congratulations on doing a good volume given the headwinds you described in this quarter. Hello?

Yes, yes, yes, go on. We are listening. Yes, please.

Okay. So my first question is, Rajeev Ji, given your stature and experience in the industry, what kind of increase do you see in this season in the volumes? And therefore, what kind of pricing do you see in the procurement in this current season?

Look, last year, our revenue was INR 1,400 crores about. So yes, we have to achieve some -- that target, which we feel it will come. The way these 2-quarter total, how much is the total is around 2 quarters? It is how much percentage of INR 1,400 crores? It must be 45 around...

INR 570 crores.

INR 570 crores. So these are the -- normally, the second quarter is always green. So hopefully, we will meet the target of INR 1,400 crores and can grow -- go up also. Let's hope.

No, my question was about the procurement in this season. I'm not concerned about the revenue for this year. I was saying [Foreign Language] compared to last year, how much more do you expect to procure, [Foreign Language]? And number two, what is your sense of pricing per kg? [Foreign Language]. So that's what I am trying to understand.

That is satellite imaging report. The written report is yet to come. In the meeting, they told us that approx 15%, basmati is [ 5 ] at this time. And that area, which is out of GI, MP and Rajasthan is not covered in that. And we are getting figures that crop on that side is also high. So whenever the crop is high at the time of procurement, if we get at the cheaper prices, we always make money more.

Correct. So that's why I was trying to understand [Foreign Language] let's say compared to last season [Foreign Language] given your experience and you are obviously a [Foreign Language] veteran in the business [Foreign Language].

This quarter...

May I answer -- can I answer that one?

Ankit, you better answer.

Okay. I take care of the procurement, so I can answer this very well.

Perfect. Excellent. Please.

Right. So last year, we were very strong with our procurement. Our timing was excellent, I would say, with the procurement. And this year also, it is absolutely the same. 50% of the procurement is already done, and it has been done at excellent time.

So if 50% is done, Ankit, then pricing-wise, is it higher? And you don't have to tell me the number itself because I understand that.

But why are you saying higher? I don't understand. When I'm saying it has happened like last year, the timing was perfect.

It's very good [ purchasing ]. That's all. We told you repeatedly, of course, we cannot share -- yes, because it's the trade.

Okay. No, I understand. I was just saying directionally, whether it will be lower pricing compared to last season or it will be similar. Obviously, it won't be higher because volumes [Foreign Language] market. So that's what I was trying to understand.

The dollar has gone up by 10% as compared to last year. And so procurement is same like last year. So I do not want to say more.

Okay, understood. [Foreign Language] That's what I was trying to understand. My other question is that earlier, we were talking about U.K. FTA. And from what I was reading is that some of the guys like Tilda in the U.K. market are pushing back [Foreign Language] we can't bring down the duty. So, a, I wanted to just check with you, if that is correct. And b, do you think there will be some movement in the negotiation, whereby the duties come down even if they are not go to zero? [Foreign Language] associations are pushing back [Foreign Language].

Someone having a rice mill in U.K. would always want these duties to stay. And someone like us who's exporting polished rice would always like these duties to go away. So if the duties go away, we benefit. Companies like us, we benefit. Of course, there'll be resistance with people who have rice mills.

Right. So my question was, in that context, what is your sense? Because see, one part is that it's a country-to-country arrangement and there are different industries that the government has to look after, right? But given the strength of our lobby, do you think we will be able to reduce it even if it doesn't go to 0? That's what I'm trying to understand.

Mr. Rajesh, I'll answer. I'll continue what Ankit said. The book came from Abdul Kalam -- Abdul J. Kalam, our President. He ignited thoughts. And on the first or second page, he wrote, we are Indians. We send our raw material to U.K. and they make clothes for us and then we import. This is what he wrote. And he said this kind of mindset or this kind of thing, they are going on forever. Same is happening with the rice. What is happening in India, husk and dust. We remove the husk and remove the dust and send unpolished brown rice as a raw material for factories in England and Europe. And they get duty abatement of EUR 175, and we have to pay on the processed packed price. And as regard our industries are concerned, they are far better than their industries. We have better industries in India. So it's the high time that we continue to export raw material. And this -- it will have to be taken at the diplomat levels, at the high level, wherever the free trade agreements are coming. We cannot allow duties. It has to be either common for brown and white. If somebody wants to run their mill, let them run. But why benefit? Why not our industry gets encouraged? I've been fighting for this issue for years, but nothing is happening. If it happens, we will have a very good business in Europe, particularly.

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

Sir, there was a recently World Bank article regarding the rice prices being high until FY '25 and a lower rice yield overall. So if you could just highlight on that?

The very simple -- we're into basmati business. We know more about basmati. Even in India, I think 133 million ton rice is for this current Kharif is coming, summer Kharif period as well as the current winter Kharif period is coming, 133 million. So we don't feel any shortage in India. And basmati is just 6 million, 7 million ton, out of which 4.5 million is exported, around 2 million remains in India. So there is no shortage. I don't know how come it's that. But yes, food is a topic in the world now.

Okay. And sir, do we see the prices being up until like FY '25 as they have guided?

Repeat your question.

Sir, they have guided that prices will remain high until FY '25 because of all these inflation issues, El Nino and a lower yield. So will that be true for basmati as well?

I said for this particular year, there is 15% higher crop. And secondly, the way new seeds or new variants of basmatis are coming in India, they are all with the high yields and pest resistance. Both sides, they are good seeds. Otherwise, what is the use of invention?

Okay. And sir, where do we see our branded sales going from 2 to 3 years down the line as a percentage of our total revenue?

Look, nothing can be committed, but it's our endeavor, because when I exported my first consignment in 1982, it was Maharani brand. So I knew I have to sell my brand first. My second consignment to Dubai was also in Maharani brand. And thereafter, it's the competition, it's the growth, we had to go for private labels also, and we are one of the largest amongst them. It's our endeavor. In India, we are trying to come up with our brand. Internationally, we are doing -- we're already in around 38, 39 countries. So let's assume we grow around 25%, 30% in coming 2 years or so.

The next question is from [ Anuj Sharma ].

Congratulations for a good result. Ankit, I have a question for you. You made a reference that we made INR 10 per kg, one of the best. Now how do we look at realization or maybe margin? And is it an absolute number which you look at? Or is it a percentage margin? And Rajeev Ji, if you can just help us into the history how this number has been and how do you look at forward?

No, no. I just gave an example that we did business of 35,000 tons, and we made EBITDA of INR 35 crores. So if you divide it, it comes to INR 10 per kilo. This is what I said, which is a very good margin according to me.

All right. All right. But how does the pricing work so that...

The rice industry, you leave 2, 3 people, they don't post profits more than 2%. You can go through CRISIL. You'll find a lot of rice millers, exporters, you can go through their balance sheets on CRISIL or other rating companies. There is nobody who gives more than 2%. So that is why I made the examples.

Yes. And Rajeev Ji, if you can just go back into the history that this number of 10, how has that been? And how do you see this number going forward?

You see, it's a speculative business also, rice. Paddy price, 1 year is different, other year is different. Size of the crop come higher, suddenly the prices fall. There are many things and quite subjective. But our company works in a manner -- first thing first, you see how we earn more than others. I make payment to my vendor in 3 to 4 days and deduct 2%. When I deduct 2% and give them payment without asking, I know I get 1% or 2% higher in my -- this value. I mean they sell to me at a cheaper price, relatively, you see? So 3%, 4% is the gain at the point of purchase. And rest is our marketing team. Ankit and Sankesh run around the world and they go to the very far places and they sell there in the private label, in our own label. So this is easy to attain, achieve. Not something -- we can continue like this.

Okay. Due to time constraints, this would be the last question. And if your questions are not answered, please write over to the IR ID, which is mentioned on the last page of investor presentation. And I will now hand over the call to the management for closing comments.

I mean, is there any more question or it's all? It's already done?

Yes, this was the last question. It's done. I will now hand over the call to you for closing comments.

Yes. I thank you, everybody, who joined and those who didn't join, all the stakeholders, investors, our well-wishers, I heartly thank you very much. We will strive to work hard. We'll keep on focusing on our business diligently as regard our sale is concerned, profitability is concerned, our goodwill is concerned. All things with all parameters, we'll try to improve upon. Because I believe room for improvement is always there, and it never closes. So it will continue. Thank you so very much for joining.

Thank you very much, everyone.