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

Ladies and gentlemen, good day, and welcome to Chaman Lal Setia Exports Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Anushka Chitnis. Thank you, and over to you.

Thank you. Good morning, everyone, and welcome to the Q1 FY '25 Earnings Conference Call of Chaman Lal Setia Exports. Today from the management, we have Mr. Vijay Setia, Chairman and Managing Director; and Mr. Ankit Setia, the Executive Director. Now without further ado, I'd like to hand the conference call over to Mr. Ankit Setia. Over to you, sir.

Okay. Good morning, everyone, and a warm welcome to all of you to the earnings conference call of Chaman Lal Setia Exports Limited. We are going to discuss the business and financial performance for quarter 1 of the financial year 2025. Mr. Vijay Setia, our Chairman and Managing Director, is with me today. We hope you've had a chance to review the results and earnings presentation on stock exchange websites. Before we begin, I would like to remind everyone that this call may contain forward-looking statements, which are predictions, projections or other estimates about future events. These statements are based on management's current expectations and involve risks that could cause actual results to differ. The industry faced another challenging quarter due to geopolitical tension and shipment receptions in some of our key markets. Despite these difficulties, we are pleased to report a strong rebound in revenues. Our revenues were at INR 363 crores this quarter, grown by a remarkable 38% year-on-year. As we have always mentioned about our strategic efforts to derisk our revenues, our existing -- sorry, our extensive presence in 90-plus countries and a robust distributor network globally have been instrumental in achieving the high growth in revenues this quarter, demonstrating resilience to our operations. The quarter witnessed an increase in penetration in APAC, Middle East and African markets. Our team has actively participated in Gulfood exhibitions like -- sorry, global food exhibitions like Gulfood in Dubai, Agroexpos in Istanbul, Uzbekistan and Thailand, and Indusfood in India. Our team has been aggressively traveling globally to meet new as well as existing customers. As we speak now, Mr. Rajeev Setia, our Joint Managing Director and CFO, is currently in the U.S.A., meeting some of our long-standing customers to further strengthen our strong relationships. Our export volume grew by almost 38% y-on-y in quarter 1 to approximately 35,000 metric tonnes. This quarter has also been significantly growth in our domestic business, growing by a healthy 70%, resulting in an improvement in share to 13% of our overall business. Given the geopolitical scenario and the resulting disruptions in the supply chain, we are however, witnessing some impact on the margins. Our EBITDA stood at INR 32 crores, and our margins stood at 8.9%, impacted by softening of basmati prices, along with the geopolitical issues, leading to some of our new contracts being negotiated at relatively lower spreads. With most of our contracts being on FOB basis, we anticipate that these conditions will normalize in the upcoming quarters as supply chain issue stabilizes. I would, however, like to emphasize that our business model continues to remain asset-light with most of our inventory likely to be liquidated before the start of next season. And hence, the majority of our revenues are directly translated into cash flows. Over the years, this has resulted in strong liquidity positioning of our company. As of June 2023, the company had INR 150 crores of cash and liquid investments and almost a debt-free status. Moreover, our inventory levels were at INR 288 crores, which is mostly order backed and is expected to be, by and large, liquidated in the coming quarter itself. Before we move into -- before we move into [indiscernible]. Adding further to our cash position, taking this in account, the Board has recommended to enhance returns for our shareholders in the previous quarter through increase in dividend payout to 10% to 15% every year. I'm pleased to also announce that this quarter, our Board has approved a buyback of 2 million shares at INR 300 per share, totaling to INR 60.24 crores. The proposed buyback price is 35% higher compared to yesterday's closing price. We believe that this further demonstrates our commitment to enhance shareholder return and reflects our confidence in the company's future prospects. At Chaman Lal Setia Exports Ltd., our strategic focus, continue on profitable growth and secured cash flows, thus avoiding high-risk territories and concentration on any single customer or territory. As a result of this strategy, we have had a healthy and efficient balance sheet for all these years, which we strongly believe would continue in the future as well. Despite the usual business challenges with our strong execution capabilities, established customer relationships and expanding distribution network, we are optimistic that -- we are optimistic about the quarters ahead. With this, I would like to open the floor for questions and answers. Thank you very much.

[Operator Instructions] Our first question is from the line of Nitin Gandhi from Inoquest Advisors Private Limited.

Congratulations on a good set of numbers. Will you just share [Foreign Language]. If you can clarify that, that will be helpful.

Okay. Our chartered accountant, Mr. Gaurav, is also with us. So Gaurav ji, you can please answer this question.

Can you repeat the question, please?

Do you wish me to repeat the question?

Yes, yes.

Okay. So the buyback, which is approved of INR 60 crores at INR 300,, if this is open market buyback or is it a tender route buyback? And whether promoters will be participating or not?

The promoters are participating in this buyback, and it is open market based. Yes.

Our next question is from line [ Sakshi ] from Swan Investments.

Congratulations on a good set of numbers. I wanted to just understand that on the domestic market side, what was the increase in the realization and the increase in the volume?

As I mentioned in my speech, this quarter, there was an increase in domestic sales, a growth of 70%, resulting in an improvisation in share to 13% of overall business. This quarter was -- sorry, the last quarter was 35,000 MT in total.

No, I understand that, but I'm wanted the breakup between the realization and [indiscernible].

See, in terms of profitability, of course, export market is more profitable.

Yes. But the way you have mentioned that in export, the volume increased 38%. What was the increase of volume in the domestic market?

I think you're comparing quarter versus quarter. And if we compare the quarter -- I don't have the real figures in crores, how much it has gone up by. But in percentage, I'm sharing you.

So what was the percentage increase in the volume?

Of export or domestic?

Domestic.

70%.

Okay. I thought 70% was a revenue increase. That is why I was asking for the breakup between the realization and volume.

No, no. I said clear that domestic business growing by a healthy 70%, resulting in an improvement to share to 13% of our overall business. 13%, 1-3 percent of overall business.

Okay. So in terms of price then, was there a decrease in the price?

Of what, domestic business?

Yes.

See, domestic business is always less profitable. In terms of pricing, it is the same. Like of course, there are no expenses that we incur when we are exporting. But in terms of pricing, it is same, but the profitability is less in domestic business.

Okay. But on a year-on-year basis, was there any change in the price, in the pricing?

Okay. Particularly talking about last quarter, the prices of rice came down. The trend was down. If I compare it year-on-year, last year's same quarter, prices went up. And this quarter, prices came down. We're talking about general market.

So was it down like 5%, 7%, 10%, can you mention?

If you want to know in terms of percentage, maybe 10%.

Yes. Gaurav this side. Actually, I would like to correct my last answer. And as I answered that it is tender-based, actually, the buyback is. It's not market based. And promoters are participating, right?

Our next question is from the line of [ Pravin ], an individual investor.

No, no. You just answered the question. Because in the meeting record it was clearly mentioned it was on a proportionate basis and record date was also mentioned. So I think now it is clarified that it will be on a proportionate basis through tender offer route and not from the open market. So that clarifies the point as of now. If I have any other questions, I'll come in the queue.

Our next question is from the line of [ Akash ].

Yes. So I had a question regarding the new packaging units. So during the last conference call, it was mentioned that the company has decided to settle like 3 new packaging units. So what is the time line? And when can we expect the revenues to come from that?

So [ Akash ji ], the first unit, like I said, 3 new units are coming up. So we completed the flooring of the first unit. And in next 2 to 3 months, the first unit is going to get operational. So that is the current status. And once the first unit is complete, I think next 3 months, the second one. And after that, 3 months, the third one also will be added. And by end of this year, whereas -- I expect there is going to be a jump in revenues.

Our next question is from the line of Chirag Shah from White Pine Investment Management Limited.

So my first question is in the export market, you indicated there is a drop in realization per kg. So can you elaborate on this? Why it happened or what is driving it? Is it Pakistan currency replication is the reason? Or what is driving this drop?

So my father can answer better. I will also add something.

Hello, can everybody hear me?

Yes, sir.

Okay. You see, our team was very aggressively marketing in the last year. And there were 2 reasons: last year, prices of raw material went up. So the material we were holding, the profitability from normal level went to the, I think, a higher level. This was the one reason. And the buyers were ready to pay higher price last year. This year, because of problem from Ukraine, then in the Middle East, Red Sea, the logistic cost has gone up. My company works on FOB basis, that is true. But then the freight from $500 is coming $4,000, so buyer is not ready to get better price. So they negotiate hard now. So we have to keep the business moving. We have to adjust the prices a little bit. And it is not for us, it is for the entire industry. And this year, many companies have made some unexpected losses, whereas our committed buyers and our model of working, we have a wide number of buyers. I think that is keeping our company in a better position. And the future, I think, is going to be further better. The new raw material has started coming at a very reasonable price. And I think if you look at some newspapers, they are also indicating -- rice industry will make more profit this time.

So sir, would it be right to say that this year -- at least that -- this year, the raw material cost would be lower than your last year cost? Sir, as the new material comes in, your profit margin should expand, which it can compensate a drop in realization. Is that the way to look at?

You see, as Mr. Ankit Setia said, that the previous stock we will be finishing in this quarter, okay? So we will be starting fresh with the material. The technologies we have, we can do our rice [indiscernible] in 24 hours. The technology systems are strong. So when the buyer needs a good cooking rice, we are there to offer the rice with an excellent cooking, right? And then this logistic cost, which has put pressure on us, then we have a cushion of that price gap for where we will be making money.

Sir, in your best estimate -- sorry, in your best estimate, given the way the crop is expected to be, what kind of improvement in -- you can see in the raw material market versus last -- last year, we have got the raw material at INR 100 a kg. Just an example, can it be 10% lower this year? Or such a sharp drop is not possible?

Okay, 2 parts. Last year, there was drought-like condition in many parts. And paddy at the time of ripening, it was under stress. So when we were processing, we realized that broken percentage higher as compared to previous years. This year the monsoon is predicted to be excellent and widespread, so crop is going to be excellent. This is the prediction. Right now, the health of the crop is very good. And in some parts, some farmers do early sowing. And that material we have seen in the market, quality is good, and prices are almost close to the MSP, which is a very rare thing for the basmati selling close to the MSP price. So if we have continuous orders in your hands and in this company's case, large number of buyer base is there, so -- and small buyers are there. So there brands we are doing as a loyal supplier. So the private label we are doing, we are doing like it is our own brand. So our profitability will remain good. And hopefully, it will peak.

Okay. And sir, just one more clarification on this. So sequentially, if you look at raw material to sales, it is up from by 400 bps, 4%, from some 77.3% to 81%, so much 400 percentage points. How should one look at this number? Because this has been volatile in the past on quarterly basis, I understand that. Is this more because price realization being lower? Or it is just because of high cost of inventory? So between the 2, how will you look at it?

I have pointed to the government one thing, the minimum export price, you have made $950, okay? And Pakistan very cleverly made their prices, MEP $700, okay? So they will -- they have a small crop as compared to India, they will get first opportunity to sell in the international market. And then our position will come. Government is considering to remove the MEP. I think we have made a lot of representations and positive consideration is going on within the government. And even any change comes, it will be favorable for the industry. And the ultra-low prices will also improve, what are hovering today. So I think industry will make money this year, by and large, whether they are small miller or big miller. And only thing I can say to last year's small millers, those -- the millers who are not exporting guys, they are just selling in the domestic market, they lost money. And exporters, they managed to make money, and you can see all the exporting companies are growing and the domestic companies have loss of money. That's the difference. Okay. Prices will remain lower by 10%, 15%, that is possibility.

So you have paddy cost, right? The raw material cost will be 10%, 15% lower?

Raw material cost will be lower this time. And I think if the headwind recovery will be better, so that means that will be adding to the profit, yes.

Okay. And sir, you made a comment -- Ankit made a comment that the new contracts are at a lower pricing. So is it again because of the fact of that you've indicated competition coming from Pakistan or something else? Or is it more because of the free trade and cost issues that you highlighted? Because we were under impression, if you look at the last call also, that as new contracts come in, the freight cost will get passed on, because last quarter, we had a INR 10 crore of freight cost impact which you had to absorb as compared to earlier, where it was kind of a 9-month freight cost or an annual freight cost, which -- in this 1 quarter. So can you just elaborate on this, the new contracts at a lower price?

Chirag ji, from last 4 months only, the freights have continuously gone up.

Yes.

So we are supporting our customers, that is why the EBITDA margin has become 8.9%.

Okay. Great, great. And in setting today, if you have to look at the whole year and let's ignore the quarterly volatility, what kind of EBITDA margin or per kg EBITDA is a reasonable number that you would be looking to achieve, given the dynamics as they are today? See, dynamics can change, I understand.

Normally -- like we've told in the past also, we work on a margin of INR 10 per kilogram, right? And current inventory June-end quarter was INR 280 crores, and we are fast finishing that inventory also. Now the freight problem also is solving because it's been going on from last 5, 6 months. So that also is becoming stable or it is coming down. So things are coming in our favor now.

Okay. So INR 10 EBITDA per kg is a kind of ballpark number you will try to achieve this year, given that we are only at INR 7...

If you look at the average of the full year, we always achieve that.

Yes. Yes, that's what -- see, I'm asking this -- sorry for hampering this. But I'm asking it because since last 2 quarters, our EBITDA per KG is around INR 8 and INR 7, right? That's why is it new normal or things are changing from here? That is the question I have.

All I can say is that the troubles we are facing, they are going away now. The inventories we had, they are finishing. The freight part also resolving. So I think brighter future ahead.

One last question, if I can ask. Any color on competitive intensity because currencies of some of your competitors have also depreciated more than where we -- versus INR, right? So that also has indirect impact on you in that sense. So any...

Sorry, what is depreciated?

Depreciation in currency, like Pakistan rupiah would have depreciated more. Some of the other exporting countries, depreciated more than INR versus dollars. So they are in better position, right?

Right. But currently, the INR is trading almost at 84 level, 83.89, 83.93, something like that. So it is always benefiting us because we don't have any future forward booking.

Okay. So you're not seeing any competitive pressure coming from your other countries as far as -- that was the question.

No. Nothing. Nothing.

Our next question is from the line of [ Pravin ], an individual investor.

My first question is on this MEP. It has been quite a while since the reduction has been sought, but it's not forthcoming. So what is the situation on that? This is the first. And second is, does this MEP, minimum export price, is regulated on FOB basis or CIF basis, means can we include freight also in this? Or it's just on FOB basis? This is the first question.

So let us finish first question. Otherwise, it will mix up, okay?

Yes. But the second question is...

Second, you can ask later, okay? I'll answer this. For MEP last year, because the raw material prices were very high, even then we pointed to the government that there are 2 varieties of basmati, they consists of large portion of the total exports and their price should be kept around $850. So this was our suggestion, though we were exporting at $950 and $1000. We told and pointed, in future the prices if come down, we will not come back to you time and again, you make it $850. But government of elections and other views of inflation, they capped it at $950. But as the time industry was comfortable, people exported rice. Every company exported rice. But as similar, some seeds, Pakistan is also growing and they made their MEP lower side, so the sale for these 1, 2 varieties like PB1 and 1509 became a little difficult. Though these are basmati varieties, raw material price going down and acceptability not at a higher price was also a problem. So we pointed this to the government, but government is looking from the totality. The overall average export price is around $1,061 in May, June. So government is looking at -- from $950, you are still higher by $50, that's why they are taking little more time. But they are very clearly told by the agencies within the government like APEDA, which is monitoring the basmati exports, that industry having a very clear mandate -- representation is coming for these 2 varieties, kindly take a decision at the earliest. And we are hopeful that in near future, this will be done. In the NITI Aayog also, this was discussed that overall rice scenario is comfortable. The government is holding 3x buffer stock, which is also there. The problem with the inflation, though it is not your question, but I'm answering. The problem is the government policy of buying 100% wheat, buying 100% common man's rice, so then supply for the common man's food requirements is blocked in the government block. And in the open market, supply is less, that gives spikes in the inflation. When government sell the rice, there is pilferage also. Some of it to the export, which was also I told to the RBI. So they may be looking into these things, how to do it and how to control it. So for MEP, we are 100% sure and assured by even minister himself, that we are looking into this and we will do the needed. Maybe next 15 days, things will be clear. So what is your second question?

No. MEP is FOB or...

It is FOB.

The second question is, though Ankit that the freight situation is coming down, but while I'm speaking to other companies who are in garment export and other things, the freight situation has perpetually become bad since '22 when the Russia-Ukraine war and then the Israel-Hamas, and now this Middle East escalation further, it seems to and this situation seems to -- is there a way forward to offset this problem?

Okay. I got your point. I'll answer you. You see there is 2 parts of this logistics: first is, if I'm trying to get shipping containers from India. And another is my buyer is getting containers. We are in the -- many industries, people get their containers in India. In our case, most of the buyers, they buy large quantities from different sources. So when they negotiate with the companies, they get better price than us. Suppose I'm exporting 10 containers to x country. But buyer is important 200 containers from different sources. And he's talking to the company, company gives him a better rate. So this could be the reason. As you said, some companies will feel that prices are going up, but whereas, what we are now realizing, it is becoming stable. And hopefully, things will not further worsen from Ukraine and Middle East. Then as Ankit has told, and now it is stable, it come down. And it will add to the buying capacity of buyers. And that will also help us.

I would like to add. For example, we were doing some CIF business with a buyer 2 months back. We are trying to -- we've already shifted the buyer to FOB basis. You understood. Because 2 months back, it is difficult to shift in because he is in this habit. But now since -- by persuading him continuously, we have gotten down to FOB. So that is why I said we are in control.

And my last question is on the domestic strategy. See, means, the way I see things and this is what I am seeing that other companies which are into bed linen and others, they are also focusing a lot on domestic market, wherein we somehow are lacking there. I still don't see -- especially, there is a lot of premiumization focus in India, the way things are moving. India today is different from what it was in, say, 2017, '16, '18. A lot of premiumization is there and buying power of people of a certain section at least has increased a lot. So I think -- are we investing -- I personally feel that we are investing quite low on the domestic market as far as marketing and strategy there is concerned. I think we'll need to -- this is my suggestion, we need to focus more on domestic. While exports are going on, this lever should also play out, the domestic market lever. Especially your quick-cooking healthy rice and brown rice and those varieties -- I have been not been -- personally not been able to find them in e-commerce or modern trade channels. So this is just a point for you to ponder upon. I think it can give you a very stable business, maybe the margins will be a bit lower than export, but you need to focus on that.

Good advice. We'll definitely look into this, and we are deliberating on this thing, that we have put some persons especially to be focused on this thing. And the product, definitely, we have better than a lot of our competitors, whether it is brown rice or it is [indiscernible]. And we have some senior person in our team now who is dedicatedly working on this. Thank you for your advice.

Our next question is from the line of [ Gunit Singh ] from [indiscernible].

Sir, you mentioned that the raw material prices are coming down and freight situation improving, inventory situation also improving. And sir, you mentioned that we would be looking at achieving peak margins. So I mean, what kind of margins are we looking at and -- for FY '25, basically? That would be the first question.

See the -- what I said was that the expensive inventory which we were holding, we are finishing fast. And yes, the freights have gone up in the last quarter, and they -- continuously they were going up. Now we are in control because they are stabilizing or they are coming down. This is what I said. Regarding the margins, if you look at the history of our balance sheets, we normally operate on an EBITDA of between 8% to 14%. So you can see similar EBITDA margins in the future also.

All right. So sir, I mean, the kind of improvement that you mentioned in margins that we would be looking at. So I mean, would they be starting Q2 onwards? I mean what is the current trend?

We expect the coming quarters to be bright.

100% we cannot accurately say anything. But Ankit has given the right picture, our profit range was 8% to 15%, okay? So if we are on the bottom line -- we should expect a better line for the future.

All right. Sir, with the new packaging units coming in, I mean, what kind of additional revenues can we expect in FY '25 and [indiscernible]?

So I explained it. I explained this in the last quarter also. Currently, the orders are more, packing speed is slow. So that is why these 3 new packing units are coming up in Karnal. And with 1 packing unit, you can expect at least a revenue increase of, I would say, about INR 150 crores every quarter. This is the maximum we can go at full representation.

All right. So maximum annual -- with these packing units, annually we can add INR 150 crores or more?

No, this will be quarterly, but this is the maximum I'm saying. This is 100% efficiency. Normally, the level of -- you can take about INR 70 crores, INR 80 crores every quarter, to be on the safer side.

Per packaging unit, INR 70 crores.

This is for 1 unit, yes.

All right. So with 3 units -- so I mean...

See, what will happen after putting each of these units, the delivery will become on time. The commitment will become better. The delivery will become on time. The revenues are going to go up. So we'll be in a better position to take better orders and deliver them, reaching them to our customers on time.

This is a very important aspect of trade. If your commitment is met, delivery is as per your promise, that customer gives you more attention, more business and better price. So the way we are working, everything is -- our system is working like this, total information to the buyers, where your goods are packing, where they have moved, where they have reached, when we will get the material. So what mostly customers have a problem from many suppliers, they give information, your rice will reach you, and when they see the record, they are still packing the material. So we have a very perfect control in our system. So then we are realizing the business is growing and we need more packing units, so we have taken a call. And I think it will be well in time the things will be working and smoothly.

Yes. So for example, on an average, every day, we are dispatching 400 to 450 tonnes of rice. The idea is to reach 600 tonnes within the next 9 months or 12 months.

All right, sir. That is very encouraging. Got it. And sir, you are -- in one of the previous calls, you had alluded that we have a target of reaching [indiscernible]. So I mean when can we [indiscernible]? And moving forward, do you expect any margin [indiscernible] coming in?

In my last con call, I had put a target of INR 1,800 crores to start with. This is the first target we want to achieve. And we plan to achieve it the moment these 3 plants will be activated.

All right, sir. Got it. So, sir, any revenue target for FY '25?

Like I said, moment these 3 plants will get activated, our first target is to achieve -- right now, we are doing a revenue of INR 1,350 INR 1,400 crores, the idea is to achieve first INR 1,800 crores.

Our next question is from the line of Chirag Shah from White Pine Investment Management Private Limited.

First question is on these packing units. So you are looking to procure 1/3 higher than your current procurement once the units are up and running. So what gives you the confidence on both the sides. Are you able to procure such a high quantum versus your past few year track record as well as your ability to sustain the order on a sustainable basis? So what are the changes you're internally doing on both the sides? If you can just speak about that, it would helpful?

Chirag ji -- what you've commit, you have to deliver and you have to deliver on time. Currently, what is happening is we are not able to deliver on time to our customers. Things are getting delayed. So that is what we are trying to eradicate. That is why we are adding these plants so that the delivery can happen on time. And once the goods reach a buyer on time, you can request him for the next order. The whole process becomes quicker.

Okay. And on the procurement side, because we also will have to procure, if you're doing 400 tonnes today and if you're looking at the 600 tonnes, that is a big jump. So on the procurement side, what gives you confidence that you can really scale it up in 1 year such a big procurement?

Yes, yes. So procurement is not at all difficult, I would say. We are currently, maybe on a single day, we can secure 1,200 tonnes, 1,500 tonnes of rice. There's no issue in procurement.

We have an excellent team. We have an in-house complete infrastructure for all forklifts and loading, unloading, everything is mechanized. So I think we are in a position.

We have a covered space of around 0.5 million tonnes square feet of covered space, which we can take position on rice or raw material any time. So the team is there. The same person who's buying, let's say, 500 tonnes a day, if I tell him to buy 700 tonnes a day, I don't think it will be any difficult task for him.

Okay. Okay. And sir, because [indiscernible] on the call for the first time, since I have looked at. Sir, I have a kind of a broader question for you. We have been focusing on rice and fair enough over so many years at [indiscernible] were among the late entrants versus some of the other established players, et cetera. Is there any thought process internally to diversify or to add more then rice? At a strategic level, is there any thought process of that kind? Why I'm asking this is you are a single-product company, a single-product business. And generally, we have observed over the period people try to evolve themselves to do multiple products, either derivatives of existing products or adjacencies that could evolve apart from rice. So Is there a thought process? And how one understand this? Hello? Was I clear in my question? Or if you like to summarize?

Your question is clear. Should I answer?

Yes, you could go ahead.

Okay. So if you look at some of the rice companies who diversified, if you look at their model, still, I would say, 95% of all the revenue is coming through rice business only, number one. For now, we are, I would say, we see a lot of opportunity in the same model what we are doing. Like I said, I want to increase packing plants and I want the revenue -- I would like my revenue to go up from INR 1,400 crores to INR 1,800 crores. So I see this as an opportunity. Then I diversify and I go somewhere else and I put my energies, and I'm not able to even -- I'm not able to get this revenue up. So I see this as a low hanging fruit, which is easy for me to achieve.

In fact, my question is also...

Now you see, our life, our energy, our experience more is with the rice. We can do other things, but definitely that will not give us that growth what we are getting here. And there, we are more confident to grow rather what we are projecting and then go above that, right, sir?

Yes. Because my question is also from industry perspective also. I was going to actually put this across, that rice industry is one where people are not trying to diversify beyond the point for the right reasons. I respect your point, and I'm just trying to [indiscernible] -- I'm just trying to [indiscernible] you why not look at it. Because if when we look at variety of other industries in the food business, I'm putting FMCG as a part of this in general, food processing business, people tend to diversify -- growth. India is a market where people focus more on growth apart from profitability, it's a combination of both. Hence, this was the question, which I was trying to throw to you -- nothing else.

Our next question is from the line of [ Anurag Jain ], an individual investor.

My question is Australia had earlier denied the geographical indicator status for basmati rice. Later on New Zealand has also joined in, and they have also denied the geographical indicator for basmati rice. So there are 2 parts to this question: one is market access and now any rice in Australia and New Zealand can be termed as basmati rice. There's no protection for the actual basmati coming from India and Pakistan. And part two of this is, there's large-scale commercial agriculture happening in Australia and the aromatic rice they are doing, they are labeling it as basmati rice and selling it domestically and overseas. So if you could throw some light on this, how this has impacted the industry?

Okay. Ankit, I'll answer this. First is regarding GI, okay? So there are only 2 countries producing basmati in the world, okay? And America was tried to copy Indian basmati and they are selling it in the name of Texmati, and the selling price is just half the price of Indian basmati. So it is like a non-basmati rice. This is one. Now the question of this Australia and New Zealand -- India and Pakistan, they are the -- you can say, it is a heritage of these 2 countries. And India and Pakistan agreed in 2005 that they will jointly file an application for GI registration with the EU, okay? And in 2005, in that meeting, Pakistan declared they have 14 districts which produced basmati, and India gave a list of 7 states where we are producing basmati. So this was the understanding, and both the countries agreed to move forward. And later, Pakistan changed its position. The state has a power to declare more areas as GI areas, Pakistan, without any scientific basis, from 14 districts, they then said -- our 44 districts are producing basmati. And then they added another 4 districts of Jammu and Kashmir. So India said to hell with you, Pakistan, we don't want to go with you. We are going directly for our GI tag registration with the -- all importing countries. So when EU is still saying you negotiate with Pakistan, then the question of Jammu-Kashmir comes, India will never negotiate and India will go solo. So in New Zealand and Australia, this was only the reason of decline in India due to the joint heritage of India and Pakistan, how come we are coming all alone. So India has filed appeal for it for review. I hope things will be clear to the importing countries and their governments. They need rice. They need India's cooperation. So hopefully, things will be corrected in the near future. This is one thing. There was another part of your question. Can you repeat? Can you repeat it again, apart from GI?

Yes. There is large-scale commercial agriculture happening in Australia. So the aromatic rice they are growing there, reportedly they are labeling it as basmati and selling it domestically and also exporting it. So if you could throw some light on this part.

See -- okay, I'll tell you. Basmati cannot grow everywhere. We need soil. We need climatic conditions. Without that, you cannot get the right material. As I told about U.S.A., they are more advanced than Australia. And they tried with the basmati and they came with Texmati. And Texmati is now selling at the price of non-basmati, okay? And the same, whatsoever Australia is producing, that rice will be different. You need certain temperature. If temperature is high or low, product will change. If soil conditions are different, product -- cooking behavior will change. So it cannot match basmati, and we have never seen. Still we have a large number of our customers in Australia, they are importing from us and same that they're importing from other companies from India. So I think we have not felt any change from any rice which is from any other country, only Pakistan and India. I can admit, they are producing quality basmati. Right, sir?

And I would say that the customers are very peculiar and careful about the actual product. A slight change, they start -- I mean, they will start to put a complaint. So just by taking normal rice and you type basmati, the customer is not fool. I don't think they would easily buy that product. They still look out for Indian brands which they were buying from previous and they would like to carry on with those particular brands.

So nobody wants to spoil his brand.

Our next question is from the line of Nitin Gandhi from Inoquest Advisors Private Limited.

Recently, this Punjab, there are some incentives being at INR 7,000 per hectare or something for shifting from paddy to other crops. So what this could be implications in the long term for you? If there's a state supporting shift from paddy? And how do you do sourcing? And what is your current sourcing in Punjab? And how is it spread and how do you mitigate this risk?

Okay. I'll answer, Ankit, on this. That is true. Paddy is a water-guzzling crop. But basmati does not take that much water and non-basmati takes almost double the amount of water as compared to basmati. The campaign in Punjab is shifting from non-basmati to basmati. It is from [ Rakhra ] kisan, there is a young farmer association in Rakhra, I think with 20,000 members, and there are a lot of reputed scientists that are involved in that organization. So they are promoting that shifting in the crop should be from non-basmati to basmati to save the water. So there is -- this part of campaign is also going on. And government wants that the rice and wheat cycle should be broken. So they encourage farmers for multiple crops and they are giving some incentives, and farmers will always see this economy. If he is getting more money from basmati, he will go for the basmati. If he is getting more money from corn or anything else, he will definitely shift to that crop. But in near future, I think basmati don't feel any threat. But water is a serious concern. So a lot of universities are working on SRI technique and direct seedling, then paddy on the ridges, to reduce the water consumption. So a lot of research work is going on. I think some solution will be there.

Can you share what is the current basmati production of Punjab, and non-basmati? And how is it likely to shape post this kind of announcement? Is it materially changing after 3, 5 years?

Okay. You see one thing. Last year, area under basmati in Punjab was around 6.5 lakh million hectare. And this time, Punjab agriculture department says, it will be from 6.5 million hectare, it will increase to 10 million hectare. So total area in Punjab is 32 million hectares for cultivation, 10 million hectare will be going over to basmati only. 35% area increase, this is the expectation of Punjab government. So it is not that Punjab government is encouraging them, it is farmer's economy, he looks at this profitability accordingly to what grows for the crops. And the basmati, definitely less water consuming, late sowing. You see the sowing of basmati takes place in the month of July. And July, August are our rainy seasons. And whereas non-basmati sown in the month of June. So -- a lot of evaporation of water, water seepage, too much pressure on electricity and [indiscernible], taking of permissions. So many troubles are there. So government discouraging non-basmati. But in farmers' issue, government we are always shy to take a strong decision. That's all. But farmers are definitely shifting towards basmati in Punjab this time.

Can you also share some changes happening per hectare production of basmati as well as non-basmati, how is it right now? And because of the changes, will it increase this year, how much?

You see Pusa Institute in Delhi. And Dr A. K. Singh, who has just retired as a Director and Vice Chancellor of ICAR. He was the key person who was working on basmati varieties. And I think there's 2 latest varieties now released. They are high-yielding. They will be taking less -- they are prone to pest attacks and diseases. So farmer's profitability in basmati will increase. If they are not using any pesticide, that cost will be reduced. So the good work is going on in university in Delhi, this ICAR. And the yield, everything is improving. Only concern is the soil health in India is getting weaker. Because farm sizes are small and people who are taking land on lease and doing cultivation, to get the higher production, they use a lot of fertilizer and a lot of pesticide. That is an area of concern. Because when you use too much pesticide -- sorry, fertilizer, then suddenly crop grows up and a lot of pest attack the crop. Then it suddenly get longer, it is weak. So Dr. A. K. Singh is working. As I told, 2 varieties are coming. So I think a lot of changes will take place and basmati will stay. The government interest is there, farmer interest is there. We are getting foreign revenue was more than INR 50,000 crores. It's a big amount. Government and institutions, they're working for the welfare of farmers. Okay?

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Ms. Anushka Chitnis for closing comments.

On behalf of Arihant Capital, we are grateful to the management of Chaman Lal Setia Exports for giving us the opportunity to host this call. And thank you as well to the management for your valuable insights.

Thank you.

Thank you very much.

Thank you. On behalf of Chaman Lal Setia Exports, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you. Bye-bye.