Chaman Lal Setia Exports Ltd. ($530307)

On behalf of Consulting Investor Relations team, I welcome you all to the Q4 and FY '23 Post Earnings Conference Call of Chaman Lal Setia Exports Limited. Today on the call from the management, we have with us Mr. Rajeev Setia, Joint Managing Director and CFO; Mr. Setia, Wholetime Director; Mr. Sankesh Setia, Whole-Time Director; and [indiscernible]. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to detail us about business and performance highlights for the period ended March 2026, their growth perspective and vision for the coming years, post which we will open the floor for Q&A. Over to the management team.

Good afternoon, everyone. I'm happy... Today and all the team should be happy and my investors should be happy with the performance of the company as a whole year and as the last quarter, 31st '26. You may have seen the press note and read that, and you must have been appraised with all the figures. The company has announced a dividend of INR 3 per share. So I hope everything goes well in the future also, and you are welcome for your questions. Thank you. Ankit, do you want to say something?

Its been a profitable year. I hope the investor will be happy.

[Operator Instructions] Sir we will take the first question from [indiscernible]

So I want to understand how have we been impacted by the current Iran in terms of realizations of our [ rice ] also in terms of any disruption in shipping in March, April, May, the current situation. So I would like to hear your views on that...

Mr Vaneet, I thank you for appreciating the figures of the company. Yes, your question is most pertinent that this war, how it has affected. If I say it has not affected, it will be wrong, but it has affected the entire export community, import community in India and most of the nations are hit by this problem. But as we always say the company works in multiple countries. I have not -- we go with a separate. We are not only dependent upon Middle East. Of course, Middle East is a very good market for us, but the rest of the world is also serving. We are in about 100 countries now. Yes, this effect is there, but you see the handling has come from the government also. Whatever the shipments we made prior to war and we had to pay extra charges by ocean freight or war charges and so on and so forth. And ECGC has given has been mandated by Government of India to help the exporters and whatever are our extra charges, we have filed the claim with the ECGC. That will be reimburse to us. So -- but the countries where export is happening to Red Sea, it's regular. In the past, once there were disturbance, this Iran-Iraq war -- sorry, Iran and Israel war. Red Sea was also hit. But this time, Red Sea is open, our export to Egypt, export to Lebanon, export to Jordan is continuously going. And it's more consignments are going, maybe they are reselling to other parts of the world. And the rest ocean freights have gone up, but they have been factored in our prices. And people do understand because of the crude prices higher, the transportation cost, logistics are relatively high as compared to the past. But it's the business and it's the essential food product itself and it will continue to sell.

Got it, sir. So in terms of overall volumes, say, pre-war, it was 100, for example, just for understanding purposes. So I mean, during war and currently, how much percentage would there be a fall in the volumes because of these disruptions to the Middle East?

See, it is to some extent, premature stage also because if the demand is full, demand is too much, particularly from Afghanistan, so much demand I'm getting calls every other day. But there is no route to send cargo because it has to go to Bandarabasia. Right now, other parts are taking because, as I said, Red Sea area, a lot of cargo is going. How it is moving to other parts is there. And we are shipping to -- through Dubai, Kolkata and Fujarat ports. The cargo is going to other parts. Oman is no problem. It's [indiscernible] And sorry, there was in between disturbance. And yes, Saudi shipment to Jeddah are going and there's no problem. But ocean freights are very high. The buyers are relatively slow to buy. So do you think that these higher demand from, I mean, other shipping routes are they compensated for, say, the disruption or the volume that might have had. So -- I mean, for Q1, we can expect things to be fairly normal in terms of volumes. Is it fair to assume that? And in terms of EBITDA margins, I mean, what kind of margins are we looking at because of this higher freight, higher scenario? Are we able to maintain the margins of Q4 FY '26 in Q1?

Let's wait for the time. It's premature to say anything right now. Because ocean freights are high and -- but business is happening. There is no stoppage of business. And always remember, whenever there is any war or any kind of disturbance, people don't go for luxury, they go for essentials and particular food. There is no [indiscernible]

So in terms of the supply scenario for rice, I mean, do you think that the situation is fairly normal because I mean, have there been a fall in the total rice supply? Can that be constrained this year?

There is a reasonably good crop, why should there be fall? The one thing I'm going to tell for all of us and all those who are listening, the prices of rice from the onset of this season were very low and very attractive and our -- some of the people were saying that there is a very large crop prices will fall based that, but our business wisdom said and particularly the Chairman always [indiscernible] that we must buy as much as we can, and we did that. And you see there has been 30% increase in prices from November, December to March. That is one of the reasons of getting good gains and Ankit better you explain.

Got it. And how are our realizations in Q4? I mean what were the realizations on average? And how are they trending currently in April, May?

Yes, the prices are high. It's good. Even if they come down, they're very good because we have purchased at a very comfortable and very reasonable prices. We have stocked.

Got it. Sir, my last question would be regarding our numbers in FY '27, FY '28. So in one of the previous calls, you mentioned that the company stays at, say, INR 700 crores to the stage for 4 years. Now it's been about 3, 4 years, we've been around INR 1,400 crores to INR 1,500 crores revenues. So I mean, should we expect that FY '27 is the next inflection point for growth? Or I mean, is there -- can that be postponed because of the current disruptions?

No, this -- because the first thing first is the cargo is moving in this part also, maybe through other directions, one. And the rest of the world, it is perfect as regard Europe is concerned, U.S. is concerned, Canada, every Australia every beer, it's going full thing. Yes, historically, we have seen that 3 years sometimes continuously are almost constant. And after 3 years, suddenly, it goes up. And we are roping a company, which is buying very large quantity, and they are visiting our factory shortly next week. And if we get approval, they always say we want to deal with your company. You are not cooperating much not attaching to us. But now we have decided after all, we tell them, if you will give us legal profits will not work. If you give us reasonable profit will definitely work and your business will grow because it's the trust also and it's the goodwill of the company, what you say and you supply and you keep live up to your commitments and expectation of the business growth.

[indiscernible] Share buyback because we have large cash reserves and buyback is an efficient way to return money to the long-term shareholders and also increase the EPS in the long run is that efficient. So kindly consider share buyback going forward [indiscernible]

We'll take the next question from [indiscernible]

My first question is export has been strong over the last few years. How much of the recent growth has come from the market share gains versus overall industry growth?

Can you repeat your question, please?

Sure, sir. Export growth has been strong over the last few years. How much of the recent growth has come from the market share gain versus overall industry growth?

Overall industry export is 6 million, 6.5 million. Ankit, you are aware tonnes.

It is around 6 million tonnes last year.

6 million tonnes 6.5 million.

I think she is trying to ask this growth that we have seen is because of market share improvement or because of the growth in the industry overall?

Both sides, Industry business is also growing and the company itself is growing all around. We are participating in every single exhibition and we get new customers. Recently, Sesh and Mr. exhibition. We got new customers also. And obviously, it will add to our team. And of course, Vijay was there. He always says this kind of exhibition gives us opportunity to go for some new products or new things. We are looking forward for anything which we can do the best.

Okay, sir. Sir, my next question is which specific countries are expected to drive the next phase of growth over the next 3 to 5 years?

Ankit [indiscernible]

In terms of increase, I think we'll be focusing on U.S. and Europe going forward.

Sir, my next question is what percentage of revenue comes from the top 10 customers?

Top 10, I need to check, but it should be, I think, about 35%.

35%.

It should be around 35%.

35% from the biggest customers.

Okay. And my last question, sir, now has customer concentration increased or decreased over the last 3 years?

No. Our customer base is always increasing. We are always looking out for new customers. So it's always increasing. It must have increased drastically from last 3 years.

We take the next question from [indiscernible]

So, our recent profitability has benefited from favorable export realizations and lower freight costs. So how much of the current margin profile is structural versus cyclical?

As I have already explained that in this particular year, at the beginning, the prices were low. Company has vast experience of this industry. We are with this business for more than 4 to 5 -- 4 decades at least. Evenisd matters a lot. The Chairman this time, both of us decided and Ankit, of course, along with us, that we should buy the right time, we should buy the biggest inventory should be built up the best biggest possible. [indiscernible] the lower price. We still have stock and we are selling. We are to are...

So if the exports fall by around 10%, while the paddy prices remain elevated, what kind of impact would we see on the EBITDA margins?

Can you say again about the paddy point? We not clear about your question...

Paddy prices remain where they are and if export realizations were to drop, then what do you think will happen to margins?

Yes. This year, what happened, the prices of paddy were low. Farmer and sells in first 2 months till December, almost 80%, 90% of the paddy is sold up by the farmer and the prices were low. Consequently, the prices of rice were also low. And truly speaking, as a business earn more farmer didn't this time. And that's because they have those who kept some stock, they could sell at higher prices also, maybe 20%, 30%, whatever the farmer kept I mean waiting for the prices to go up. They got good money. The prices of rice have been high. And I think the farmer should grow more and more this year.

[indiscernible] is a key component of our business model due to seasonal procurement. So what is the management's target working capital cycle?

Question... Gaur, can you answer.

So what is the management's target working capital cycle?

Target cycle of finance?

Working capital cycle.

45 days.

Current working capital cycle is approximately 60 days and inventory is 140 days. 90 days working capital cycle. So do we look to maintain this.

Okay, sir. Sir, one last question. Is the company exploring adjacent categories such as packaged food, ready-to-cook products, derivatives or any value-added exports or the focus is to scale up the...

Branding is concerned, we are right now branding outside India. We have our brand in around 40, 45 countries and in some places, it is selling great. And the name is also famous. Yes, Indian market is still -- we are through online sale through various portal is going on. But visibility is relatively less in India, and that is our next target because company has funds, company has no problem in we are -- because the prices suddenly go up in Indian market was not accepting. Otherwise, I could have started by April onwards or earlier also. But international prices -- high prices were working well, no problem. We were selling over there. Once the prices are little stable and our Indian market start accepting, I am tying up new distributors in the domestic market. It deserves to be -- I mean it should be famous in India, our flagship brand in India, which is...

Take the next question from [indiscernible]

So my first question is on the current situation in the export market. So is there any kind of shipments stuck or any dumping happening from any other countries?

So Ami, as of now, no shipments are stuck. And what was your second question, sir?

Any kind of dumping if you are witnessing from any other countries?

No dumping, sir, because for Basmati only India is the producer and the brands we are exporting, they are strictly tacking all Indian rice. So dumping cannot happen. So as far as any obstruction because of the war in the month of February when the war started Feb end, some obstruction came, but now everything is smooth.

Okay. So like sir mentioned, business is continuing to go on, but still you would be paying very increased freight costs or any insurance payment. So if you can highlight on that as well, what is the increase in cost there.

So after -- I mean, like the war started, of course, the insurance cost and -- so of course, the freight cost and insurance cost has gone up, but all these expenses are mostly borne by the buyer, who's importing. Prices are calculated based on that.

Okay. So it's an entire pass-through?

Yes. Maybe initially, we adjusted some part of the freight and insurance. But now going forward, everything is on the buyer.

Okay. All right. And also in the opening remarks, sir, I mentioned regarding a visit that a customer was planning to factory. So if you can elaborate a bit more on that.

I think Rajiv sir will tell more about that.

One of the biggest importer from Samit Arabia, a very reputed company. They have been buying from 30, 40 rice mills. And you see the mills are small. they don't live up to their commitments, the prices go up, they start branding this and that they are facing. And that's why -- and we have been avoiding such companies, bigger companies because they don't let you earn much. And I have told them that you have to pay price. You have to pay because unless everybody in the chain doesn't the business never happens. So you just want to squeeze your suppliers, so they will spoil you. They agreed I had meeting. They are coming to visit our factory in Karnal and they are also going to our Gujarat unit. And I'm confident now what they expect, they will get the quality and we'll get our margins and the turnover can come -- the business of 30,000, 40,000 tonnes can increase in-house. If it happens, very good for us. And rest of the business as usual going on. Sanesh...

Yes, I'm here. Okay. So 30,000, 40,000 tonnes on a -- I mean, monthly, quarterly...

This company buys to about 2, 2.5 lakh already, they are buying from India. So they some part to begin with. The rest depends...

Okay. All right. So I mean another question would be, on the news, what we are witnessing reading about this El Nino things. So any kind of -- in terms of the procurement, what kind of impact are we expecting?

You see now the farmer is yet to the pad, it's a premature stage to say anything. Let's see how the quality of crop size of crop, area cultivation and it remains healthy tatters.

So just one last question would be that post this war, is there any increased demand coming in from any of the export markets? Or is it business as usual?

As of now, it's business as usual. So what is -- I would add... So what is happening is because of the war, especially rice, which was going Iran, the process has become very slow. Demand is there, but the process of breaching has become very slow. So that's the only change. That too only for a country like Iran. Other countries still managing.

We'll take the next question from [indiscernible]

Yes, sir. I wanted to know that the company has built significant scale in rice export. So what is the next growth engine that can potentially become 20%, 30% of revenue over the next decade? Or are we effectively betting only on continued growth in rice exports?

See, majorly, we are betting on continuous growth in the rice exports. Of course, we can start strong with our domestic sales. That still we've not explored and maybe we come up with different projects also in the future. Maybe we can start with spices, we can start with rice puffs. So everything is there, and we can start with them in near future.

We take the next question from Manish...

So first of all, I would congratulate the management on the superb set of numbers. So I have a couple of questions. One, I just wanted a flavor as to how are our new units doing? What is the capacity utilization there? And are all of those units already operational? I know those are operational, but I guess there are some 4 or 5 units. So all of those are operational and what is the current capacity utilization of those units?

Manish, so 3 units -- new units have been installed and they've started to work. Regarding the efficiency, what you asked, they would be working at around 50% of their efficiency, normal efficiency. So in terms of sales, right, what would have been the contribution from these new units, let's say, for Q3 and Q4? Would you have a number? I would not have a number, but I can give you an idea. One unit can give a sale of around -- it should be around INR 15 crores to INR 20 crores a month. Questions?

I have one other question. So Rajiv sir was talking about good demand coming from, say, some of the countries like Afghanistan and maybe even Jordan. So just wanted to understand as to what is driving this demand? Is it because customers have kind of almost exhausted the stock of inventory or they expect the war situation to kind of continue a bit longer and they hence want to kind of stock up more of inventory. So just wanted your thoughts on that.

So about Afghanistan, Afghanistan primarily was buying all their rice requirements from Pakistan. And some problem happened between Afghanistan and Pakistan and suddenly, Afghanistan came towards Indian rice. So that's the reason how Afghanistan is importing so much rice from India now. But the process of exporting is complex because the port they use is Bhangabas. And since the war is going on, the export procedure has become very slow. So that's the thing with Afghanistan. And about Jordan, some of the ports are not functional because of the war like Iraq port Umamkasar. So all the rights, which was earlier going to Mamkasar is going to Jordan Agaba port. So that's where the export has increased.

Okay. That helps. If I can squeeze in one final question. So I just want to check if the performance that we've shown during Q3 and Q4, can that be sustained throughout this year or if we can, in fact, better that performance, both in terms of top line and bottom line?

See, Manish, the war problem started February end, right? And you can see the quarter. We've exported fairly well. So if during the war, we can get such an export, then why not the next quarters also will be absolutely right. I think that's very encouraging. But I also saw this commentary which came along with the results wherein we talked about some level of shipments getting impacted, obviously, because of the war. So I guess that will have a spill over to Q1. Would you be able to quantify as to what would be the quantum maybe in terms of volume numbers or even in, what would that impact be? I would not like to get into the figures, but what you're saying is true and that will come in the future.

We'll take the next question from Praveen Sharma

First of all, congratulations on the good -- and my only question is from the previous participant, this El Nino thing. Based on your past experience, historically, when there is a scarce rainfall, production drops and crop prices increase, what is the effect past experience, maybe 2019, '15...

Praveenji, the paddy will start to come in, in the month of October, November. So it's very early to comment what is going to happen. See, my question was based on past experience. -- does it affect the production of this happened in 2015 and '19, super El Nino kind of thing. So if you only want to know about the effect, yes, it can affect the crop size. It is true. -- but there are various factors. This is, of course, one of them. Yes, you're right. So in light of that, do we -- normally, we keep inventory till the season ends like September end we buy fresh crop. So in such scenario, when obviously, you guys see through the ISR model, crop Casa, all those data you get and you do it very scientifically and beautifully. So in such situation, can we thinkCOpempt buying will be in advance and so that while the prices are low, you will buy? Just thinking out. Like I said, we are only in the month of May. This question can be better answered in the month of July. Where I was coming from after this quarter and next quarter, I think we will do very well because we have an inventory, which is a low-cost inventory. And given the situation, demand is only going to increase, rupee will only depreciate. So I think this Q1, Q2 will be fantastic. Working in the right way, the way it was supposed. Like what you are asking, we've been working exactly the way your question was. Many, I understand because you guys are the veteran when the prices were low and people were saying, inventory and you bought it at the right time at a lower price. And we are seeing the benefit of that right now. And you will see in the future also, yes. That's very encouraging to hear. And I think we should move towards next orbit of profitability, although we are doing very well. So let's see. I hope best...

We'll take the next question from [indiscernible]

What you said earlier is true the prices have gone up in international market Okay. And have we also increased our prices to our customers

Our margins remain same based on the market prices. The markets have gone up similar I'm sitting on a bigger... [indiscernible] because of the September quarter the volumes have come down the last 000 9% drop is due to some of the shipments that were stuck in between due to Iran. If you see the press release, they mentioned that a few containers were stuck. Executed in Q1.

I will take the follow-up question from Manish...

Ankit, I just wanted to check as to have you made any headway in terms of quick commerce or e-commerce sales? I remember Rajiv, sir, talking in the previous calls that those do not give us much of a margin. So any update on that front?

We have one unit in our Gurgaon office only looking after e-commerce. So I have met them personally, they are going very strong with all e-commerce. So yes, Mani is coming up with e-commerce. If you look up for Mani on Blinkit or Amazon in Gurgaon or nearby NCR, you will get it. So am I correct in assuming that our volumes would have definitely increased when you compare it with the previous quarter last year, the e-commerce sales... Yes. If you're comparing only e-commerce sales, I'm sure the sales are going up.

Okay. And is there any plan to kind of take it to a pan-India level because currently, you said you are doing it mostly in the Gurgaon and surrounding. Yes, Manish, we are expanding our territories.

Absolutely, yes. Sir, since there are no further questions, you would like to give any closing comments?

My closing comments would be that this year has been really great. We've done good profitability. And continuously in the future also, you're going to see similar quarters with similar profit...

Thank you to the management for their valuable time, and thank you to all the parts for joining the call. This brings us to the end of today's conference call. You may disconnect now. Thank you.