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

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q1 FY '27 Post Earnings Conference Call of Chamanlal Setia Exports Limited. Today on the call from the management team, we have with us Mr. Rajeev Setia, Joint Managing Director and CFO; and Mr. Ankit Setia, Whole-Time Director. 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 team to brief us about the business and performance highlights for the period ended June 2026, the growth plan and vision for the coming quarters or the year, post which we will open the floor for Q&A. Over to the management team.

I welcome all for joining us. And I would like to thank everybody for investing, having trust in our company. [Foreign Language] This was a quarter, which happened during the war of Iran and U.S.A. [Foreign Language] There was absolutely no effect. The sales went fine. There were no claims. There were no containers, which got stuck anywhere. So it was a smooth quarter for us. [Foreign Language] Somebody very senior from MSC line, shipping line, was in our office. And he highly praised about the company's way of working. They said, the way Chaman Lal Setia Exports Limited has diversified their export business, the way we are capturing multiple ports all over the world, like he said that this way, there is no other company working. So it gave us great confidence to listen to that. So this is what I wanted to say. Chacha, if you like to add?

Yes. With the spread risk, we are working. This is what we are doing for years altogether, and this has really paid now when the war situation is going on. The movement to Middle East is low. Of course, through Red Sea, the countries like Egypt and Aqaba Port, Jordan, and Lebanon is doing well. And this part, it slowed down. But let's hope it goes well. Our 500-tonne shipment to Jeddah is moving in a day or 2. So it's going, let's see. This part is not as good as it used to be, but the other part of the world, like U.S., Canada, New Zealand, Europe, Russia, African part, we are all over.

Though last quarter, we had zero shipments to Iran. That is why you can see there is no effect.

When we have shipped to Iran?

Let's move on to the Q&A.

[Operator Instructions] Sir, we will take the first question from Question from Manish Kela.

Congrats once again displaying a solid performance, both on top line as well as bottom line. So I have a couple of questions, sir. One is in your commentary, you've talked about, again, elevated ocean freight costs. Again, I understand all of this is because of the geopolitical situation. So again, were we able to absorb these costs, like were we able to pass it through the customers? So that's the question. That's one. And my second question would be, we also talked about doing good purchase of low-cost inventory. So this was highlighted on the previous call. So are we still holding on to any low-cost inventory? And if yes, what would be the quantum? And do we expect Q2 realizations to be strong as well going by the current rates of basmati rice?

Your first question is about ocean freight. We are quoting only FOB these days and telling the buyers, we will ship CIF, of course, because we have to secure our cargo also with the insurance. And the actual ocean freight as on that date will be added to the price to make it CIF. And we always tell them, we give you the price, whatever -- because you are yet to sell, we have sold you and you are yet to sell, you are in a better situation than us despite paying ocean freight. But everybody knows ocean freight has gone up and accordingly, they factor into their prices and sell. The demand is there. It's an essential product. Demand is too much. And other question, you know, we built up huge stock of low prices and starting from the commencement of season until mid-January, we bought a lot of rice. We still have reasonable quantity with us at the lower price. And whenever the prices went down in this period also because when there was good news from the war side, the prices used to go up. And when any eventuality happened, like a resume of war, whatever unfortunate, we should say, the prices used to come down. We got opportunities to procure also. So in all, we are in a very good situation to serve.

If I can squeeze in one final question. While sales increased, the volumes reduced. So do we expect volumes to be soft in Q2 as well?

Q2, it's very little premature stage to comment because it's just beginning of the quarter 2. Demand is there. Now it depends -- demand is there means, buyer and seller are confident about the business. Now it depends upon the logistic. If the -- I mean, this war is receding slow day by day, and let's hope good time comes, ocean freights come down or the movement to all destinations is in order going quick, the business can happen anything. And if the slowdown remain, then it can hit also. I mean it's premature to say. Still we have to pass...

And how are the current prices of basmati ruling at? Is it high or what is it?

They are high, of course, but not the peak level, which was achieved by rice, they are less than that, but still high.

We'll take the next question from Rajesh.

[Foreign Language]

Ankit, you will answer or should I answer?

Sir, you are right with saying [Foreign Language]. So I would say we are in that process. [Foreign Language]

[Foreign Language] The good part is recently, we have come across a company, Al Muhaidib, buyer called, a Saudi company. And because they have been buying from multiple people, but they got hits here and there. So they have selected our company for, of course, part of their purchases. And they are very big buyer. They are buying around 2.5 lakh tonnes. So first shipment of 500 tonnes is moving. And there's -- I mean, it's not a question of their satisfaction because they examine everything in our factory, in our plant. They go -- we have learned from them also the way they are procuring. And hope so, this company remains with us. And if we live up to their expectation, why not they will be going here and there because after a lot of investigation or observation, they have come to us. And we have told them our company doesn't work on breakeven or losses. We need because -- I always said the true marker of any business is profitability and it has to be there, low or high. And I'm expecting increase of top line from these people. Apart from that, we are regularly discussing in our own company for domestic sales. Because 2 days back, I was talking to my distributor in Agra. He is my distributor since 1980, and Maharani is quite famous in Agra. So just one call of mine and talking to him, he placed order of 100 tonne to factory. Very nice. And what we really need is maybe personally me or Ankit or my son because Vijay is involved in quality production in the factory. He's not free. We need to meet the people. We have to revive our old -- these distributors. It will grow. And I have seen -- we have as that brand is concerned, somebody has carried out some this survey. Next to Lal Qilla, we are coming. I'm happy. So domestic sales is very important now and particularly after this war and disturbance happens in any part of the world. It was earlier in Ukraine, then we have seen Israel-Iran war only and now America entering into it, which hit not only Iran and GCC countries also. Nobody ever dreamed this thing will happen. So it's like not putting all egg one basket, we are doing separate business and domestic is our next target.

[Foreign Language]

[Foreign Language] Suggestion is well taken. CS team Has to work hard. And it is essential for the management also to visit once.

I would like to correct something over here, Rajesh ji. In FY '23, our export revenue as a percentage of sales was 73% -- export revenue as a percentage of total revenue was 73%. Today, in FY '26, it was 91%.

[Foreign Language]

Let me just recheck and come back to you on this. But as per the data, it has gone from 73% to 91%.

[Foreign Language]

What I personally assume, 90% export, 10% domestic. But figures you have to reconcile.

[Foreign Language]

It needs recheck rather than to make any claimings.

[Foreign Language]

[Foreign Language]

EBIT margin and net profit margin?

[Foreign Language] EBITDA is 12.3%. So you can see it is going up. And future, maybe you can expect similar things to happen.

[Foreign Language]

Sir, Maharani, of course, is the flagship brand [Foreign Language], which is also very strong. Begum [Foreign Language] which is also very strong and Anarkali [Foreign Language], which also is very strong. [Foreign Language]

[Foreign Language]

See, Maharani, because it's the flagship brand, that is the brand we are known for [Foreign Language].

[Foreign Language]

[Foreign Language]

Royal India is doing great, Ankit.

So we have a brand, Dewan, which has become very big in one of the countries. Maharani would be #1 brand in Nigeria. So different countries brands [Foreign Language].

[Foreign Language]

[Foreign Language]

Just to clarify on the export query. If you go to Slide #31, when you go Slide #31 of the presentation, we've given the export sales, which is INR 1,011 crores, right? Against a turnover of INR 1,387 crores in FY '23, which is 73% of revenues, okay? Against that, it is INR 1,268 crores in FY '26, okay, against a turnover of INR 1,440 crores. This is including other operating income [Foreign Language] your turnover is INR 1,399 crores. If I take as a percentage of that, it comes to 91% of revenue.

[Foreign Language]

That's right.

We'll take the next question from Mrunal Kadam.

Congratulations on a strong set of numbers. And I believe this is one of your best quarters. We have seen average realization move up significantly. Can you help us understand how this moves in domestic and export? And what was the key drivers for this higher realization? And is this looking sustainable?

Chacha [Foreign Language]

Actually, you see the prices in this particular year, they raised around 30% from January onwards, they started rising and the peak level was observed 30%, which added to the profitability, of course. And secondly, despite war, demand was too high because the people buy essential in such tough times. So the prices -- the profitability was good. We were supplying timely, and we have a very big spread of our business.

Vijay [Foreign Language]

Yes, that's right. So in Q1 of FY '27, our domestic selling price is INR 64, but our export selling price is INR 98.

[Foreign Language]

But I think since at least the data I have since Q1 FY '23.

This is the highest we've done till now [Foreign Language].

Which markets contributed the most to the growth in quarter 1? And are these markets expected to remain strong through FY '27?

Absolutely. [Foreign Language]

We'll take the next question from Surabhi Mishra.

I wanted to know in the current global rice trade environment, where does Chaman Lal Setia sees the biggest opportunity to gain market share from competitors?

You see, the business comes -- increases the kind of dealings we have with our customers. If we live up to the expectation of the customers, one, give them the good quality, good price, they remain attached to us always, and it grows. So we don't see more to the -- our peers, let them do their own way, and we have a different way of business. We don't do in 2, 3, 4 countries business. We do with multiple. And it's very tough one. Believe it, it is more than 300 brands of private label of the customers and backing them and live up to their expectation is quite tough, and we are doing tough job. It's hard to do. So we sometimes feel we have hardly much competition, and we are going our way good.

I also wanted to know, are international customers increasingly looking for reliable long-term suppliers post recent supply disruptions? And has the company won any strategic new customers in the upcoming year?

Yes, yes, always new people are coming. Right now, one guy from Saudi Arabia is sitting on the upper floor, and I was with him, and I just came at 12:00. My sales team is handling.

[Foreign Language] We have a team of new buyer development. There are more than 20 people working in it, 24/7. The process of getting the buyer is incentivized, so they work very hard to get new customers. [Foreign Language] And they've been chasing these customers for a very long time. [Foreign Language]

We'll take the next question from Luv Uttar.

So sir, firstly, I wanted to understand why has our EBITDA remained flat around INR 150 crores, INR 160 crores over the past 4 years? And what could be a sustainable EBITDA margin that we can expect to operate at going forward?

This time, EBITDA has gone up.

For us, the EBITDA basically oscillates between 8% to 12%, sometimes 14% also. So this quarter, we've done 12.35%.

So do we expect to sustain this for the full year?

Yes, we expect it to sustain it because we are sitting on stocks. You can check the figures.

All right, sir. And secondly, our export volumes have also been flat since the past 2, 3 years. And as Mr. Vijay mentioned that 90% of our business is now from export. So can we say that we have lost some share in the domestic market?

If you look at the domestic sales, it has been consistent. Nothing has gone down, right? So in the future, focus is going to come on domestic sales also.

And sir, the volumes in the export market, them being flat, what is the reason for that?