Kaveri Seed Company Limited (KSCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kaveri Seed Company Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us on the Kaveri Seed Company Limited's conference call. We are joined today by Mr. Mithun Chand, the Executive Director. Before we get started, I would like to point out that certain statements made or discussed on the conference call today may be forward-looking in nature and must be viewed in conjunction with the risks we face. The company does not undertake to update them. A statement in this regard is available for reference in the presentation. We will begin the call with opening remarks from Mr. Mithun Chand, who will share updates on the market environment and take you through the strategic imperatives ofthe company. He will also share his thoughts on the performance of the company during the review period. We will then have the forum open for an interactive question-and-answer session. Now I would like to invite Mr. Mithun Chand to share his views. Over to you, sir.

Thank you, Rishab. Good day, everyone, and a very warm welcome to all of you. I hope you and your loved ones are all safe and healthy. The company continued to deliver a strong operating performance amidst the COVID-19 pandemic. We are thankful, as we have stated, by the support of the government to overcome the challenges that we have seen in this pandemic [indiscernible]. During these times, I would also like to hope and pray that all of you and your families are safe and healthy. Revenue growth was almost 15% for the corresponding quarter basis and EBITDA margin excluding other income continued to be healthy at 39.88%. Financial performance has seen considerable improvement, and I will dive into the details shortly. Where acreage details of crops are concerned, cotton has increased by 4.94%, maize acreage has marginally at 0.59%. Rice at [indiscernible] growth in acreage over the previous year, whereas bajra, jowar and sunflower have also increased over the previous years. It is also needed to really understand that these figures are as on date, not for the corresponding year. [indiscernible] these figures are as on date [indiscernible]. It is important to highlight that maize, the prices are down and farmers are holding on to grains in free markets. Where crops performance is concerned, concerned cotton volume decreased by about 5% in quarter 1 FY '21. The volume was gained in the northern market, maize volume increased by 7% in quarter 1 '21 and the revenue was up 9%. Although there was a decrease in Telangana, volume increased in all other states. Increase in value was driven by contribution from the premium segment portfolio. Hybrid Rice volumes increased by 44% and revenue grew by 53%. Hybrid paddy KPH 468 continued to [indiscernible] steady growth. Selection Rice volumes have increased by 23% during the quarter, and revenue increased by 28%. We don't think the premium segment is more [indiscernible] than the general segment. On a consolidated basis -- on a consolidated basis in quarters 1 FY '21, revenues were at INR 719.48 crore as against INR 627.58 crore, a growth of 14.64%. In quarter 1 FY '21, EBITDA excluding other income stood at INR 286.95 crore as against INR 236.08 crores in the corresponding quarter. EBITDA margin further -- excluding other income at 39.88%. In quarter 1, FY '21, PAT was at INR 294.29 crores compared to INR 229.58 crores. Our balance sheet remains strong. Total cash on book as on June 30, 2020, was INR 524 crores and as on March 31 was INR 337 crores. As most of you are aware, the first quarter is always a summer for us. The majority of the rainfall takes place in June. Our financial performance has been good and crop growth performance has also increased. I would like to highlight that we have taken firm measures of safety for all our employees during the pandemic and then [indiscernible] during these difficult times. Operationally as well, the minimum ratio that we had in our supply chain and [indiscernible]. The government support continues to be acknowledged. If you go to point from the outlook is that the area of cotton is down in key states as Maharashtra and Gujarat. While overall cotton may be down, when we go in the second quarter in states like Tamil Nadu. The prices for key crops like cotton and maize are not good and farmers' sentiment for the coming quarter may not change. But rabi area may be impacted in case hurdles do not improve. New hybrids continue to be a focus, and we have introduced [indiscernible]. Vegetables are also performing very well. Hybrids continue introducing hot pepper, tomato, bitter gourd, okra. And Kaveri's okra, Kaveri 54 is now the market leader. New crops are also being introduced like cabbage, beet root, carrot, marigold, sweet pepper, pumpkin, muskmelon et cetera. On that note, I conclude my opening remarks. We would be happy to give our perspective on any questions that you may have. I would request the operator on this call to open question-and-answer session.

[Operator Instructions] The first question from the line of Rohit Nagraj from Sunidhi Securities.

Congrats on a very good set of numbers. Sir, in terms of -- so we have done very good performing across all the segments. So from a growth perspective over the next maybe 3 to 5 years, what are the steps that you are taking in terms of getting into newer geographies or growing the market share from the combines or probably giving traction in the areas where both hybrid is still unpenetrated or vegetables still have significant scope. So from a strategy perspective, what is the direction that you are working on from 3 to 5 years perspective?

[indiscernible] we were already [indiscernible] product lines to achieve the growth. And our company from day 1, we started [indiscernible]. And in the last 2 years, [indiscernible] market and a strategy [indiscernible] to the portfolio. And now we are able to launch [indiscernible]. And moreover as a company, we are spending a lot on R&D as [indiscernible] infrastructure [indiscernible] you are new products in all the segments and in the market share. If you see in the last 5 years, we have grown in [indiscernible] and northern India [indiscernible] regional markets. And continue [indiscernible] launching new hybrid [indiscernible] market. And for example, [indiscernible], which was investing for the last 10 years now will show its results. And that's what we are planning [indiscernible] exports. And in terms of the growth for the coming years, we see that will continue to do a stock of what we have. And frankly, that [indiscernible].

Just a couple of book keeping questions. The other operating expenses have come down during this quarter, and the other income has gone up. So the reasons for this are?

[indiscernible]. Coming back to the other expenses, other expenses [indiscernible] of content compared to last year, the royalties are lower by INR 15 crores compared to previous year, because at 19 basis [indiscernible]. So that is the bigger picture [indiscernible] competitive.

The next question is from the line of Chetan Thacker from ASK Investment Managers.

I just wanted to understand on the rice portfolio, both hybrid and selection. Just wanted to get a sense on which markets have we grown, when and what are expecting in those markets?

We have done a [indiscernible] hybrid basically it is [indiscernible] parts of the [indiscernible]. These are the major areas which we have [indiscernible] and growing very fast. And there are [indiscernible].

So sir, industry level, what would be the growth in this quarter? Any sense on hybrid rice.

I think the hybrid rice has grown by around 25% of [indiscernible] a normal guidance rice has gone up so significantly, competition should be up more on like rice compared to previous year. [indiscernible].

So we would have gained market share in the hybrid rice then?

Yes, we have gained 60% market share in hybrid rice and if you see our growth [indiscernible] and if you see the past 3 years, we are growing at 35-40% rate [indiscernible] market size and we are hoping in the process of 3 or 4 in hybrid rice.

The next question is from the line of [indiscernible].

Congratulations on a good set of results. Just with regard to the outlook now going forward for the rest of the year. Number one, given the early monsoon that we have had this year, would we expect 2Q to be somewhat more subdued compared to what we had last year? Last year, I believe, we had sold about 5 lakh package of cotton in 2Q. So that was one. And second, any risk of sales returns in cotton that you might consider given the shift in cropping towards other crops in some of the key states?

Regarding the quarter 2, I don't think there is much for [indiscernible] across coming quarters, comparative quarters, because in whatever is being too much of importance for the [indiscernible]. As last year also [indiscernible] early on contain during the first quarter. There is not much of an impact in the second quarter. And most of the [indiscernible] as you said last year second quarter, it should be in line with [indiscernible] It should not [indiscernible]. And coming back to the [indiscernible], whatever we sure that [indiscernible] a little bit of [indiscernible]. We don't foresee any [indiscernible].

Great. That's good to hear. And also this time rabi, the presentation you've shared a little bit of a cautious outlook for the rabi acreages of corn and -- so if you could just talk about what you expect in terms of rabi? Last year, rabi was very strong. We have a high base asset now. So should we expect corn hybrid sales to be a little bit weak in the second half of this year?

First of all, corn, which we [indiscernible] this was [indiscernible] but other than that in terms of [indiscernible] the performance of for the second half has [indiscernible] but in coming months probably I don't think it will impact much because we are [indiscernible]. So it should have a minimal life [indiscernible] like you said this might be a little bit earlier [indiscernible] a couple of months before at least [indiscernible] in the situation of COVID [indiscernible] sentiment. As of now, it looks like it all should [indiscernible]. The other thing what we [indiscernible] probably in hilly areas. In some parts [indiscernible] in terms of the revenue, [indiscernible] but overall [indiscernible] second half, the second half as I imagine that.

Okay. Great. Just one last question for me, and I'll get back in the queue. Just with regard to vegetables, the performance has been excellent so far. I think almost all tripling of revenues year-over-year. Now I believe, last year, we had done about INR 15 crore vegetable revenues. Could you give us some sense of where you would expect that number to be this year?

[indiscernible] last year for the entire year [indiscernible] for the entire year compared to the first quarter, we have done INR 6-odd crores [indiscernible] and INR 115 crores this year. On the demand [indiscernible] high profitable steps. We are pretty confident that we will [indiscernible] constantly the coming over the last 3, 4 years. And make sure [indiscernible] growth in there, definitely we see that this [indiscernible]. And that's the initial [indiscernible] much more than numbers and the execution [indiscernible].

Okay. So INR 20 crores last year and about at least INR 30 crores this year, is what you are saying?

40% to 50% growth over last year.

The next question is from the line of Nitin Awasthi from East India Securities.

Firstly, congratulations on a great set of numbers. I was going through your presentation, in the presentation, you have mentioned that HP bt 3 [indiscernible] has basically affected the whole [indiscernible] basket by 15%. What would be the impact on our company as a whole? Would you see that there has been a lot of growth being taken out because of the whole [indiscernible] business?

No, if you do [indiscernible] we had shown given that the [indiscernible] down by 5% to 8% [indiscernible] in terms of cotton [indiscernible] you will see a growth in terms of volume. [indiscernible] market share [indiscernible] you already have. Now coming back to HTBT, likely, there was an [indiscernible] in the individual BT. But as a second stage, it will impact more because [indiscernible] cut down on the [indiscernible] most of the branded seeds, which we offer [indiscernible] because the transportation issues and other issues being not available during this summer [indiscernible] segment and all [indiscernible] so the impact that, to quantify the impact, it would be difficult [indiscernible].

Okay. So now we're getting into this market and understanding this whole [indiscernible] business. Is that every year, the impact has been growing? And is the impact growing every year, the impact on our growth number will be there or [indiscernible] meaning that the illegal business is booming right now. So just [indiscernible] could you correct the course of action that could be taken, would it be that we can [indiscernible] just utilizing what are the guarantees retailing at [indiscernible] the company [indiscernible] how much time do you think the company to scale up again?

If you go back to the [indiscernible] And if you see in the past year [indiscernible] months, but if you take the [indiscernible] 5, 7 years, [indiscernible] and moreover [indiscernible] state government and [indiscernible] to come back to conclude with these contaminated seeds. So I think [indiscernible], we can further go on this day, because the government has its [indiscernible] from that. And [indiscernible] in the last year, the state has expanded its [indiscernible] COVID conditions they were all followed, and not given a free hand to operate. So that might be [indiscernible] difficult task as the individual seeds [indiscernible] some part we need to see. Going forward, we are getting legalized in the government sector. I don't think [indiscernible] the government needs to take its policy focus first [indiscernible] committee, which a modified cost. That means [indiscernible] can be legalized. So I don't think that as a major aspect from the [indiscernible] for the branded [indiscernible]. In fact, I [indiscernible].

Okay, okay, sir. And during the year, we had a major breakthrough with the DNS [indiscernible]. So the benefits of that have started to show in this year or will we see the benefit of it next year?

A part of that is [indiscernible] in this year, but majority of that [indiscernible].

So can you quantify sir...

We had a carry forward stock of last year. So that we are clearing this year. So some stock has [indiscernible].

Okay. So could you just quantify how much would be the [indiscernible].

15%.

Sorry, sir. Come again?

15% or so.

15% or so, okay.

Or on the entire seeds [indiscernible], it should be somewhere 15% [indiscernible].

Okay. And next year, you are seeing these numbers to increase to almost 100%?

More than 75%.

More than 75%. And the savings for package because of GMS has been [indiscernible] price?

It should be roughly of 2% to 3%.

2% to 3% of the overall price. Okay. So. Okay. Great. So that clears a lot of questions on a copy, and I'll get back in the queue.

The next question is from Madhav Marda from Fidelity Investments.

So my question was, on your outlook, I joined the call a little late, so I don't know if you've already shared your outlook, but from your presentation, if I look at your outlook for cotton seeds [indiscernible] big negative due to the lower demand and the higher supply which might come in. Could you share your perspective on the cotton side a bit more in detail in how the pricing might pan out and the increase for the coming Q1?

Sure. But I already shared it, but I'll again share the cost [indiscernible]. In terms of the quarter, majority of the sale is already done, we don't see much of an impact on this financial quarter. And even for the [indiscernible] because all in a bit of [indiscernible] that. But going forward, that is having [indiscernible] from the third and fourth quarter, the main crop might be impacted because of the commodity prices and most of the [indiscernible]. So that might be an impact on the overall industry. But I -- in respect to Kaveri, I don't see much of an impact, because most of the market we are just gaining market share, and we are in the very initial stages. So that should not have much of an impact for us. And definitely, with this -- to you, I don't think second half should [indiscernible] very much when compared to last year. But, in terms of the industry, we need to wait and watch, another 2 or 3 months of the [indiscernible] for rabi crop, we need to see. If the exports are unlocked then definitely it is there, we got it.

But next year, basically, we have [indiscernible] prices are bit weaker and we have oversupply. Would it be fair to say that next year [indiscernible] for these crops could be a bit lower Y-o-Y. That there could be some impact?

It's too early to talk about the next year because the pandemic situation, what sort of transportation, what sort of export [indiscernible] now. I think one is few things when the entire operations [indiscernible]. And the other part, you need to understand is that in India, there are very few cost [indiscernible]. So it definitely should resolve our [indiscernible] crops. And at Kaveri, we get at the beginning of the costs. So I don't think there is much impact on our value on the overall market, but it's the early thing to do talk about anything in the [indiscernible]. We can get to know only in a month of October, what is the [indiscernible] levels of grain. [indiscernible] the strategy of Kaveri is that we operate at a [indiscernible] that is actually aimed in that. For example, when you talk to the rabi crop, instead of May as the May [indiscernible] we are already doing [indiscernible]. So we'll get some market share in [indiscernible] as well. So in that way, we are slightly insulated to the market condition. And that's why we say that our strategy of operating in many crops, and going into different crops and adding few of new crops has continued to help us gain our leadership in that area.

The next question is from the line of Sumant Kumar from Motilal Oswal.

Yes. So you -- in Q4 FY '21, you have guided cotton volume growth in the range of 10% to 15%. And as we now 10% growth, also our previous year, the overall -- the package [indiscernible] and upper band I think going to be an 8 million bucket. So can we achieve for 7.5%, against for FY '21.

I don't think so because most of the [indiscernible] states have already improved volume growth compared to previous year [indiscernible] the call, you were saying that the market may go up by 5% this year. But in fact, on [indiscernible] condition, we are able to gain volumes and market share. So instead of 10%, we will be doing around 5%. But the other way to look at it is that [indiscernible] as a company we have given a guidance of between 10% to 15%. I think we are close to [indiscernible]. So we are in line with our guidance.

Okay. So in the cotton side, this [indiscernible] is going to be a lower than [indiscernible], because of [indiscernible].

Last year, Q2 was only 4 or 5 months [indiscernible] 90% to 94% came in the first quarter in the last year. [indiscernible], I think we should be in line with last year, at least [indiscernible] year-end, but it should be in line with last year.

So what are the -- the fact [indiscernible]?

Sorry?

No, you were talking about [indiscernible] will be similar or lower than that of the previous year?

[indiscernible] second quarter for corresponding second quarter -- last year, second quarter to this year, second quarter. So it should not have much impact on profits. Because when your last year, you have only done higher [indiscernible].

Okay. Okay. So it could be a 6% to 7% kind of volume at [indiscernible].

It may be lower or higher. I mean [indiscernible], I don't have the exact details [indiscernible] last year second quarter, but it should be in line with [indiscernible].

[Operator Instructions] We take the next question from the line of Nitin Agarwal from IDFC Securities.

In on the rice business, will you think that this season marks a bit of an inflection point in the -- the way rice has taken off for us and for the industry and after a long time, rice is considered to be the next [indiscernible] somehow we never really saw the traction coming through in this crop. Any thoughts on that?

[indiscernible] in the same thing because rice is [indiscernible] And the other encouraging point, if you look at it is that every year [indiscernible] hybrid rice are going down. So that itself shows that the hybrid rice is going to one of the best, I think, one of the top [indiscernible]. So we have good [indiscernible] in that way, we are working in that direction for the last many years, and we are going ahead [indiscernible].

If you were to use sort of 2 [indiscernible], I mean what proportion of business could rice be for you in 3 to 5 years if all goes well?

So I think, rice as such should be at [indiscernible] the next 3 to 5 years.

You see that happening?

That's what is happening. We are already making [indiscernible] If you see the high in the last 2 years, we have grown at more than 40% in hybrid rice. We are one of the largest [indiscernible] in hybrid rice and selection rice, we are able to [indiscernible]. So with that segment, if you see the value of growth what have done this year, we accounted more than 50% of the hybrid rice and 25%, 30% in [indiscernible]. So that's very exciting, and we are already on the -- we think that we are already on that path.

And [indiscernible] over the seasonality of rice, all of your sales like got booked into quarter 1, [indiscernible]?

Look, as of now, the majority of [indiscernible] rice in the first quarter. So we are in line with the industry, and it should be continued. Where as in the research, like the selection rice, what we say, like 15% to 20% comes in the second half.

Next question is from the line of Nandan Vartak from Wealth Managers India Private Limited.

Sir, my question is on the new policy for government [indiscernible] quality assurance agreements under the new policy decision. So will there be any delayed benefit out of it for steel industry or Kaveri specific?

We don't see any direct benefit as such, but it will help the farmers to have more choice than, to have to monetize more on it. I mean the [indiscernible], they can have a back-to-back agreements. So it can help achieve the [indiscernible] we, as a company, best quality seeds, which helps the farmers produce more. So then we have a choice and power, I mean back to back agreement, it can be in a better way and for a high value that [indiscernible] seeds. And then also [indiscernible] the government has taken a very good initiative, not only in [indiscernible], but we can be [indiscernible] developing agriculture et cetera, especially for the backend where all the [indiscernible] in that and just [indiscernible] So that itself will give a very good advantage for the farmer. So going forward, agriculture looks very good and these sort of government initiatives will definitely help agriculture. So in that way, indirectly, we should be one of these benefited out of it.

The next question is from the line of Rohan Gupta from Edelweiss.

So you think -- yes. So you think because of the nature about business, which is quite regional and we are Q1 having because of other concentration on to cotton seeds, [indiscernible] because a sharp rise in [indiscernible] and do you see that the [indiscernible] impact will come down a little bit and that can give particularly a good boost to the overall margin because ultimately your margin cost remained same for Q2, Q3, Q4. And vegetables, I believe, is not just concentrating on one quarter, but spread across the region -- across the year. So with this kind of gain in other crops, do you see that the overall margin improvement is quite possible?

Yes. If you go back towards, in comment on the patent of the cotton segment, if you see, going back, [indiscernible], we were at 75%, 80% quarter. And if you recollect discussions in the last few years, we are saying that we are [indiscernible] our dependency on the cotton and we are increasing our market share and volumes in all other non cotton crops, including cotton [indiscernible] and vegetables [indiscernible] to contribute more amount than the cotton segment. And as a percentage if you see this year, the cotton percentage year-on-year is [indiscernible] in terms of the [indiscernible]. And we all are aware that the non cotton contributes majority of the profitable gain in terms of [indiscernible]. Another vegetable [indiscernible] much more than the other field crops. But if you see with the growth what we had this year we [indiscernible] markets have expanded. And -- by more than 100, 120 basis points compared to previous years. So that it can show that the margins are more now for that segment. And coming back to the dependency on the coming quarter, it will continue for -- going forward [indiscernible] because it is not only cotton and even [indiscernible] quarter for us. And yes, compared to second, third and fourth quarters year-on-year, it might improve because we are adding revenue crops and [indiscernible] vegetables we eat much which all [indiscernible]. So this will add to the contribution. It will add in terms of the absolute terms, it is like of 2%, 3 and 4%, but definitely going forward [indiscernible] with the Indian climatic conditions, we think quarter 1 will be high.

In the presentation, you mentioned that [indiscernible] sort of revenue from vegetables we see that was in FY '20. That was for full year or Q1 [indiscernible].

[indiscernible].

Okay. What is the full year revenue last year in the vegetables?

INR 20 crores.

So do you see that this current revenue is run rate of INR 15 crores, it is not impacted by any one-off, and we should just see [indiscernible] INR 70 crore in revenue in the current year from vegetables?

[indiscernible] but what we're saying is that we had [indiscernible] at this year compared to previous year. And we are pretty confident that we will end up by at least 40% to 50% gain over last year [indiscernible] very conservative figure [indiscernible] much higher, but it is not for sure we will [indiscernible].

So you see that this INR 15 crores in current quarter is, it is driven by some extraordinary gains which will not be sustainable and are you saying that [indiscernible].

[indiscernible] I am saying that we [indiscernible] start because we are [indiscernible], we are very good at. The figure what I mean at 40% to 50% growth is very conservative figure. We have [indiscernible] we don't want to consider that. But we are in line with it. It's not [indiscernible] the same. It's in line with our guidance.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Congratulations for a very good set of numbers. Sir, one question in the rice, you said that we are in the top five players. So if you can give us some sense of who are the other 3, 4 players who are ahead of us.

The leader is [indiscernible]. We have continued all [indiscernible] products. Most of them [indiscernible].

So, no major Indian player is...

Not many players in non cotton segments. That's where we stand compared to some other companies. Most of the Indian companies dominate in the cotton segment. We are the only company in India to [indiscernible] in both cotton and non cotton segment. We compete with domestic players in cotton seeds, and we compete with all MNCs in the cotton segment. And that has in portfolio, even in MNCs. MNCs are presently in very few crops. For example, one company [indiscernible] we are the highest revenue and the highest [indiscernible] because of our crops and the currency, because of [indiscernible].

And in the cotton segment, you were saying that the market has contracted by 5% to 7%, while we have grown by 5%, 6%. So we have gained market share. So what is leading to this. Because are there particular hybrids, which have done very well for us. Because there is some sort of maturity, which comes to the top of the cotton seeds at a time. So what is contributing for us because we've been in this market for a long time. But [indiscernible] we haven't been able to gain the market share?

Yes. We are gaining market share because we are -- our hybrids are paying well. Even though we are servicing the market for the last 15 years, we have [indiscernible] for the last 10 15 -- between the last 10, 15 years, we are including a market [indiscernible] it is not the same hybrids that are performing. We have released many hybrid varieties. And it's a very dynamic profit, and every year, we launch new hybrids. Based on that, there will be a combination of new and old hybrids. Going forward, new hybrids will take over [indiscernible] So that's for the strategy ourselves. And as we are [indiscernible]. So that's is going to be [indiscernible] mantra to market share.

Yes, sir. So currently, the hybrids you might have launched a few years back are kind of helping us gain the market share. Is that what you...

Yes, yes, yes.

Okay. And now with the cash on the balance sheet, I know that you have done [indiscernible] limited buybacks in the previous year, but that is going to be the situation even in this year? Or there is some change because of the COVID scenario?

We seem to have lost the the line from Mr. Mithun. Please stay connected, while we reconnect him. Participants please stay connected while we reconnect the management. We have the management reconnected. Over to you, sir.

Sorry, there was some hiccups.

Yes. Sir, my question was that given that, again, we have a sizable cash on the balance sheet, and we have been doing buybacks every year. So is that trend going to continue? Or is there any claims because of the COVID scenario this year?

I don't think anything because we -- as a company, we had a policy of [indiscernible] INR 300 crores as lasted and whatever we had [indiscernible] back to the shareholders. As of now, we think that we will follow it, because we don't have any other [indiscernible]. But again, that's subject to the Board meetings, Board decisions. But as of now, our intention [indiscernible].

The next question is from the line of Adi Lubar from Renuka Investments.

First of all, I would like to congratulate [indiscernible] for the excellent results and giving [indiscernible] that a company has crossed INR 1,000 crores turnover, which [indiscernible] INR 1,000 crores now in this quarter -- this year. My question regarding the R&D spend that the company has done. What exactly would be the [indiscernible] this year on R&D, and do you see any buildings and equipment or would we focus happens on adding new science or new people, new team of people to our group?

The R&D spend, basically, if you see is spent on the scientists and recurring expenses. Yes, [indiscernible]. There are some expenses like, for example, where we have spent on biotechnology lab, but also comes for the R&D. But the minimum of CapEx because most of the assets are owned by the company. So that's the reason, whatever we spend we are showing under the R&D, the majority of the spend goes for the manpower, that is the scientists cost or the farm expenses or the recurring expenses. Basically, what we incur during the [indiscernible]. That's the major spend. Not of the minimum of our CapEx.

The second question, which I would want to ask you is regarding the [indiscernible] that we have. So is -- are we now focusing on vegetables? Or are we [indiscernible] grain crops and vegetables to be the driver for the next 3 to 4 years?

We are focusing on crops for the segment. We have added vegetables [indiscernible] we are in vegetables for the last 50 years. But in the last 10 years, we are advanced into [indiscernible] vegetables. That's what we [indiscernible] right now. So we are focused on -- our focus on crops are equal and based on the market size and [indiscernible]. And we are adding new crops that doesn't mean that we are leaving the other crops. We are processing equally on all crops. And we want to bring the company where we are leaders in all sort of crops. That's our strategy, and we are trying to do that. And if you see in the last year, we were also successful in development [indiscernible].

Regarding [indiscernible], which would be the focus area, [indiscernible], chilli, Okra or any other vegetables, which we are looking for? Because Q2, the [indiscernible] which people are consuming vegetables has changed [indiscernible]. Now we -- people are not going to restaurants and many other places. What has happened is that the trend has absolutely changed. So are we looking at some other [indiscernible] like cauliflower and many of other vegetables or just the 3 vegetables which you have right now. If you [indiscernible]?

[indiscernible] vegetables as such [indiscernible] segment which is growing much faster than any other segment. And vegetable as a crop is more unrelated to the market than any other crops, most of the crops. And in vegetables, if you take the overall market side, the market, Okra, green chilli and tomato contributes the majority of the market share. Now, the other costs are like [indiscernible] eggplant, cauliflower, carrot also contributed those crops. But our main crops 3, like we started with chilli, Okra and tomato and gourd. Now if you see in our presentation, we have again said that we are [indiscernible] beetroot, cabbage, cauliflower, everything. And [indiscernible] we are importing from other countries. We have a [indiscernible] that we are selling it. [indiscernible] but in terms of the basic research, we are focusing on these 5 crops [indiscernible].

The next question is from the line of Amit Vohra from PCS Securities.

Congratulations on good set of numbers. My first question is regarding vegetable margins. What would be the number [indiscernible].

Thank you, Amit. The margins are better than the 3 crops, but because of the size, we need to see this year. Last year because of the size, it might be lower. It will be increased going forward. We'll come back with the margin later once we have [indiscernible].

Sure. On the royalty that we have saved on cotton. How much of that we have retained and how much of that has been passed on through to our distributors?

As of now, most of that is retained with us, like majority of the [indiscernible] retained with us, some of it we might see [indiscernible] dealers going forward.

Okay. One last question is on the state wise breakup is there is the number that we have in terms of what on how much have we done in each state?

Right now, I don't have the number as such, but it's still in line with the last year number. Apart from Maharashtra, where we had done better. In Maharashtra we have growth, but other markets all remain same, because Gujarat is on the coast [indiscernible] 15% to 18%. Northern area has done well, but all of the states remain same.

Okay. Do you have retained market share in Telangana? Or have we lost it?

No, we have retained our market share in Telangana, but if you see the agriculture region in Telangana. Both maize and [indiscernible] If you talk about maize, the maize [indiscernible] done by more than 50% in the Telangana. And [indiscernible] is down by 15% to 20%. So we have gained -- I mean, we have retained, not gained, but we have retained the market for most of the part that we are operating.

[Operator Instructions] The next question is from the line of Sunken Bedi for the Envisia investor.

So I wanted to ask you, what is the company's strategy to expand the volume going in next 2 to 3 years? And how does the company plan to use the cash on hand as of June?

So we have the policy like in terms of the strategy, as I said -- as I mentioned earlier, we want to focus on all crops, and we want to increase our market share [indiscernible]. And we are spending a lot in improving our product portfolio. We have a huge set of products pipeline. And we are focusing on the growth rate as well as like what we have achieved last year. And as a leader, we want to grow better than the market. In terms of the cash, in the last 3 years, we have distributed or rewarded the shareholders. As of now, [indiscernible] shareholders. But again, [indiscernible].

The next question is from the line of Ritesh Thakkar, who is a retail Investor.

Congrats on the one set of numbers. Very brief question in terms of our strategy with the export market. If you could shed some light on which are the export markets that you target, our current sort of share of exports of the overall sales and the margin and profitability over there. And obviously, that trend emerging in exports.

We have been close to INR 20 crores exports compared to '19, '20, it remains the same. We are slightly grown in '20, but this year, we have plans of exporting more, but again, we need to see about the condition of the [indiscernible] happen between these countries. But we are very bullish on the exports and we are not concerned that what is a year or 2 with the difficult condition. But going forward, we are focusing more on the export market because as we have used in [indiscernible] and we have many in the portfolio. If you think of the number of hybrids [indiscernible] one of the highest in the industry, [indiscernible]. So we have many hybrids, which are suitable for many areas and climate conditions. So we are initially trying those countries. Those countries where climatic conditions are favorable for India, [indiscernible] are in line with India. So we are now targeting 7 countries. So definitely [indiscernible] going forward, it should be a [indiscernible] in these countries. In the next 5 years, definitely we see at least like doubling or more than doubling [indiscernible] exports. Sure, sir. But we have started with 2 or 3 years back, but you are aware that it takes a time process to raise a hybrid in different countries as we are importing as exporting, we need to [indiscernible] raise their day. That's where we are taking time. But we are pretty confident that we have a good set of hybrids, which can definitely add some value to our exports.

Sir. I mean, as you mentioned, in the non cotton segment, we are comfortable with like [indiscernible]. So in terms of margins, do you see export markets providing a better margin when compared to the domestic sales? And what would be the differential in terms of the margins that you there?

I think both in margins, export and domestic are in line with it. And some crops domestic margins are much better than export. Because if we have an initial figure, we are not commanded much. But once we have [indiscernible], then we can command a price. But definitely, even export, we have good margins in that.

The next question is from Harish Kumar Gupta, who is an individual Investor.

Sir, I have one query. Like I think you mentioned that your turnover from rice will cross [indiscernible]. So is it true or how you can [indiscernible]?

[indiscernible] true. But yes, our plan is to [indiscernible] of the cotton segment revenue in the next 5 years, and we are in line with it. And we are really confident that rice will be the major contributor to our revenue sales.

And then while cotton seeds revenue also will keep increasing, right?

Yes. Yes. But not in line with rice, cotton will increase to some extent, that rice [indiscernible].

Obviously, like any [indiscernible].

[indiscernible] big market, rice now is a very huge market. And we have many [indiscernible].

So margins in rice is high than cotton seeds or lower?

Almost all the crops -- all the margins for the crops are higher than cotton. Noncotton segment is higher than cotton margins.

Okay. So basically, it is fair to assume that we may have EBITDA growth more than 30% in the next 5 years or so?

I don't comment on that. But if you see definitely the margin should improve and 60% what you are seeing for the last couple of years. Going forward, as we increase our revenues in -- as a percentage of revenue, [indiscernible] definitely EBITDA margin should also increase.

The next question is from the line of Bharat Shah from ASK Investment Managers.

I could join in a little late after 10 minutes [indiscernible], so I may have missed it. But [indiscernible], what has been done to [indiscernible] control? And secondly, anything special in other income part? Or is this just the financial income?

So that's number. I guess you see [indiscernible].

No, I'm just saying that on expenses, there has been a [indiscernible] decent control. So just wanted to know what was done on that front. And as far as the other income is concerned, is that basically the financial income? Or is there anything else?

I'll first answer the second question, the other income part. Basically, the financial income, which was -- which is generated by investing into the debt fund and interest income, what you can say, because we have cash on hold, some got matured in the first quarter, that [indiscernible] in other income, which will be the interest income what we got. And coming back to the first question in terms of the other expenses, even the royalty is shown as the other expenses. As of this year, the royalty is 0, as against 90% last year. That's the major impact. If you see the other expense that we had on the INR 20 crores, of which INR 14-odd crore was from the royalty portion. So the other INR 5 crores or INR 6 crore from the traveling part, because we don't have -- traveling was very minimal in that particular time. So we have saved some amount in the traveling part.

Excellent. And on a longer term, if we build on exports, if we build on cotton seeds and as we get into more and more rabi season related supplies. Would you think that the skew of the seasonality will be able to gain decent control over, say, five years?

I don't think so. But definitely, on absolute term basis, second, third, fourth quarters will add more than the current coming going forward. But in terms of the overall dependency as a percentage of sales in the first quarter will remain same. Because in India, most of the cost comes as Kharif part, for example, you take cotton or you take rice or you take maize, a part of any other crops. Majority of that is shown in the first quarter. So definitely, the first quarter will have more waiting. But in the absolute terms, all the segments, all like 2, 3, 4, will definitely have a higher value. And vegetables coming into picture, wheat coming into picture, definitely as a percentage, quarter 1 should be slightly lower, but I don't think that will be a significant impact on bottom line as a percentage. [indiscernible] not even over a 5- year period. No. That's it because we are going in maize, rice and other costs, which are not in the first quarter.

The next question is from the line of Abhijeet Akela from [indiscernible].

Just one follow-up. Regarding the cotton market, you mentioned that there has been a decline of 6% to 8% this year. But if you could just quantify what the market price stands at in terms of packages? And how are the leading players other than Kaveri, is there anyone else that gained share? Or has everyone had a difficult year?

I think in terms of the growth, we might have grown better than peers. If you take the companies, hardly 1 or 2, with a small base has done. But not with a bigger base. Most -- most of them have lost market shares.

In value of the market. And what would the market size, right sir?

It should have on the sale like INR 4.5 crores. Last time it was around higher INR 5 crore packet market, it should be between that INR 4.3 crores or INR 4.5 crores per quarter.

The next question is from the line of Rohit Nagraj from Sunidhi Securities.

Sir, in terms of our guidance, sir, last quarter, we had said 15% to 20% overall growth. So now it is reduced to 10% to 15%, given that the cotton will not grow as per your expectation, 10% to 15% is this right?

So if you see [indiscernible], which is a majority contributor of the overall [indiscernible] we have grown almost 15% in terms of the revenue and 20% as the bottom line, more than 20%. So you see as [indiscernible] is that 10% to 15% growth at the top line and 15% to 20% growth at the bottom line. So we are at the higher end of the projection of this.

Right. And sir, the last question...

[indiscernible] even though we have not grown much in cotton, but [indiscernible] better than the guidance of -- we have grown better than the guidance in the non cotton segment. So that's the reason our revenues are close to 15%.

Right. Sir, what was the contribution from new products in quarter?

I don't have the right now to figure, but it is there in the presentation which we have given to you, which is submitted today. [indiscernible].

The next question is from the line of Nitin Awasthi from East India Securities.

So just to take forward the exports question asked by an earlier participant. Because of the time it takes for a company in the seeds business to gain up support in a country. Could you just highlight the major countries we are focusing on and where we stand as of today in those countries?

Yes. Right now, we are starting -- we have started selling in 7 countries. We expected that is small to medium size exports to these countries, but there are some other countries we are in the registration process, but the majority, these countries are -- we are dealing with the countries, especially as Bangladesh, Nepal, Pakistan and the other South far east countries like Thailand, Indonesia, Philippines, Vietnam. So these are the countries that we are dealing in. But we are dealing with the countries where the crops -- major crop is like maize or rice. We are not dealing with the countries where we cotton is there, because we [indiscernible] crops that requires another set of permissions. So we are taking [indiscernible] where the crop and patent machine are with maize, rice, and vegetables.

Any major African country you're focusing on for rice right now?

Sorry?

Any major African in country?

We have send to African [indiscernible] South African countries .

Okay. Okay.

That's in Tanzania [indiscernible] everything in initial stages.

Okay, sir. And just on the vegetable front. How much of this growth that we saw this lady finger growth that we saw, was the contribution of the existing portfolio doing well? And how much of it was introduction of new products?

If you see the growth, majority of the revenues are from the products which were introduced in that new area. In the food industry nothing is gained in the first year, it takes at least 2- to 3 years, 2 to 3 years at least to get a meaningful sale, which is [indiscernible]

Okay. And everything that you have mentioned in the presentation, all the new vegetables. They will be introduced in the current year.

Some might be in the last [indiscernible].

The next question is from the line of Karthi Keyan from Suyash Advisors.

Many congratulations. 2 questions. One is how -- what is the collection team like right now? I see that the cash is good, but can you please clarify on the collection situation?

Yes. If you look at the call, I want to see that one of the government introducing [indiscernible] and the rural economy as we [indiscernible] some money in terms of the commodity. They are in the [indiscernible] for the commodities. But another part is that as a company, we have a very good plan. And this year, we are able to connect more number of companies, other companies [indiscernible]. So in that way, if you see overall year-on-year basis, our collection is much better than last. We are collecting more, and we don't see any issue in terms of the collection [indiscernible].

Perfect. So the second question on [indiscernible], how effective are these seeds and because we are [indiscernible], does that impact the quality in any way. Any thoughts on how effective they are on field? Are they able to actually resist? Like you say some thoughts on that?

Yes, it's a mix thing. Some seeds are performing well and some seeds do not perform at all. It's really risky to choose [indiscernible]. And as a farmer, it's always better to go for a legal seeds because the cost of the hybrids are non performing hybrids. And the second thing is that they are not reliable too. So it's a very mixed thing. And most of the farmers [indiscernible].

So, and what why price would they be selling it?

It is just like any price, because the quality of seeds is [indiscernible].

That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

It has been a pleasure interacting with you all on the call. We thank you for taking the time out and engaging with us today. We value your continued interest and support. If you have any further questions or would like to know more about the company, try and reach our Investor Relations. Thank you.

Thank you very much. On behalf of Kaveri Seed Company, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.