KRBL Limited (KRBL.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Investor Conference Call of KRBL Limited. [Operator Instructions] Please note that this conference is being recorded, and the duration of this call will be 30 minutes. I now hand the conference over to Mr. Ashish Jain, Chief Financial Officer of KRBL Limited. Thank you, and over to you, sir.

Thank you, and good evening to each one of you. Thank you for joining the call at short notice. This call has been scheduled to apprise the investors and shareholders with respect to events post the resignation of Mr. Anil Kumar Chaudhary, Independent Director of the company. With me on the call are Mr. Anil Kumar Mittal, Chairman and Managing Director; and Mr. Anoop Kumar Gupta, Joint Managing Director. I will request Anilji for his comments.

Good evening, all the stakeholders. I will just like to share my views. Mr. Chaudhary was appointed on Board on 30th August 2024. However, he decided to step down with effect from 8th September 2025. The contents of the letter required internal Board level deliberation. The letter submitted to stock exchanges within statutory timelines. Mr. Chaudhary has mentioned certain concern in his resignation letter. Mr. Chaudhary has not highlighted any gaps in compliances relating to financial and legal matters, and his observations are focused on Board processes. We would like to mention that there are no apparent lapses, and the company confirms to the standards as stipulated by the law governing bodies of India to the best of our understanding. The company has the confidence and support of all Board members, including the other 3 independent directors who are of repute and are standing strong with the company. Mr. Dogra, an existing Independent Director, has stepped into the Audit Committee with effect from yesterday. Taking cognizance of the observations, and as a matter of good corporate governance, separate meetings of independent directors and the Boards were convened at a shorter notice yesterday, that is on Monday, September 15, 2025. The observations were discussed at the said meetings. It was noted that the company has in place systems and processes commensurate with the size of the company's operation to ensure that any kind of financial impact on noncompliances are highlighted to the Board and respective committees, with full closure to the stock exchange in compliances with applicable laws as and when required. However, the Board and independent directors have concurred of taking following actions. An independent, reputed third-party firm be appointed to conduct a thorough review of the observation as soon as possible, but not later than 30 days, and present a report to the respective Board committees. The respective Board committees will deliberate on that report to their area of observations and submit recommendations to the Board. I will now hand over to Mr. Ashish Jain to share some facts.

Thank you, sir. I would just like to share some facts with respect to some of the observations. First, on the observation with respect to write-offs. Coming to this transaction, as disclosed in financial year '24-'25 annual report, the company has written off export receivables of approximately INR 58 crores relating to financial year '23 shipments to a customer based in Africa. The customer is not a related party. Details of the transaction are as under. On 7th Feb '23, KRBL executed a contract to sell around 23,000 metric tonnes of non-basmati rice for around INR 79 crores. This transaction was confirmed by the customer on 8th February. The buyer paid approximately INR 17 crores in Jan '23, and the balance, INR 62 crores, fell due by 7th August '23. Apart from around INR 6 crores received across financial year '24-'25, with last payment being received in April '24, no further payments were made despite sustained follow-up and demand and legal notices sent by the company. KRBL recorded an expected credit loss provision under Ind AS 109, the value of which was around INR 18 crores in FY '24, with the first provision being recorded in September '23 and the remainder value in financial year '25. This was supported by a legal opinion that the counterparty is untraceable and enforcement is unlikely. With authorized dealer bank authorization for self write-off under FEMA and RBI export directions, approximately INR 58 crores was written off in FY '25, leaving nil outstanding as on 31st March 2025. Related provisions are disclosed in Note 36 of financial year '24 and '25 annual reports. This matter, including the chronology, the provisioning and the write-off rationale were placed before the Audit Committee and the Board and the statutory auditors. Separately, from the accounting treatment that I just described, we are finalizing a recovery plan comprising commencing arbitration and appointing a collection forum. Recoveries, if any, will be recognized in the P&L when received. Moving on to the concerns that have been raised on CSR funds. Over the past 3 years, including the current year till date, the company has spent approximately INR 40 crores on CSR. And as on date, there is an unspent balance, including current year's obligation of INR 37 crores. The company follows the due process in CSR, wherein an annual operating plan is presented and approved. It is ensured that CSR spendings are in line with applicable rules and regulations. Unspent amount is planned for utilization in a phased manner for ongoing projects to ensure that funds are only released based on careful evaluation of the agreed utilization. Proper due diligence is undertaken before appointing any implementing agency or initiating a project. Utilization, certificates and impact assessments are obtained for all projects up to '25 -- financial year '25, this is in place. Appropriate disclosures are made in financial statements, and CSR committee not only approves all spends, but also monitors the spends closely. Moving on to the subject of change in object clause of Memorandum of Association. This pertains to the land monetization and real estate projects proposal as discussed in the Board meeting dated August 7 '25 and explained in the subsequent earnings call by the management. This is meant to be an enabling resolution for the company to engage in real estate business with a view to unlocking shareholder value and to utilize available funds more competently. As above is intended only as an enabling resolution, any project will be brought before the relevant committee and the Board for approval as required before being taken up for execution. Similarly, a detailed plan along with business and financial details will be disclosed in due course. When this proposal was presented, one of the directors recorded dissent, which has been duly recorded in the minutes, and the resolution was approved by majority in Audit Committee and the Board, and is now being put up for shareholder approval at the ensuing meeting as required. Coming to the fourth point. On the point of variable pay and annual increments to persons holding office or place of profit, I would like to inform that there are currently 8 persons that hold office or place of profit. These include 4 executive directors, while the other 4 either head businesses or important verticals within the company. Their compensation is recommended by NRC and approved by the Board. In their review, NRC considers the compensation policy, their performance, industry benchmarking, underlying reasons and skills and responsibility. Board considers NRC recommendations and decides post deliberation. We would further like to confirm that increments in variable pay are within the limits approved by the shareholders. With that, I come to an end of my prepared comments. We can now take up a few questions, but we need to close the call at 4:30 because of other commitments. So moderator, you can take a few questions now.

[Operator Instructions] Our first question comes from the line of Hitesh Goyal from Origin Capital.

This is regarding to the Board composition, right? I mean, if you look at firms, basically, they have more than 50% of their Board comprising of independent members -- independent directors, right? If I look at your Board composition, actually, there are 3 independent directors, right, and 4 are related to the promoter family. So what are we doing regarding this to improve the Board composition?

We are already in a search out of the fourth in replacement of Mr. Anil Chaudhary. And since we have 3 months' time, but we will try to finish that gap within -- as early as possible.

So we are going to have 4 independent directors and 4 members from the family, right -- I mean, from management team.

Right.

Okay. And sir, regarding -- the second question is regarding this export receivables. So like Ashish has mentioned, there is no other outstanding, as of now, export resumable issue right now in the company, except for this, which has been provisioned in FY '25. So we should not see this provision coming in FY '26 as such?

That's correct.

Okay. Okay. And finally, can we ask a business question or this is related to this issue only?

No, I think we should focus on this call -- on the objective of this call for now.

Okay. Okay. Then my questions are answered.

Our next question comes from the line of [ Mohit Saini ] from Way2Wealth Securities.

I just had a small question. Mr. Anil Kumar Chaudhary has attended 2 meetings as mentioned in the FY '25 report. So how is it possible that he found out the governance issue and all within those 2 and there's dissent and everything going on? Can you just throw some light on that?

I didn't get your question.

Sir, in the annual report, it was seen that he has attended 2 meetings. Is that correct?

Yes, that's fine. I think the annual report is correct, yes.

Yes. Sir, so my question was that then how did he found out and he raised questions in the meetings about the governance and all? Still, there was no solution or any further meetings for that.

Let me tell you, whenever there was a Board meeting or committee meeting, he had never placed before the Board or within the committee that he has some issues. But if a person has decided or he was cooking up some stories within himself, that cannot be answered. And now, I'm also -- I also want that let this independent audit be happen so that we become more stronger to enable us, to ensure that we are within compliance for everything.

Okay. All right, sir. So we'll wait for the report now.

Our next question comes from the line of Jatin Chawla from RTL Investments.

So the first question is that on this export receivable, is this the first time that we dealt with this party or have we dealt with this party before as well?

No. We used to deal with this party way back in 1995 to 2005. After 2005, we stopped it. All of a sudden, he requested us that he wants 1 vessel of non-basmati rice for African continent and it was on C&D basis. But ultimately, the man who is notorious or who has a wrong understanding, he can -- he has played with us, let us be very frank. He played a dirty and a smart game with us. We could never imagine in our 30 years or 40 years of export business, I think, sir, this would be the only issue of bad debt.

Got it. Got it. And the second question was on the kind of audit -- the independent audit export that you are looking to appoint. What sort of organization are we looking to appoint, the stature of the organization?

Yes. We are looking for somebody -- we are looking for a reputable firm who has the necessary skill. So typically, it will either be a Big Four or a firm of that stature or a reputed legal firm.

We'll take the last question from the line of Niteen S. Dharmawat from Aurum Capital.

Am I audible?

Yes, you are audible.

Okay. Sir, my question is the resignation happened on 8th, and it was reported to exchanges on 13th. It might be legally right and within the limits, but the company took so much of time to report to shareholders. So why company took it so long? Don't you think that this is a case of legally right, but ethically wrong?

No. I tell you, when we received this letter, the whole Board was under shock because we could not dream that he is going to react like this. One is that you are already prepared and you know that somebody is going to play a dirty role or is going to become a hostile, this we knew. We didn't knew about it. When we received the letter, you will not believe, we could not imagine that such type of letter will come, and that made a delay of 3, 4 days or 5 days, whatever it was.

So if you think that this is something -- dirty work has been done, so are you contemplating any legal action against the independent director for the kind of level of allegations, which are there in the letter?

See, my comment at this moment will not be appropriate. See, we are a -- we are from the part of the Board, let that independent report come and then only we will be able to answer you in a more transparent manner. Until the report is not there, I will say my positive side, which is not good. Let the report come.

I appreciate it, sir. But I think we should have been more careful in reporting to the exchanges.

Ladies and gentlemen, I now hand the conference over to Mr. Anoop Kumar Gupta for closing comments.

In the end, I would just like to reiterate that we operate in accordance with the applicable laws and regulations. The Board has moved swiftly and taken cognizance and set a transparent review process. Where improvements if any are identified, we will implement them and inform the market. Meanwhile, the business remains focused on execution. We appreciate your continued trust. Thank you.

On behalf of KRBL Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.