KRBL Limited (KRBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to KRBL Limited Q4 and FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you. And over to you, sir.

Thank you. Welcome to KRBL's Q4 and FY '20 earnings conference call for analysts and investors. Today, we are joined by senior members of the management team, including Mr. Anil Kumar Mittal, Chairman and Managing Director; Mr. Anoop Kumar Gupta, Joint Managing Director; and Mr. Rakesh Mehrotra, Chief Financial Officer. We propose to commence with an update on the financial performance by Mr. Rakesh Mehrotra. Thereafter, we will have Mr. Anoop Kumar Gupta, sharing his perspectives. After the opening remarks from the management, the forum will be open for an interactive question-and-answer session. A cautionary note. Certain statements that may be made on today's conference call could be forward-looking in nature, and actual results could vary from these statements. A detailed statement in this regard is available in KRBL's Q4 and FY '20 investor presentation, which has been shared with you earlier. I would now like to invite Mr. Rakesh Mehrotra. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you all for taking out time to join us on our Q4 and FY '20 earnings conference call.

[Foreign Language]

I hope you and your loved ones are safe during this trying period of COVID-19 pandemic. I will be covering quarterly business highlights and financial performance for the quarter ended and year ended 31st March 2020. We begin with the fourth quarter on an encouraging note, witnessing healthy demand and robust growth across domestic and international markets and continued our good momentum seen during the earlier quarters. In stand-alone terms, our revenue from operations in Q4 FY '20 stood at INR 1,062 crores as compared to INR 1,196 crores in the same period last year. This followed the impact from the country-wide lockdown during the last 10 days of the March in India and similar restrictions in many of our international geographies. Otherwise, our performance would have stood even better year-on-year. Q4 FY '20 EBITDA came in at INR 238 crores higher by 3% versus INR 232 crores in Q4 of the same period last year. PBT for Q4 FY '20 increased by 3% to INR 201 crores as compared to INR 196 crores in the same period last year. PAT stood at INR 150 crores in Q4 FY '20, up by 10% as against INR 137 crores in Q4 FY '19. Moving to full year performance in stand-alone terms. We registered a top line growth of 9%, where revenue from operations stood at INR 4,499 crores as compared to same period last year at INR 4,120 crores. EBITDA during the FY '20 came in at INR 894 crores as compared to INR 865 crores in the same period last year. PBT for FY '20 stood at INR 759 crores as against INR 733 crores in FY '19. Our FY '20 PAT was also at INR 559 crores, higher by 11% as compared to INR 503 crores. The cash generated over the last 12 months has helped us significantly to reduce our borrowing requirement, which at 31st March 2020, stood at INR 496 crores as compared to INR 1,428 crores as on 31st March 2019. Our inventory level has stood at INR 2,852 crores as in the recent procurement region, we have been able to buy highest ever paddy -- as of -- in quantity terms as the prices of the paddy were lower. Our company has very little long-term loans. Most of our debt is in the form of working capital loans, which starts rising from with the commencement of procurement of paddy at the beginning of Q3 every year and becomes insignificantly low by the end of Q2 in the next financial year. If you analyze our performance over the past couple of years, has consistently improved our PBT year-on-year regardless of distribution in the cost of procurement of paddy. The growth shown by the rice business year-on-year has consistently contributed to the enhancement in our return on capital implied, which as on 31st March 2020, stood at 22.7% as compared to 19.3% last year. Similarly, our net worth increased by 15% to INR 3,918.57 crores as on 31st March 2020 as compared to INR 2,717.45 crores as on 31st March 2019. As the business grows, we will be able to further enhance these metrics. I now hand over the call to our Joint Managing Director, Mr. Anoop Kumar Gupta, for his perspective.

Thank you, Mr. Mehrotra. A very warm welcome to all of you once again, and thank you for joining us on our call. Since we connected the last time, there have been some improvements on the ground operationally. I would just like to share some further update in terms of trends and outlook for the business and our continuing response to the COVID-19 pandemic as a corporate. During the first few days of the lockdown, we had to stop our milling plants just for 3, 4 days. The same has since resumed, rice being an essential commodity, we got government's permission to run the plants. The government remains very supportive for the essential category and especially for the food industry, and thus, the situation has progressively improved. For us, the health, safety and well-being of customers and team members have always been of utmost importance. In addition to our existing hygiene and cleanliness standards, we have implemented further preventive measure based on guidelines from the Ministry of Health and Family Welfare. Our brands represent the best quality attributes that make us a preferred choice among customers and with these additional measures, we will further reinforce on the safety, health and hygiene aspects. Trend-wise, we have seen growth accelerating for our brands in the wake of good consumer demand for our trusted portfolio, even in the midst of the lockdown. Partially because of the initial wave of panic mind -- demand, both in India and in our international geographies improved additionally as there was a positive trend in consumption behavior where customers are broadly recognizing the benefits of branded products. Our strong presence in key export market for basmati was a big positive during this period. On an annual basis, the company has achieved over 5% year-on-year volume growth for India and around 14% in exports on the back of our strong focus on branding, customer engagement and wide distribution network. Our paddy procurement has been robust this season and we are geared to scale our performance as for higher sales momentum. Whereas the business continues to grow, our key operating thoughts has stood steady, in line with our prudent financial strategy, facilitating higher-margin traction. As the nation progresses towards lifting the lockdown restriction, we are making our suppliers optimally available through all channels possible, including modern trade and e-commerce, both of which have been crucial. Accordingly, additionally, our company has identified nimbly associated with delivery partners like Swiggy and Zomato to strengthen our outreach and give assurance to everyone who wants our brands to be delivered safely at the doorstep. As time progresses, we will see rebalancing of demand as consumer sentiments normalize, although some increase of permanent nature cannot be ruled out as customers would have switched off -- switched from unbranded to branded category. Over the last 2 months, economies worldwide and various industries across India have been facing an unprecedented situation due to COVID-19 pandemic. As a corporate, we have supported local commodities around our operations and under privileged class, both by way of donating rice and through financial support and continue to do so. Our primary focus during this challenging period has been towards undertaking all necessary measures, drive branded business strongly and seamlessly, maintain a sound financial strategy and deliver best-in-class operations, so that our performance momentum continues to enhance. As you would be aware, we have sent a best mark of achieving INR 8,000 crores of top line in next 4 to 5 years, and I'm glad to share that we are moving in the right direction, led by healthy demand in both domestic and international markets as well as our unique positioning within that. With that, I would request the moderator to open the floor for Q&A.

[Operator Instructions] The first question is from the line of Dhananjay Mishra from Crédit Suisse.

Congratulation for delivering very decent operating performance and also thanks for making very elaborative and detailed presentation. So my question is regarding -- I mean what is the outlook for this year? Also, what is the progress on export quantities because we have seen in Q4, there has been mutual performance on the forefronts. So what is the outlook for this forward market and also in this HoReCa segment, if you could just give us any update?

Yes. Good morning. As far as export is concerned, the demand is quite good in exports. The present challenge in export is the problem which we are facing in the break bulk cargo. That is the problem. During the pre corona days, we could load only in -- we could load up to 5,000 tonnes of break bulk cargo per day, which has come down to just 800, 900 metric tons per day. Thus for the loading of a 20,000 tonnes vessel, it takes about 20 to 25 days, which was hardly 4, 5 days earlier. So this is a long waiting period for getting buff for vessel. Today, the waiting period for buffing a vessel is around 15 to 20 days, so it takes more than a month to complete a vessel. The waiting for buffing has slowed down so they are so bad that have affected the whole shipment. Recently, there are about 6 vessels standing of sugar and I think for the whole month will be consumed in those 6 vessels, loading those 6 sugar shipments, but there is hardly any chance for loading any other cargo, including rice. This is the biggest challenge. But as far as exports are concerned, orders are very good. Our order book is full of orders, there is no problem in orders. There were 2 problems, which from today only they've got solved out. For last about 2.5 months from -- you can say from 24th of March up till now, all the labor which used to prepare starting material for us, the 10-kilo, 5-kilo [Technical Difficulty]

Sir, we are unable to hear you. Ladies and gentlemen, seems that we have lost the line of the Management. We request the participants to stay connected, while we reconnect them. Thank you. Ladies and gentlemen, apologies for the inconvenience. We now have the management line connected. Over to you, sir. Please, go ahead. And also request Mr. Dhananjay Mishra to please repeat the question.

Sir, you were telling something, I mean, from today onwards something from the near...

So what I was trying to tell you is that export orders and our export registered is very firm. And there are plenty of shipments, which has to -- which are still to be shipped out. And because of pandemic, there couldn't be, there were certain problems related to shipping related to packing material, one by one in last 60 days, 70 days, everything is over. Since yesterday only our factory is now running on a full capacity, all stacking labor has come back, duty was not available, packing duty is now available. So I believe next 2, 3 months, we have a load of 5 months, so we have to make shipment in next 3 months equivalent to 5 months. So now that things will come into strong momentum. Compared to last year, the export orders are quite good quantities.

Okay. And any demand outlook for this HoReCa segment both -- the spinoff happened 8th March onwards.

See, HoReCa segment is really -- which has beaten us. Our domestic sales -- out of the domestic sales, 30% was institutional in HoReCa. And last few months, we have seen no uptake on that point. But now since government has allowed restaurants and allowed home delivery, so certain movement has started coming, and I feel within next 30 or 60 days, this HoReCa segment will also start buying.

And sir, we have seen a remarkable improvement in working capital. So are we moving towards a debt free EBITDA by the end of this year or?

I think by August -- mid of August, we should be 0 debt.

And sir, given all these challenges, what kind of volume growth you are seeing for this year, full year basis?

Yes?

What kind of volume growth you are expecting for the full year basis?

Full year basis, we are expecting an increase of 5% to 10%. Previously, we were expecting an increase of 20%, but due to COVID and 3 months, there is a downfall in domestic sales. So we are expecting a 10% jump overall over the year.

The next question is from the line of Varun Goenka from Nippon Mutual Funds.

Yes. Anil ji, Anoop ji, Rakesh ji. Yes, hello.

Yes, but the voice is not clear, actually.

Okay. So just my compliments on great, very comprehensive presentation. And the way we have managed our balance sheet in this period is truly exceptional. And I've been noticing the way KRBL has extended support to the society. That is also -- and you mentioned some data in the presentation, really, really commendable, sir. So I don't have any questions regarding our numbers. I think we have been consistently delivering for last 15 years. So no clarification on numbers. Just on -- by the end of this year, we will -- be generating very, very large cash flows. Even today, we are generating in excess of INR 700 crores, INR 800 crores. So have we put out any kind of a capital allocation policy? Or how -- where are we going to use this capital in terms of either new investments towards non-basmati that we were talking about in the last call, or buyback, or dividend or any other plan? If you could help us understand that for the next 2, 3 years?

Varun ji, we are working on a debt free company, frankly. And whatever investments we are doing and the raw material investment, basically, now we are debt-free for just 2 months. We want to be debt-free for at least 6, 7 months, number one. Number two, we will be investing more in the inventory. Number two, we'll be investing in regional rices and regional rice, not only the raw material investment, we will be investing in warehouses, some packing plants, et cetera. So in next 2, 3 years, you'll see a lot of investments in regional rice and investments in inventory will also go up. When I say INR 8,000 crores top line, that means minimum we require INR 4,000 crores, INR 3,500 crores, [ INR 4,500 crores ] budgeted to invest in raw materials. Likewise, now we are looking at that only, but let's see what happens.

So could you just help us understand the non-basmati or the premium segment? What is the demand opportunity size? I'm sure it's very, very large. What is the return on capital that we generally -- what is the aging period of working capital cycle in that segment? Basmati, of course, has a longer period.

You see non-basmati, generally, aging cycle is about 8 to 9 months. When I say 8 months, that means you have to keep stocks for 1.5 years to keep a cycle of 8 months. And there are certain regional, rices, like sona masoori. Sona masoori is raw aged, has got a premium. And since we will be planning in India Gate brands. We will go over in a niche market where the brand -- where the premium is there. When you talk of a premium, the market of sona masoori maybe 10 million tonnes. But I am talking 40,000 tonnes, 50,000 tonnes, to only for the niche market. Like this there's a Gobindo Bhog in West Bengal, where it is already a very niche product. It is sold above INR 100 per kg. But that also requires a 1 year aging. Similarly, there's a...

How big is that demand opportunity? Gobindo Bhog, how big is that demand?

Gobindo Bhog only Kerala market is a 5 lakh tonne. Demand is big. Demand is big. But we are looking not at a 5 lakh tonne market. We are looking at a premium market. Maybe we are looking at a 40,000, 50,000 tonne market.

Yes. Any key -- any other key players in this segment, sir?

There is no national player. There are regional players working on that. There is no national player.

Right, right. The other thing that I'm a little -- I'm just trying to understand is, where are the investments in technology that we're doing? We are seeing a lot of agri technology, logistics, technology-related investments happening in the country, which can improve the efficiency working capital cycle, the asset turns, et cetera. So are we doing anything on this side?

See we already have quite -- our -- all the units are highly automized. We have really worked very hard in the last 7, 8 years to ensure that all our units are fully automized, complete rice, and that has already happened. Now what we have to work and look at the logistics side because for the first time, we found this difficult -- we realized the difficulty during the pandemic. So now we have started working on that. But how to automize completely as we see abroad to automize the packaging, loading and all that, we have started working on that.

Yes. So actually, I meant out of factory only. In factory, of course, KRBL is par excellence to anywhere in the world. Yes, I meant out of factory, which is distribution or marketing, branding, logistics, et cetera. So any changes that we are doing, which -- any learnings post this event or any major changes that we are thinking of?

Well there are no things such as, but I see -- but nowadays what people are doing, they have -- instead of raising they are selling a lot of steam rice and they don't understand the difference between steam rice and aged rice. You cannot compare steam rice with aged rice. Aged rice maybe having interest on net carryforward charges with it, but the quality difference between steam and aged rice is hell of a lot. So we don't think we have any situation where an aged rice can be replaced with any new technological invention.

Right, right, sir. Just final 2 questions that I had before I come back in the queue. One, our e-commerce, I found our -- how is our traction on the e-commerce, either Amazon or anything else? How is our ratings or are volume growth there because I found some data that we are still not leading there?

Yes. Amazon, I tell you. As far as Amazon is concerned, on grocery side, Amazon is number last. Today, #1 is Big Basket, Grofers and others, they are players #1, and we are #1 there. Amazon, still the sales are very less. We are not that much aggressive on Amazon, but now e-commerce has become a very, very important platform, and we have started -- because Amazon, you have to spend money on their pallets and all, now we have started spending money, that's not a big thing.

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

Sir, first question is that if I see your volume growth in exports in the last 4 quarters, there has been a lot of fluctuations. So Q1 was 150% up, then Q2, 50% down, then 3Q 150% up, then 4Q, again, 24% down. So first of all, what is contributing to this high fluctuation in the export volume? And related to that, in Q1 -- in Q4, I think we are 24% down. And what you are alluding to is we have not been able to ship out a lot of our products, which will get a spillover effect in Q1. So what can be the spillover effect in Q1 for the exports?

Yes. Let me tell you, as far as spillover is concerned, the -- as I told you for the last 3 months or 2.5 months as far as trade shipments were concerned, they are totally at a halt. Instead of loading a vessel in 5 days, now the vessel has been loaded in 25 to 30 days, which is not at all within the parity of the company. And already, it's a big, big, big concern. We have been talking to the Shipping Ministry, also to the Chairman of both Mundra Port Trust as well as Kandla Port Trust and they are quite hopeful. See, as far as loading is concerned, it is already directly selected to the labor. The labor is just 20% at Kandla Port, which used to be at pre-COVID. So now the labor has to come, which have started coming for last 2, 3 days, we are quite sure that by first week of July or end of June, the labor will be there in the port and the normal loading structure will start. That is problem #1. And for last, you will not believe that Kandla Port as on date have got about more than 40,000 tonnes of stock, which is waiting for the loading structure only. The shipment ships are not available. And when you tell a ship that I want to load a vessel, it will take 30 days at Kandla Port. The freight is 3 tonnes or 3.5 tonnes. So we are waiting. We said, let us wait for a month, 1.5 months, at least in the first week of July, things are settled, then we will load total cargo in one quarter only.

But sir, here, the -- if your vendors outside in Middle East, if they are having adequate inventory, then there won't be any stock out. So this is -- but in case they don't...

No, no. They have -- my next customer, for which I'm holding these 2, 3 customers, for which I'm holding this 40,000, 50,000 tonnes stock. Let me tell you one more thing, which will clear out your doubts. Saudi Arabia, Iran, these are -- Iraq, these are certain countries which store the rice themselves for 1, 1 year. So everything is done at their end. They do not buy the aged rice. Only there is one company which is shipping them the aged rice from India is KRBL, our India Gate and India Gate Classic. Otherwise, you go to any company in Saudi Arabia or in Iraq, they have a stock of 1, 1 year or 9, 9 months, and out of that, they supply to their customers. This is the first time where the demand has been increased by at least 20%, 30%. But due to logistic problems, those shipment could not be affected, especially to Iran, to Iraq. These are the 2 countries which have affected the shipments. I believe by 30th June, everything will be finished. This problem of pandemic, labor will come, and things will come to its normal working.

So sir, there won't be any permanent demand destruction for us because we have adequate inventories. So we have to just ship more in this Q1 or Q2 instead of the Q4, which we lost.

So if these are replacement, you have to understand, they do not import the total quantity in 2 months. Now whatever they are selling currently in the market is from the imports they made last year. That imports when they will vanish, then they will start the phase of the current year. When I am saying they are keeping in stock for 1 year or 15 months, it means by October -- up to October, they will be selling the old stock. From October, they will start selling the crop from 2021 -- '19/'20.

Okay, sir. But can you quantify what was the demand loss? What was the sales lost because of this problem in Q4? And what will be the impact in Q1 and Q2 because of this crunching of...

I tell you, there is no loss of quantities in export, but there is a loss of quantity due to HoReCa in domestic. And domestic, there is a loss of about 30% of domestic sales, which is a loss in April, May. And June, I think there won't be any loss.

Okay. And in this projection that you are doing of around 10% volume growth, I'm assuming exports will have a higher growth than 10% and domestic because of the HoReCa?

Yes. Yes, correct.

And given that our prices are much higher for exports, plus the fact that last crop was purchased at a lower price, so our paddy price is lower. So because of this mix change plus RM change, I think if -- even if you assume 10% volume growth, your gross margin profit should significantly expand in the coming years?

Yes, EBITDA should be better.

Okay, sir. And sir, one more question. On the energy business side, I think there were some thoughts about demerging it. But just one suggestion is that, given that the market may not once that, I mean the share is separately listed, people may not give the adequate value, and given that the valuation of that business might have increased because of lower interest rates. So it might make sense for us to sell it off and use the cash for doing a lot of buyback and investing in this business, which will be getting adequate value in the market.

You see our PPAs are of very good rate. In Maharashtra, we are selling at 5-plus. In Andhra, we are selling at 4-plus. And with good PPAs and the PPAs are for 25 days out of 8, 9 years, past, the seniors are there. Our IRR is quite good. We should not sell, but we have given the work to KPMG for demerging it in a separate listed entity. So that was due to COVID was a bit slow, but now we are working on that.

Understood, sir. And sir, related to the previous question, I think since we are going to generate another INR 800 crores or INR 900 crores sort of cash this year. And CapEx, we have done only INR 20 crores this year. So even if you do more CapEx, that maybe even INR 100 crores. But what is going to be the remaining use of that INR 700 crores, sir? Because this INR 400 crores debt is anyway to less to -- and we get interest when a tax benefit on interest payment also. So it may not be the best to reduce the debt.

No. We will be investing in the inventory. We'll be investing heavily on the inventory because only it is the inventory, which makes our turnover. When I talk a turnover of INR 5,000 crores and against INR 6,000 crores and another INR 7,000 crores, naturally, we have to invest more and more on the inventory. And I don't want to be dependent on the banks. I want to be, my company to be a 0 debt company.

[Operator Instructions] The next question is from the line of Shailesh Kumar from Inside Edge.

Congrats to management for a very resilient performance and also for a proper disclosure. Sir, I have a few questions. First is, how is pricing now going on in the first quarter in both domestic and overseas markets, our average realization, basically, on a Q-on-Q basis?

See as far as the pricing is concerned, it is difficult to mention the pricing because for different SKUs, our pricing is different. But in general, today, we are getting a realization of about INR 90 as far as exports is concerned. Realization will more or less will be the same as for quarter 4. There won't be any decrease. There might be some increase, but there is no question of any decrease.

Okay. And sir, what has been our branded sales during the full year FY '20?

Branded?

Sales.

Our -- generally brand percentage sales is about above 75%, 80% because you see domestic is total 100% is branded. In exports, we do somewhat 20%, 25% of private label. So in all, about 10% to 15% comes as the private level, 85% is a branded business.

Okay. Sir, we have seen a good -- very good improvement in the working capital, not only for KRBL, but also for peers who have declared the number. How sustainable is this? Because we understand because of lockdown, there was extraordinary situation and people were ready to pay anything to get the stock. But how sustainable is that going forward?

For us, to KRBL, you see, if you talk of efficiencies or working capital from last 7 years in the end of second quarter, I made my debt 0. It is not due to COVID or anything nor it has happened. From last 7 years, it has become 0. And it is all internal accruals of the company, which is making the debt low and low day-by-day and more and more inventory is what out of that income.

Sir, exactly. I mean that was the question. Because normally, we used to see that during Q2, your debt were minimal, but this time, we are seeing this at Q4 itself. So I mean, what explains this?

The cash generated over the last year and this year, has been put into the inventory, and that is why the bank borrowings are less.

Okay. And any update on potential buyback?

That is the call to be taken by Board of Directors, actually.

No, buyback, yes, maybe we'll think of it. We'll discuss within the Board and then we'll see to it. We can look at it because of the -- yes.

The next question is from the line of Anshul Saigal from Kotak PMS.

Hello. Can you hear me?

Hello.

My question is I noticed in your cash flows that your inventory number has actually -- I mean there has been a decrease in inventory. And so in cash terms, there has been an inflow. In volume terms, we've had an increase in our total inventory number. And if there is a decrease in value of inventory, that means that we probably procured at a lower price because of which our volumes are higher, and still, we are having to pay less. Is that a correct assessment?

Yes, yes, yes.

Yes.

Okay. And so what would be our average procurement price?

Average procurement is of the paddy?

That's right. And also -- I mean we also hold some inventory of rice. So I'm asking what would be the average procurement of both paddy and rice.

See, if you talk about the closing stock then paddy is valued at INR 28,934 a tonne, and rice is INR 48,021 a tonne.

And when we give the average realization of, say, INR 90 for the export market...

Anil is here.

Yes. And when we give the average realization of INR 90, that is for both -- I mean that is for the rice, of course. So...

That is for export of rice, not domestic. If you talk of total rice, then average is INR 68.

INR 68. Okay. And secondly, the receivables number has also improved markedly. What has been the reason for that, Anoop ji?

Mehrotra, please take it.

Can you repeat the question?

Your receivables position has also improved quite significantly. What is the...

It was one of our... Actually, we had one account, which got stuck up last year, which we tried to regulate it this year, and we make sure that in future procurement will not happen. So that is one of the biggest reason of improvement.

No, Saudi Arabia, actually -- this is due to Saudi Arabia shipments where we are doing 180 days against ECGC. There is no question of any days, but the 180 days payments are there.

Okay. And thirdly, Anoop ji, to your point that for INR 8,000 crores of revenues, you will need INR 4,000 crores of inventory, and you don't want to be holding any debt. If you look at your current inventory, we are at about INR 3,000 crores at book value of holding of inventory. Now if we generate INR 1,000 crores of cash each year, then even by next year, we can be holding INR 4,000 crores of inventory without any debt on our -- any incremental debt?

Right.

As generation this year was INR 630 crores..

Your cash flow statement is showing INR 1,200 crores, net cash flow.

That is increased, decrease in inventory and everything. I'm talking of cash profit.

Correct. Okay. So even if it is INR 600 crores, the point being that it means that in 2 years, we will be able to hold incrementally INR 1,000-plus crores of inventory without having any incremental debt. Is that a correct assessment?

Yes, definitely, you're right.

And so INR 8,000 crores of revenues, I mean, if demand is there, it can be achieved even in 2, 2.5 years from now.

Yes, that means, if it will be achieved in 2.5 years, 3 years, and we'll see at that time what to -- where to deploy the money and what to do. And Mr. Mittal would like to talk to you.

See, let me tell you, reaching to top line to INR 6,000 crores in rice is not difficult. It's not very difficult because then you have to lose your hands. Luckily in last 25 years or 30 years, there has been no bad debt for KRBL. And when we take this to anybody, including the ministry, including the trade, we are bit surprised, normally with such a heavy turnover, there are always certain bad debts. But luckily, we are the -- maybe within rice or within the commodity, the only company which have not lost any money up till now whether in exports or in domestic. That's number one. For example, I give you an example, we do business in Iran. Everybody does business in Iran. There are total 23 people who are doing business with Iran. Iran payment, now this is very important part, which has to be understood. Making a turnover and showing the top line is not difficult. Now in Iran, I had an offer from 2, 3 guys to ship them 200,000 tonnes. Now 200,000 tonnes was actually INR 1,400 crores, in ending 2019/'20, I would have got the turnover. But if I tell you something, the practical aspect of that, you will be amazed to note that, that from October up to March, the total shipment went to Iran to the 5-year trade was INR 540 crores. At $530,000 valued around INR 3,200 crores, not a single payment has come, the condition of -- in Iran of KRBL is, either you give us the LC Letter of Credit or give us 25% advance before you want to sign a contract. So what I mean to say in rice trade, what you say in a year or 2 years or 3 years, it is not very difficult to achieve those turnovers. That's number one. Number two. Number two, the biggest thing is, that's the profit of margin. If you want a fair we will enable more profit on margin, which we show our EBITDA today compared to other peers, you will find there is a big difference. Today, alone in Saudi Arabia I can sell another 70,000, 80,000 tonne or 100,000 tonne under the private label and get a top line, but that profit of margin will be 5%, 6%. Recently, I asked my CFO to bring out all the balance sheets of private limited and the limited companies in rice industry. You know what is the profit they are showing? 2%, 3%, 2%, 1.5%. So we at KRBL as to look at 2 things: safety of the money and the profit of margin. Then that's what the top line is not very difficult in commodity.

Sure. Sure. And finally, my question, Anoop ji, you mentioned that this year, our target is to grow 10% in volume terms. What does that translate into value terms? Can we be at about 15% in value terms?

We are looking at around INR 5,000 crores. We are targeting at around INR 5,000 crores. I don't know how the COVID takes place in India. Because due to COVID, there's no problem in export sales, but India, there's a problem. In India as well as consumer packs are concerned, they are going very well. Even during April, May, there is no decline in my consumer pack sales. The decline is of 25 kg, which is also a 30%, 35% segment of my domestic sales. So I'm looking at a INR 5,000 crores revenue this year. This is just a forward-looking statement, but I am looking at INR 5,000 crores shipment.

Mr. Saigal, we request you to join back queue for any follow-up.

I'll just complete one point. This 25 kg pack is -- would mostly be HoReCa, right?

It is mostly HoReCa. Yes

The next question is from the line of [ Hetal Sanghvi from Savan Capital ].

I had a few questions. Firstly, our competitors have got good traction in U.S.A. And so how has our performance during the quarter? Have we lost any market share to the competitors?

See that's altogether a different story that we got that opportunity to buy a brand about 15 years back in USA. And because of that, they already established brand, therefore, develop that business in America locally. And because they have been now here for the last 20 years and when they got this brand already, the market share of that brand was 20,000, 25,000 tonnes. We are as from 25,000 tonnes today they are from -- in 15 to 18 years, they have jumped to about 70,000 or 75,000 tonnes. So that is one achievement. No doubt, our peers have done, and everybody knows about it. But at monthly basis, what we have seen, if you minus the COVID, the margin of profit, see I tell you again, the margin of profit is the most important part. The margin of profit, because what happens when the major sale of about 40,000 tonnes or maybe more than that is in that club, Costco, Walmart, Sam's Club. So these are the clubs which buy around 40,000 to 50,000 tonnes. And we have seen many times when the bid comes over there, the margin of profits are not that high, what we are getting there still in America. Though my share in America is comparatively very low, maybe 12% of my peers or 13% of my peers, but our margin of profits are still very high. We are the only company selling our India Gate Classic over there at $2,200 per tonne. $2,200 per tonne. So we have to look at those points -- those parameters also.

Okay. Sir, also one more thing. One of the trading houses, Phoenix Global, has recently gone bankrupt. So would KRBL be a beneficiary in any case in this situation?

No, they are into non-basmati rice. They were totally commodity traders and they used to speculate, they all have speculate a lot. They were not at all into branding. Their main market was East Africa and West Africa. We have nowhere [Foreign Language] we do not do that business at all.

Okay. And so sir, what was the worth of the export order, which was affected due to lockdown in March and which has been covered up in April?

I think so, I've got now today about 70,000 tonne -- 60,000 tonne line of support. That is the only delay which has primarily taken place, which is valued today at around 9...

INR 40 crores.

About INR 480 crores, INR 470 crores, INR 480 crores.

Okay. So has this been covered up? Or has it -- is it still lying near the port?

No, no. But now the things are starting cleaning up at the port, I think our one vessel is -- we might keep out at end of June or that might go by 15th July at least to 50,000 tonnes will go out.

Okay. Also, sir, what is the status of the inventory at ports in Iran? Also in the last call, you had mentioned that the volumes from Iran could go up from 300 million tonnes to 500 million tonnes. So are we still expecting that?

300 million tonnes? No I think, I wonder what you're talking. The total imports of Iran last year was 1.28 million tonnes. Prior to that in ending 2019, ending 2019, it was 1.4 million tonnes. So the total importation of Iran is around 1.2 million to 1.4 million tonnes, out of which, no payment has been received by the exporter from Iran, shipments made from October to March 2020, other than those payments have come, which were against Letter of Credit.

Okay. So sir and you have guided that we would have a greater opportunity because it would be more expensive for the private peers to import in Iran, and that could be a good opportunity for KRBL. So do you have a comment on that?

Yes. As far as Iran is concerned, we are a little bit reluctant to do business in Iran because there the business is not straightforward. So we are always reluctant to do business with Iran. We do that business only, which is crystal clear that by Letter of Credit or controlled by the government where there is no risk of doing the business. Doing business for last 7, 8 years with Iran, first of all, is not a transparent business, number one. Payments are always in problem. That is why today, the amount which I'm telling you of INR 3,500 crores spending for last 5, 6 months is not a small amount or a small number. So we want to discourage Iran. We do only business which is clear, transparent business.

Sir, so will those kind of volumes be covered up from the business, like the extra demand coming in from Saudi Arabia?

Extra demand coming from?

Saudi, Saudi Arabia and UAE.

There the reason extra demand and we are shipping those quantities, you are right. But those quantities, for example, Saudi Arabia used to import about 850,000 to 900,000 tonnes. This year, the figure has reached to 1.1 million or 1.15 million tonnes. So there is an extra quantity being shipped to Saudi Arabia is around 200,000 tonnes. As far as Dubai is concerned, Dubai's local demand, whatever, extra quantities have gone to Dubai, it is not only for local Dubai, there is a lot of a power shipment to other countries from Dubai.

Ms. [ Sanghvi ] I request you to join the question queue for any follow-ups.

Yes, just one follow-up. What was the peak of the sales that we had from Middle East earlier in 2015, '16?

Ma'am, you put a mail to Mr. -- I think they will give you all your data. They are all connected to numbers. And those numbers, I do not know, that we can let you know, that we can let you know, you put a mail Mr. Mehrotra.

The next question is from the line of [ Ayush Agarwal ] from NACL Value Investment Fund.

Congratulations on a good set of numbers. I just had one question. I wanted to know our level of inventory, the paddy inventory and rice inventory, both in value and volume terms?

Yes, sales. I think --

Company is carrying total inventory of [Foreign Language] INR 28,052 crores.

We are carrying 427,000 metric ton of paddy. And we are carrying 314,000 metric ton of rice.

And what could be that in value terms?

Rice is valued at INR 1,512 crores, average price of INR 48,000. And paddy is valued at INR 1,235 crores average price at INR 28,000.

The next question is from the line of Jayant Mamania from Care Portfolio Managers.

Sir, in your presentation, you have given a slide for paddy prices during last 7 years, 2014 to 2020. So in 2014, they were INR 34,000 per tonne and now INR 29,000 per tonne. So does farmers make money? Or is there any increase in acreage?

See you are telling the reason why it has come down from INR 34,000 to INR 29,000?

Yes, yes, yes. In spite of rising demand.

There was an increase in acreage. Definitely, there was an increase in acreage and demand was also not that big. And Punjab and Haryana as well as surplus by the end especially MP, Kota, Bundi, Rajasthan has also come, I think there's an increase of about 6% to 7% more paddy this year.

Sir, if there is an increase in paddy price, will it be possible for us to...

Increase in paddy acreage area, not the price.

Yes, yes, yes. Suppose the -- actually, the cost of the labor since last 7 years might have gone up by 50%. But paddy prices have remained same. If the cost of paddy goes up, do we have pricing power? Or will it impact demand?

Definitely. See, basmati is a niche item grown only in India and Pakistan. And Pakistan, still 80%, 85% of the all world export is done by India only. So if the price of paddy increases, definitely, we will be able to take the price from the customer. There is no true opinion about it.

Okay. Sir, in U.S. market, our competitor, Royal brand has 45% market share. What about the 55% market share? What is our share in that?

Our share in the U.S. is to be around 10%.

Sir, are we promoting India Gate there?

Yes.

Only India Gate. We don't ship anything other than our own brand.

Sir, in case of export, we export around 280 countries. And what is our export self own brand, which is a repeat sales because of export figures fluctuates?

See, except Iraq and Iran, there is no other countries where we are exporting private label. Rest all the countries, we are doing our own label. And there is another area where we do brown rice, which is Europe. But Europe, we are doing a lot of our own branding also. But the upgrade price shipments, which are to the plants is our brown rice. So there are 3 places where shipments are done in great bulk. One is Europe, other is Iran and the third is Iraq. Rest every where, it is our branded product.

Sir, anything about the organic rice?

See, let me tell you. I do not know whether these things should be spoken in public domain. We have been working very hard for the last 4, 5 years. I'll give you an example. This year, we are the largest contract farming programmer as far as basmati rice is concerned. We have today about 100,000 -- more than 100,000 acres of land under contract farming. We thought this year, we will have at least 40,000 to 50,000 tonnes of pesticide-free rice, which is the EU compliant for the EU countries because we have orders were 40,000 tonnes, and people said, if you can give us EU compliant rice, we can by 40,000 to 50,000 tonnes from you. But when we started getting the rice from the farmer, we hardly got 20%, 10%. It was only 9,800 tonnes of rice, which we got pesticide compliant rice. I do not know how people are managing, what they are doing, how they are getting organic, whether it is a genuine organic. But these things has to be discussed within the business domain. This is nothing to be discussed in the public domain.

The next question is from the line of Manan Patel, Equirus PMS.

Congratulations for a great performance. Sir, my first question is regarding the procurement changes that we might see, given the changes in the policy at the central government level. So do you see any significant changes and improvement in our procurement?

There has been a big loss. There has been 3 days back, there has been a big loss of at least I think for the old days in particular KRBL that an ordinance has been passed by the central government whereby they have diminished the -- if they totally changed the APMC norm -- APMC act and now no Mandi fees and all those arrangements which was related to market fees has been abolished. So from the new kharif season from 1st of October, we will have all the crop, all the products without indices. So that's a big bonanza which government have given to the agriculture rice. Not a loan to the rice, paid for the total agriculture.

So sir, would it help increase our margins as well as like a margin for the farmers themselves?

Yes. You see, definitely, it will add around INR 20 crores to INR 25 crores to our bottom line.

Understood. Sir, my second question is relating to our shareholding. So I see ED has additional 1.8% of the shares. So totaling to around 4.56% of the holding in the company. So that was some -- 1.8% was added in March quarter. So while we have won the case, like Balsharaf has won the case, why is it they are still holding on to ED shares and even adding more? Can you throw some light on that?

Yes. According to our lawyers, they are doing some illegal things. And we have already filed in High Court in [Technical Difficulty]

So because that...

We have filed it. And I tell you, frankly, the Balsharaf is fighting against us. So as company is concerned, we have nothing to do with it. But as far as one of bias Balsharaf is filing, so I've got a knowledge of that.

Understood. But sir, 4.5% shares with the ED is a big overhang on the stock price itself. So it would be great if you could...

Definitely. I tell you, it's a question of time. It will come back to Balsharaf maybe 6 months, 1 year. I don't know the time line. But the case has been won, even up to the Supreme Court of India. I think Balsharaf will get back to it shares.

And sir, my last question is regarding...

May I request you to join the question queue for any follow-up.

Just one follow-up related to shareholders, sir. Sir, so you were purchasing shares from the market till like the March 2nd week. But after that, we didn't see any purchases from your side till 31st even when the share prices fell below INR 100. So is there any particular reason for that? Or you might continue the purchase program after the results now?

No, at that time, actually due to COVID there were some -- we were thinking of buying but due to COVID we couldn't. There were some practical problems on transferring monies and all. But now it was just got to create some confidence in the investor that promoters are always there. Otherwise, you see today, the liquidity in the market is just 20%. It is not a very much liquidity, so I buy shares permanently.

The next question is from the line of Anish Jobalia from Banyan Capital.

My question is on Q4 EBITDA margins. You achieved 21% margins. So -- and our realizations have remained constant. So can it be assume that the margins have come because now we have started recognizing lower paddy prices in the P&L?

You know whenever the margins are there, then when we say we have got around 15% to 20% private label business. In this quarter, there was no private label business. 100% was our own brand business. So the margin on, definitely, our own brand is much higher than the private label business. So that the mixture of the sales was typically 100% branded.

Okay. So sir, like this year, our procurement of the paddy has been lower than the last year. And so the benefits of this is yet to come into our margins going forward, right?

It will come from quarter 3.

Okay. And the related question is, are we still buying the paddy at prices lower than in FY '20? And what's your expectation of the procurement price for this year? So the question that I'm trying to understand is like whether these margin benefits can continue beyond FY '21 also, like in FY '22 and FY' 23.

It depends. You see, this paddy, what we are holding today, we are going to sell it for next 2 years. So it's always a product mix. When in November, new paddy comes, we'll be selling power, the new rice also. It is always the product mix. And we don't know what is going to be the price in the new kharif year. It depends what the price is in the new kharif year. It is difficult to say 1 year ahead, what is going to happen.

Okay. And second question is, sir, we have won the tax dispute with the ID. So I think you're supposed -- I mean we are expecting to receive some cash on behalf of that. So how much cash is expected? And when do you expect it to come like as far as notes with the accounts, we have some INR 219 crores of deposits with the ID. So is that the right number to look at?

No. We have applied for the refund of INR 100 crores, and it is expected any moment.

The next question is from the line of Rohith Potti from Marshmallow Capital.

Sir, my first question is sort of a follow-up on the shareholding pattern a previous participant asked. So I believe in a few interviews this year and towards the end of previous year, the management had indicated an intention to increase their shareholding to 60% to 63%. Am I right in understanding that you plan to continue it? Or do you intend to take a pause on it for some time for a few months at least?

You see, we -- promoters also, we have a limitation only the dividend is the income. We have certain limitations and are promoters having to buy. We had certain surplus. We have invested that we have already bought, I think, around 20 lakh, 25 lakh like shares.

1.1%.

Yes. So there are certain limitations for promoters to buyback.

Understood, sir. And the second question is, I mean, another way for promoters and long-term shareholders to increase their shareholding is if the company uses the cash for buyback. And from what I see, I mean, not just the data that you've seen -- shown in the presentation, but if I see the last 10, 15 years, this is the lowest borrowing that we have had at the end of the year, which we just goes to show the strength of margins and cash generation ability of the company. So why not spend, let's say, INR 100 crores to INR 200 crores of cash in buyback, which would increase the shareholding of promoters and the long-term shareholders, which would benefit everybody in that sense?

Well, this is a nice idea. We will take it up in the Board, and we'll put the investors call on this.

Sure, sir. And the last question I have from my end is that, sir, on average, your borrowing cost is extremely low and you are getting working capital finance from the top-tier financial institutions in the country. So in the past, we used to benefit from this by leveraging the capital -- leveraging the balance sheet a little bit and generating very high returns on equity. So this particular idea that the promoter -- the management has to fund a lot of the inventory purchases through internal accruals alone, is it a temporary strategy till this holds the uncertainty around COVID and ILS-related bank uncertainty finishes? Or going forward, as a long-term strategy, you intend to fund as much of working capital purchases through your loan funds and you plan to rely less?

This strategy is for at least 2, 2.5 years. After that, we'll think of that. Definitely, if we buy -- if we borrow at 4%, 5%, there's no sense in investing the money, we look at it. But of next 2 years, we are looking at investing the surplus in the inventory.

Understood, sir. And last one suggestion, I want to reiterate the suggestion made by a participant previously. I mean one, the promoter could think of probably selling the power business instead of delisting it and using the cash to do a buyback as well. I mean that is an option which could be considered. But if you think the delisting makes more sense at that time.

Yes. And that for buyback, you don't need to sell power business. The Company has sufficient funds.

Yes, I understand. But the reason I am suggesting that was, I mean, if you -- in future, you think that you don't want to take debt and do buyback, because if you do buyback, you have to take the capital debt and if you want own that.

See KPMG is already under process. So we're looking at it.

The next question is from the line of [ Vikas Bajpai from Reliance Life ].

Sir, I had just one question on the Iran offtake. So in your previous con call, you had mentioned that between July to September, usually, Iran imposes a ban on import of basmati rice to protect their own crops. So this year, since Q4 and Q1, the exports have been affected. So do you think that Iran would continue to impose that ban again in July to September? Or will they be continuing to store up their basmati stocks?

According to my information and knowledge, there will be no ban this year. It will be the first year where Iran is not going to impose any ban on rice imports.

Okay. And sir, if you could give us a ballpark figure in terms of percentage. What would have been the overall impact on the revenue due to the lockdown in Q4?

In Q4, yes, hardly, I think about INR 150 crores would be the -- INR 100 crores, INR 150 crores would be that.

Okay. And this is majorly due to exports, right?

No, majorly due to domestic -- exports and domestic both.

The next question is from the line of Manish Bhandari from Vallum Capital.

Sir, I have one question listed with the observation. You mentioned that you have appointed KPMG for looking at this as a separate listed entity, the power business. I would have a very strong reservation that, that's not going to be a value-creating exercise because piecemeal distribution of business, which you have nurtured so long may not fetch up the right value to the shareholders. So I would be very glad if you can consider this. If you want to hive it off to bring in an equity partner, since it's a lucrative business, and there will be enough people who will be a buyer and we can release some cash versus to list it as a separate entity in the business. So I thought maybe I should voice this as a long-term shareholder.

Okay. Let KPMG come. Then we will discuss. Yes. We have taken it.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you.

Thank you, everyone, for joining us today on the call. Hope we were all -- we were able to address all the queries. We appreciate your interest and support. We will continue to stay engaged. Please reach out to us or our Investor Relations team at CDR India for any further details or discussions. Look forward to interacting with you soon. Thank you very much once again.

Thank you very much. Ladies and gentlemen, on behalf of KRBL Limited, that concludes today's call. Thank you all for joining us, and you may now disconnect the lines.