KRBL Limited (KRBL) Earnings Call Transcript & Summary

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

Thank you. Welcome to KRBL's Q1 FY '21 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 comments with an update on the financial performance by Mr. Rakesh Mehrotra. Thereafter, we will have Mr. Anoop Kumar Gupta, sharing his perspective. 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 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 Q1 FY '21 investor presentation, which has been shared with you earlier. I would now like to invite Rakeshji. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. I welcome you to KRBL conference call to discuss performance during the Q1 FY '21. I will commence with the key highlights for the period, I trust all of you are safe and well. We too have been observing the past right safety protocol. And our teams are working with utmost dedication to maintain supplies of all our brands to our customers in trust full manner. The first quarter of FY '21 was marked by continuing impact from the lockdown measures taken to COVID pandemic. Although at our level, we rapidly streamlined the flow of labor and materials. The segments took longer than expected to normalize. Our performance reflects this transcend impact on the delivery due to severely affected logistics. The underlying demand has remained strong, and this was the same pattern seen in the export segment, too. While shipping our basmati to international destination, we had to work at significantly reduced space, which had to do with the severe impediment in the logistic. With this context, our first quarter stand-alone revenue from operations came in at INR 764 crores. Our EBITDA during the Q1 FY '21 is stood at INR 193 crores, and the company has recorded best ever margins of 25%. This was on account of enhanced gross margin at 35%. PBT for Q1 FY '21 stood at INR 167 crores, with PBT margin in the period standing at 22%, owing to higher price realization. Cost benefit of inventories and reduction achieved in the finance cost on account of lower working capital borrowings. Our PAT for the Q1 came in at INR 126 crores with PAT margin of 17%. During the last season, we had seen -- we had taken advantage of the prevailing low paddy prices and stocked incremental quantities year-on-year of paddy, which gives us unique advantage to grow volumes at attractive margins in the coming quarters. We follow a simple guiding principle, whereby our accruals get reinvested into the building inventory and the cycle -- but where this has become a key factor in differentiation in our industry. Our objective remains to reduce the utilization of borrowing towards creation of inventory. And as at 30th June 2020, we have seen lowest net debt levels of INR 268 crores as compared to earlier period last year Q1 total debt stood at INR 690 crores. The company's financial position remains robust. We hope to realize healthy cash flows this year as well. We are working steadfastly towards being a debt-free company gradually and even in the working capital level. This, with discipline I am sure we will set the benchmark for this parameter also. I now hand over the call to our Joint Managing Director, Mr. Anoop Kumar Gupta for his perspective. Thank you.

Thank you, Mr. Mehrotra. At the very outset, I hope and wish that all of you and your families are keeping safe and healthy. The quarter has started with an uncertain and unpredictable environment with the prolification of COVID-19 as all of you are aware. On behalf of everyone at KRBL, we extend our gratitude to all the frontline heroes helping us manage this pandemic. Our performance in the quarter has been resilient and reflective of the interesting strength of our portfolio agility in operation, excellence in execution, purpose-driven leadership and our strong balance sheet. Though initially in the quarter, we have seen impact from the severe disruption to logistics domestically and also to shipments bound for our export markets. As you all are aware, given the challenges and restrictions, there was little to no uptake in the HoReCa segment. Although presently with the successive phases of unlocking, this segment is showing improvement. On the retail side, where volumes have stood higher robustly, we have seen greater share of lower-priced SKUs, and thus, there is some impact on the realization, especially in the domestic market. Over the last 3 months, we have been undertaking maximum efforts to secure our business operation by putting in place stringent safety standards across our plants and offices to ensure well-being of our people. As on date, all plants are running at full capacity. And as they are highly automated, we have been able to resume the processing and packaging activities various investing. Our teams have dedicatedly work with the local authorities to streamline the flow of our product city by city, town by town, and slowly, the supplies are normalizing. Consumer sentiment towards branded product has never been stronger. Though the stringent [Audio Gap] have sharply curbed eating out and ordering in. Within households, the clear accent is on the home-cooked food. Thus, even for daily consumption of grocery items, the consumer is now looking at package options. Brands that have enjoyed deep trust and have fared well, as India Gate and our portfolio has ranked highest. We have witnessed the best ever volumes in the consumer pack segment. In the leadership consumer pack segment, we have seen around 30% growth year-on-year. Another key trend that is coming up is a marked focus on health and wellness with consumers seeking out options to promote immunity. This was an industry category earlier as well, but the lockdown, it has achieved a boost. Our lineup also includes several value-added product lines created around these aspects. And this range continues to expand with the new products to bring health and convenience to consumers. A key aspect of the lockdown has been that we have had to meet significantly higher demand for our brands across a very short window of delivery lead time. Customers these days are seeking out brands that are -- that they prefer where the route of purchase has also undergone an update. With higher preference for online and direct channels to share a statistics for KRBL during quarter 1, FY '21, we saw a stupendous 70% improvement in online sales year-on-year. The traction in the traditional channel has been good, and has, in fact, built up with the successful phases of unlocking. In our business, we have seen 10 -- 12% volume growth recorded by the modern trade segment. Efforts are also on to further strengthen our presence in smaller towns and rural India. With an offering for every category, we are geared to meet demand from all types of customers. Our teams are employing sophisticated metrics and tracking to assess these evolving trends and making adjustments in real time. Our order booking has remained healthy despite the impact from the pandemic and virtually every market, our brands enjoy a USP to which customers have shown deep loyalty. Demand has remained unchanged as per the pattern, and we are taking all efforts to supply maximum quantities, both abroad and domestically. As we grow as a business, the emphasis always remains on conducting sales profitably, and the guiding principles is serving KRBL well to distinguish itself in the industry. Looking forward, while the near-term market outlook is uncertain, we are confident of the medium to long-term growth prospects of the FMCG sector. Our strength of agility and responsiveness gives us confidence to navigate the current challenges as well as capture the structural opportunity in medium to long-term. We remain confident of a strong demand in our product category in the coming fiscal, which we believe should enable us to deliver a robust operational and financial performance, backed by strong brand lineup, smart inventory management and advanced processing capacities. At an overall level, for FY '21, it remains our intention to enhance volume growth of basmati over FY '20. With that, I would like to request the moderator to open the lines for discussion. Thank you.

[Operator Instructions] We take the first question from the line of Pritesh Chheda from Lucky Investment.

Sir, some comments on the volume performance, if you could give for the quarter? And how does it look Y-o-Y? And second, within exports, the higher realizations, which we see, if you could give some qualitative comments on those higher realization and sustainability of those higher realization?

As regards the volumes, like if you can send me a mail, I'll send you separately for this. As regard the pricing, I think Anilji will tell better realization. Our exports...

Yes, yes. Actually, as far as volumes are concerned, the major reason was that there was about 34,000, 35,000 tonnes of cargo is lying at Kandla Port, which was shipped out from our factories in the month of June -- May -- from 10th May onward up to June, and it was supposed to be shipped in June. But since we could not get the vessels in time because of the pandemic and labor problem, they have been now shipped in the month of July and August. That was the reason of this quarter revenue coming down. As far as the EBITDA and the EBITDA is...

He's asking, realization in export.

Our realization in export, which is now transformed into EBITDA realization. Actually, normally, basmati rice has various qualities and price segments, ranging from USD 1,100 to USD 2,400. Since most of the sales were taking place, in the primary segment, the average sale price has increased from INR 85 per kilo, and there it has increased to INR 101 a kilo. It will be our utmost endeavor to maintain the EBITDA margins. Though it will be difficult task because on the top line sales increases, the value realization comparatively decreases a bit. So we will try our level best to maintain. But let us see -- let us see, we are hoping the best.

Okay. Any comments on the country mix within this higher export realization?

See, the most of the exports have gone to either Middle East and to U.S.A., Middle East and Far East. As far as exports are concerned to Iran, Iraq, Yemen, African continents, they have been comparatively on a cheaper varieties compared to the high-priced basmati rice.

Okay. So these countries, there is lower in the mix and high-value countries or high-value basmati being sold is higher in the mix. That's how I should interpret?

Yes.

And is this sustainable for the subsequent quarter as a business strategy?

Yes, and why it is not -- it is sustainable because these are our permanent markets and we are -- we have good strength of sales over there in these markets, especially in Middle East.

[Operator Instructions] We take the next question from the line of Varun Darci, Individual Investor.

This is Varun here. Sir, I just had a question on the goods line on the Kandla Port due to some logistic issues that you were facing. I mean, I was hearing the commentary from some of your commentators around where they have shown quite a robust growth in this set of quarters. So I just want to understand that the issue -- that the logistics issues that you were facing was it specific to our company? Was it or -- and potentially how could others not face this problem then, and they seem to have quite a decent quarter?

The shipments which are lying at Kandla was supposed to be in break bulk. They were not containerized vessel. Whereas container vessels which are going to either Europe or to America, they are not in break bulk, they are in containers. So those container vessel comparatively had no problem compared to break bulk because break bulk vessel was a problem at Kandla Port because of the labor. I would like to add over here that previously when the pandemic was not declared and the lockdown was not declared, the loading rate at Kandla, Mundra and all these ports was about 5,000 to 6,000 tonnes a day, which has come down to 1,000, 1,200 tonnes a day. And that was the reason the ships were not coming at tankerage and that is why it got delayed by 2 months.

Sure. So the second question, sir, I had was around the shareholding of the enforcement directorate. We see that in the current -- the latest shareholding release, ED has potentially confiscated all shares of Balsharaf. So I know you've clarified this multiple times that this has got nothing to do with the KRBL, but is there any update or something that you can throw light on this?

Should I answer? Anilji?

You answered this -- I've answered that hundreds of time. But investor is every time want to listen the same, Balsharaf gains we have already won in the High Court. And over -- it is -- I mean, the action of the ED is according to our lawyers is not legal. And we are putting up -- Balsharaf has put up the case in the court to release the shares. And definitely, as per lawyer, he will definitely win the case. We have -- Balsharaf has won the case in the High Court. Balsharaf has won the case in the Supreme Court. Balsharaf has won in tribunal, I mean 5 times in double bench also Balsharaf has won the case. But ED is doing something which is not -- I mean, it is not as per the law. But Balsharaf will definitely win the case.

[Operator Instructions] Next question is form the line of Varun Goenka from Nippon Mutual Fund.

Anoopji, I wanted to ask regarding our e-commerce -- our online sales strategy or approach. So to begin with, what percentage of our domestic sales or absolute amount is through the online channel?

1.5%.

Okay. So do you have any data or shares in the online channel? Or what is the industry size within the online channel?

Industry previously was 0.4%. But during pandemic, it has grown up to 1.4%, if you talk of rice.

Okay. Total rice. Fair enough. So that includes basmati and non-basmati. So 1.5% of domestic sales, right? I'm not talking about total sales, right? Just to clarify that.

Yes.

Okay. Okay, sir. So e-commerce [Foreign Language], how will be approaching this? Are we directly selling? Or are we going through -- let's say, Amazon has a 3P model, so you go through a seller. How are we approaching this?

No. Amazon, we are directly selling. But if you go to Amazon site, there are so many parties who are selling India Gate. I mean, but we have a direct account with Amazon, Grofers, Big Basket, Flipkart. And Grofers, we are #1. We have a big share in Grofers and Big Basket. Amazon, we are #3.

Okay. So what would be the difference be #1 and #3 in terms of sales?

I mean, in the number of sales side and the sales, but Amazon shares in the e-commerce is hardly 10% to 12%, whereas Grofers and Big Basket have got it 70%, 72% share.

Okay. So just to understand this better, if we are selling directly, we do not need any mediators and in between right?

We don't need any, sorry?

We don't need any dealers or any middleman in between, right, if you're selling directly?

No, no. But thing is that at remote places, we make delivery through our distributors, but the price and everything has been done directly from the head office.

Okay. Okay. So would that entail that this is a much higher margin? Or no, it's the same margin as any other channel?

No, it is the same margin because we control PTR -- PTC, right. So the consumer has to be controlled, but because 80% share of our GT may not get disturbed if this e-commerce side, they try to sell cheap rice, but we stop them. So we always control the price to the consumer.

Okay. Just a final point, if you can give us overall outlook on exports and domestic separately? I mean, we were just ballpark towards INR 5,000 crores this year. I know it's difficult to give a guidance, per se, but are you seeing any major jump in July now? June and July, has that been much normal versus last year, both on exports side and domestic side if we can understand?

If you compare with quarter 1, actually, quarter 2 will have a jump. And as far as INR 5,000 crores is concerned, we are looking at doing something better than last year. Maybe it is INR 100 crores, INR 50 crores or 5% more because the first quarter, the revenues are less. So I think we will end up the year by 5%. We'll try our best to do it INR 5,000 crores. But maybe -- but we'll do better than last year.

But any meaningful market share? Is there an opportunity for us to gain both on domestic and export because of bank funding available to us because of our balance sheet side, brand side, any meaningful market share in any of the areas?

No, domestic -- as far as domestic is concerned, we will be having a loss of INR 300 crores to INR 400 crores on account of HoReCa. But we are trying that INR 300 crores, INR 400 crores to be overtaken by the consumer sales because consumer pack sales are driven very good and there is no problem at all. But there is a problem in HoReCa around INR 400 crores that we had done to an account of HoReCa. So we'll gain share in the consumer market.

Right, right. And Anilji, if you could help us the export, sir what would be our understanding?

Yes. Yes. Yes. 2 markets we are concentrating more. One is Saudi Arabia because Saudi Arabia share has jumped up and now we are working quite hard, and we feel that Saudi will bring an extra leverage compared to last 2, 3 years of what we have done in Saudi. And another, we are working very, very hard in U.S.A. also. We already got one account of the mainstream market in Canada, not in U.S.A. And I think so because we have already entered the mainstream into Canada after long efforts, we will enter USA also. So these are the 2 markets where we feel there would be a good jump as far as KRBL is concerned. But the biggest problem is that any anticipation, any anticipation because of pandemic, we do not know the consumer behavior because every day, every week, we listen new stories abroad. And everybody is waiting for the HoReCa to open up outside also because the Middle East culture of eating is that everybody gets food from the caterer. In the evening, there is hardly -- I think the 40%, 50% families they cook rice at home, they normally ask for outside. So everybody is waiting for HoReCa for the consumption to increase.

Yes. Fair enough, sir. And in the -- during the course of the call, if you could just -- the demerger or the power business valuation, if you could [Audio Gap] on our valuation of the total accessions. There are several deals happening today. What do we really intend to do, sir?

No. Here, the point is this is definitely a better proposition for KRBL, but there are a lot of key challenges, and those key challenges are to deal with several states to amend our PPAs to a new name, sale of the -- transfer of asset, transfer of land, they are certain forest land, they are certain revenue land. So there are a lot of key challenges. We have just taken approval from the board, so that we may apply to states for all these things. If we are able to get the PPAs transferred, then we will definitely go ahead with it. If at any case, PPAs, they want to renegotiate the price on PPA, we will not do it.

Okay. And any valuation ballpark? Has KPMG come up with or you...

No, no, no. Till now because there is some problems in the -- there are key challenges in the -- that is the main thing where the PPAs would be transferred at the same rate or not. Then we'll move forward if the PPAs are transferred. If they give us the letter to transfer the PPA and the new legal identity, then we'll definitely look at other things.

[Operator Instructions] The next question is from the line of Dhruv Kashyap from Edelweiss.

Yes, my first question was around post-COVID, this entire impetus on health and wellness, immunity, et cetera. What specifically is KRBL doing or planning to do both on the product and on the communication front?

On the product, you see, we have brown rice. The sale of brown rice have gone up, and we have started a promotion along with 1 kg of brown rice, you take 200-gram of Quinoa. So we are promoting a lot of health products and during Quinoa pandemic time, even the package food is -- no one wants to buy loose rice. So we are having a benefit of selling package rice during COVID period. That is the reason why our consumer sales have gone up. And we are more and more concentrating on healthier products now. In exports, we have come out with rice bran oil with Amaranth, with Chia Seed, with Flax Seed. So we are creating a full health basket, especially in the export market. And we are very positive on it.

My second question, sir, was that in a country like India -- let's speak specifically for India. See, whether people eat the food through a restaurant or a delivery or a corporate catering kitchen? Or if they are working from home and not going out, they will be consuming more at home? So wouldn't it be fair to say that it's not so much about a channel-specific loss of business because ultimately, food is fairly inelastic, right? The consumer is going to eat no matter where they eat. So if we are losing on HoReCa, shouldn't we be making up exactly that much and more on the consumer part, like, let's say, a Britannia or Nestlé is doing?

Yes. Yes, we are definitely -- I said, I am having a loss of INR 400 crores, but I'm anticipating that I'll make up this INR 400 crores in consumer sales. But I tell you one thing. Especially in South India, a lot of catering business is there, people like Mr. Mittal, told about Saudi Arabia, in South India, people don't like to cook food, especially in Kerala. They want to order even 5 people in the house, they will order 2 portions of biryani from a local caterer. And there are a lot of meetings, a lot of marriages, lot of functions. There are no functions, there are a lot of consumption of basmati rice in marriages, in functions, in parties, in restaurants, in catering, I mean marriage function has nothing to do with restaurants. Basmati rice has a huge consumption in parties, marriage functions and a lot of biryani culture is there in South India. You mean all thela walas are selling biryanis, and they were taking rice. So everything is practically 0. You can't say that we'll make up -- that will make up only for KRBL, I can tell you one thing because of our strong brand. Otherwise, HoReCa segment will have a big dent on other rice millers and rice exporters and rice traders.

Sure. And sir, my last question was that in terms of geographical and category wide spaces. So the geographies within India or countries outside, which we are exporting to, which we are not present in and want to enter as well as the category wide spaces. So we are in white and brown rice. We are in Quinoa, we are in Chia Seeds. What other categories and geographies are we planning to get into in a big way?

Anilji?

See as far as other categories or expansion is concerned, everything can be worked out only once the pandemic issue is solved. Every country is a little bit -- the orders and the new orders or the new connection has become dicey because every country is facing financial problems. So many other problems which cannot be narrated, but there are dozens of problems which are narrated to. Once this settles down by November, December, then only the other categories and more outlets will -- more countries will be opened up.

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

Sir, one thing on the exports spillover. You mentioned in the last con call also that because of Kandla problems certain exports could not be done and this quarter the export value has been quite low. So what is the -- so one is the conditions have they completely normalized now? And what will be the spillover impact of lower exports in 4Q and 1Q, which will get into the 2Q of this year?

See we all know that the lockdown was announced on 25th of March. And it got opened on first week of June that also partially it was allowed. Though the food industry was allowed to operate, there was an acute labor shortage because most of the labor got migrated back to their home towns in UP, Bihar and Nepal. We were learning our plants at a capacity of around 40%, including milling and packaging. Not just the manufacturing, but there was a huge chaos at the ports because of the logistic problems, both in transportation and shipping because labor was not available and you require a specialized labor for packaging for many activities in the plant. It is not that you hire labor from outside and from tomorrow, you can start doing the work. There are specialized labor for loading, unloading, specialized labor for packaging, specialized labor for bag stitching. There were so many more odd problems. So that was one of the reasons that the things became delayed vessel could not take anchorage at the port. You will not believe the first vessel for 15,000 tonnes we ordered in the month of May, because of the lockdown, nothing came in May, nothing came in June. Only it came in first week of July. When it came in first week of July, 20 days was a waiting list and the loading rate is coming, 1,200, 1,400 tonnes a day instead of 5,000, 6,000. The vessel should have been loaded in 3 days which is just the loading at the rate of 1,500. So these were the problems. And that is why around 32,000, 33,000 tonnes for last 2.5 months, 3 months, which is lying at Kandla Port is now being loaded. That is the real scenario.

No, sir, now the situation is completely normal? Or is it still partially...

Yes, yes. Now that there are 2 problems coming at Kandla Port. One is the rains. When the rains comes, our loading stop. In last 3 days, our loading rate is coming around 1,500 tonnes a day. Our third vessel is being loaded and the loading rate is coming only 1,500 tonnes a day. That's number one. Number two, still, we have not reached to 5,000 tonnes if everything normalizes as far as weather gods are concerned, then also the loading rate is coming 2,800, 2,900. To reach at 5,000, I think so it will take another 3, 4 -- 2 months or 3 months. That is what our clearing agents tells us.

And this INR 350 crores odd of material, which was lying, has that been shipped now?

I think so mostly has been shipped. We have another INR 50 crores, INR 60 crores is left.

Okay. Now coming to the domestic market, sir, I was just looking at your volumes data. If I do Y-o-Y comparison, so we were at 85,000 tonnes in last year same quarter. Now it has fallen to 73,000 tonnes. So if HoReCa was contributing, let's say, 20%, 25%, then if I take that out completely, then also, probably, we are seeing 7%, 8% growth or maximum 10% growth in the ex-HoReCa domestic business. So my sense was that given the focus on packaged food and all, probably, we could have done much better instead of just 10% sort of growth on the domestic market. So any comments on ex-HoReCa how much can we achieve this year?

HoReCa is one thing. When I say HoReCa, they are 25-kilo bulk bag also of India Gate, which retailers buy and sell in loose. That sale is also 0. The impact is around 35%, 40%. And in fact, we have not increased by 7% or 8%. We have increased our consumer sales by -- year-on-year, if you take, we have increased by 30%. Because the sale of big pack, bulk pack, 25 kg pack, not -- it's not necessary that 25 kg pack is bought by HoReCa only. It is bought by retailers also. So our increase -- net increase is around 30% on the consumer segment and 25 kg bulk pack, which is meant mainly for HoReCa, is down by 40%.

The next question is from the line of Rohit Prakash from Marshmallow Capital.

Sir, my first question is on your new products. We are -- we continue to be extremely strong on basmati and our brown rice is also doing well, but if you could give us some more update on the other segments like Chia Seeds, Quinoa, et cetera, do you see any increased traction for them in this time? And what about the regional rice like Govind Bhog and Jeera Rice that you were planning? Is there any further development there as well?

Yes. As far as Quinoa is concerned, yes there is an improvement in sales. But definitely, the market is small. We are selling around 10 to 15 tonnes a month. We were previously -- pre-COVID, we were selling around 7, 8 tonnes a month. Now we are selling 12 to 14 tonnes a month. So there is an increase of 100% if you talk of Quinoa in the domestic market. And as far as regional rice is concerned, it is going well because we are doing only consumer packs. We are doing only 1 kg, 5 kg. We are not doing bulk packs. So we are only into the premium regional rice segment. So we are doing that, and it's going up. But after COVID, I told previously also, we are going to have units in -- especially in South India and West Bengal so that we can supply directly from those units. And our logistic cost, we will save on our logistics cost and distribution. So we'll plan big after that investment.

Understood. That was helpful. So the next question is broadly, I mean, unlike most other businesses, our business is benefiting from -- I mean, in some sense, it is not harmed very a lot from -- by the pandemic. Instead, we are seeing a shift to packaged rice consumption. And this will generate quite a lot of cash flows for the business. I know the intent of the management is to become debt-free. But is there any plans of buyback on the cards, given even the current share price seems quite low? And if not, do you intend to increase the inventory size even further the coming year to cater to the increased demand you expect going forward?

Yes, we will increase our inventory. Definitely, we are going to increase our inventory so that our marketing and brand which is 2 years old, 1.5 years old, our volumes will go up. So naturally, inventory has to go up.

Understood. So no plans of buyback anytime going forward?

At the moment, there are no plans.

The next question is from the line of Rajeev Agrawal from DoorDarshi Advisors.

If I can just request the data point, which is the volume information on domestic and export market. So Mehrotraji, I can send you a mail and if you can...

Please send me a mail, I'll reply you.

Sure. Then just on the order book, I think there is a comment made that we have good order book. Is there a way to quantify it and compare it to what we have done last year?

This is export order book, we have talked.

We have not quantified it. You put the question on the -- will -- Mehrotraji, just add up the order book and give the reply to them.

Yes. Please send me a mail. I'll reply you separately on this also. But I can tell you, we have very good order books in hand. As Anilji said, this year -- this quarter, our numbers will be very good.

And then can you -- do you have some visibility on how the basmati season is looking for this Kharif crop calendar year '20? If you can share any insights on that?

Yes. There has been confusing reports as far as media is concerned, because as per media, the slowing of basmati will increase by 15%, 20% compared to last year, whereas our own survey of KRBL and our competitors, we feel that basmati production would be lower by 15%, 20% this year. And that too also, most of the farmers have grown a variety known as 1509 compared to 1121 traditional or Pusa Basmati, which are old traditional basmati. 1509 is a very newly developed basmati. Since the production is high, and this year, it was good in demand, most of the farmers have gone in sowing 1509. We feel that only 1 confusion if it is cleared, that is Iran, that what would be the course of Iran in future. That is the most important for us to understand the future of basmati production and the prices of basmati this year. Iran does not have funds, either in dollars or in rupees to buy from India. Though their offer for purchase of rice with euros or dollars, they cannot materialize because of US functions, and there are plenty of euros and dollars, and we have offered of 5 million euros and dollars, they are ready to send us in advance because it cannot be rooted through the banking channel in India because of the essentials. So we are not unable to -- we are unable to execute those orders or execute those businesses. There is an option of rooting the deals via Dubai, which we do not want to get into. Huge quantities of cargo are lying in Bandar Abbas for about 6, 7 months. About 50% cargo has been lifted and payment has been made, but still 15% to 50% cargo is still lying and payments are yet to be affected. But we are confident in one thing that food, medicine, these are essential commodities. Maybe after November when the elections are over in America, some positive news on Iran will come because in any country where there are tensions, you cannot leave that country in hunger or essential, medicines and all that. So in my opinion, this should be clear because it is a huge market for India of about 1.3 million, 1.4 million tonnes. So we are all confused that what would be the fate of Iran. Otherwise crop wise, everything, it's good. And we are thinking that the prices will increase this year compared to last year by minimum 10% to 15% of basmati rice. This is our study.

The next question is from the line of Shirish Pardeshi from Centrum Broking.

Sir, I have 2 questions. On the slide, on the consumer behavior, you have really given a good understanding how the consumer behavior has happened. So my just only question, which I picked up from your commentary that consumer would have upgraded from maybe 1 kg pack to 5 kg pack. So if you can help me to understand what would be the contribution of 5, 10 and 25 separately in the quarter? And what is the full year, last year?

No, we take 1 kg and 5 kgs as consumer packs. And I don't have ready numbers with me, but 1 kg, 5 kg on a year-on-year basis, we have got a 30% increase.

Okay. That's what I wanted to check because you said 30%, which is basically, you mean to say that then these are the packs which would have contributed to a higher contribution. That's what my understanding is.

No, it is 1 kg and 5 kg. In domestic market, if you see, my realization has gone down. This is due to product mix because during COVID, the below varieties, which is Mogra, Mini Mogra, they sold more than the upper varieties.

Okay. And sir, my last question is on the paddy. And you just mentioned about the crop, which is going to come up. So is there a understanding of probably, I'm sure you are working with not many farmers. So do you think that there is a chance that with 15% less production, you are expecting the prices to go up?

See, this is just estimates which are coming up, maybe I'm saying something else, our survey is saying something else. To comment at this moment, we'll be wrong on our part. Because if it is 10% or 15% even less, then also we will be able to cope up with basmati rice. There is -- I don't think so we will -- but because of that 15%, the prices will remain high. But it is too early to comment whether it would be the same as that offer last year or whether it will be 15% less. But yes, 1 question mark is definitely there. There is no doubt that the production of 1121 and Pusa Basmati would be lesser this year compared to last year, which will make the prices of the paddy higher by 15% over next year -- on the -- compared to previous year.

Okay. And just last, if you can squeeze in. You mentioned that we have to wait for U.S. Election and how Iran will pan out. But do you think that Dubai due to which many people are exploring, you will also try and explore maybe second half?

No, we will not do that business because according to us, that is not a legal way of doing a business and we will not involve ourselves into any illegality.

The next question is from the line of Jagpreet Singh from Bay Capital.

Anoopji, I just want to understand, did you save anything on advertising, marketing expenses during this quarter because rest of the FMCG companies seems to have saved a lot of money on that? So the results, do they reflect in savings?

No. No, I can't follow this Jagpreet, what else?

Did you give lesser advertisements on the media and saved some money in advertising costs?

Advertising. No, we have not saved anything. We have spent the money on advertising.

Okay. And sir, how was the movement between organized and unorganized market? Because it seems that unorganized would be more hit during this COVID times.

Yes, unorganized was hit. That is the reason why our sales was -- on the numbers, it was down. But I tell you, KRBL strength because 20 -- 15% of the total sale of basmati is in the organized sector. Still 85% of the sales is under unorganized sector, which we see as traditional trade. Traditional trade was a bit slow. In organized sector, we had 70% more on the e-commerce and about 50% more on the modern sales business. But there was not much loss in the traditional as far as consumer pack is concerned. You see during COVID, 70% of the retailers are closed. Then also, our numbers are quite good.

All right. All right. Should we be able to take this INR 350 crores kind of a figure as a very baseline figure for the company, for the quarter?

You are talking domestic sales?

Domestic. Yes, domestic.

Yes, that is a base figure. Yes. You're right. So it is a base.

So with the starting of HoReCa, do you expect it to increase?

Definitely, we generally done INR 500 crores a quarter. So with the HoReCa, definitely because you see our -- one of the brand is very famous in HoReCa segment. It has a big market, which is Unity. That brand is suffering a lot.

Okay. Anilji, I just wanted to ask how is the traction in the export markets in these months. Has it -- has the intensity reduced? Or is it similar intensity?

Anil, you there?

Mr. Anil Mittal, you may please unmute yourself and respond, sir.

Hello.

Anilji, had you been buying any crop during this quarter, paddy or rice?

Yes, we are buying some rice, not paddy. Paddy also, but rice, yes, we have bought some rice. And Jagpreet, you see after buying so much of rice as on date my debt is just INR 15 crores. As on date, I'm talking.

Okay. And do you see any competitors or any players who have gone out of the market because of this pandemic?

You see all small players and small brands, they are not there at all. Small brands, if you talk, those who are selling with retailers and people have opted not to buy loose rise. So that has really dented those small players because the sale of loose rice is really less compared to previous -- pre-COVID and post-COVID.

Okay. Okay. Anoopji, another figure which I wanted to discuss with you was that your float in the market, which is essentially the retail investors in the market, it's very, very high compared to other FMCG companies. I mean if you check out Marico, Dabur, Prataap Snacks, Relaxo they've got 7%, 8% of their shares as a retail shares. But in your case, it is more than 11%, 12%. So I wonder if you would want to take this figure. And what are you thinking about reducing this figure by doing a buyback?

Buyback, we have not discussed. Let us -- we'll discuss in the next board meeting, we'll see to it, by about -- we have still not discussed within ourselves.

But any reason you're not discussing it? Is it that ED has taken over the sales of Balsharaf and therefore, the management is not able to do anything because some shares are locked with ED? And it will be partition -- partly saying that you will not be able to...

No, ED cannot sell shares. ED cannot sell share unless court allows them. That is not possible for ED to sell even a single share.

No. What I'm asking is, is there any technical issues? Because if you do a buyback and Balsharaf is not able to participate, that will be problematic in terms of that?

No, no, no. That is not the point. That is not the point. That is not the point. Will discuss with in house. But I'll let you know. Hello? Anilji, are you there?

I'm there. It got off for 3, 4 minutes. I don't know why.

Okay. Okay. [Foreign Language]

The next question is from the line of Akash Shah from KFS Securities.

I have 1 question on the operations side. I just wanted to know how does the change in paddy price gets reflected in our finished goods prices?

Change in paddy price doesn't reflect -- you see, it is -- my company's cost or market, whichever is lower. My inventory is valued at the cost price. If the paddy price would be higher next season, naturally, the rice out of it would be higher.

So any fall or lower raw material price? Does that have any margin impact, higher-margin impact in our final products realization?

Naturally, if prices are low, definitely -- because we are in a branded business, we generally don't change our price on the shelf. If the paddy prices are low, definitely margin goes up.

And same way that is high, our margins get impacted downwards, right?

Yes.

Yes. If it is very high because shelf -- the price on the shelf includes many things. They are certain -- when the prices are low, we sometimes do some promotions, when the prices are high, we don't do any promotions. So we balance everything.

Okay. Okay. Got it. I'd like to know what is the share of HoReCa sales in FY '20 revenue. What percentage...

Around 35%.

35% of our entire...

Domestic sales.

Domestic sales. Okay.

The next question is from the line of Amit Doshi from Care PMS.

Sir, just recently these new guidelines came up with respect to some countries, some procedures, which were required to get done before you export have been relaxed? Do you think it will have any financial impact? Or is just more to do with just the process getting out of the picture? And anything on our export -- I mean, is it related to our countries that we export?

There were 2 issues. One was related to Saudi Arabia. They have come up with a new system for last 1 year. That is CoC, Certificate of Conformity. It has already been streamlined. 3, 4 international companies have been recognized to give those certificates, inspect the cargo and then it requires to be shipped out along with the certificate. It has been streamlined. The other problem we were facing was from Europe. Europe was -- originally, they were 28 countries, plus another 4, which was Switzerland, Norway and 2 more countries, which were then later on, it was increased to 48 countries. So we were convincing the government that the more countries you include, it will be a problematic for the exports. So recently, the DGFT has come out with the notification, that up to 31st December, the countries will be those same 28 plus 4. And after January onward, we will see to increase the countries or not. Otherwise, there is no such system change in anywhere -- any part of the world.

Okay. So nothing practically impacting us in the...

No, nothing impacting. Nothing impacting, except one thing that we have to grow India as to grow more and more pesticide-free paddy to ensure exports into U.S.A. -- Europe and U.S.A. and Middle East because within 3, 4 years, we believe all countries will have the norms of pesticide-free materials.

Right. Sir, you mentioned in your opening remarks that Canada has been -- you've been able to break through after a lot of efforts. So can you share something? Is it through this -- typically, this U.S. business happens to collapse, et cetera? Or is it a direct B2C business that you see...

You're right. These questions are not to be discussed in public domain. You write us, we'll reply you.

Okay. Okay. Okay. And...

These are all business. If individually, you want something, we can reply you. Nothing should be brought into everything in public domain.

Sure, sure. I understand. I understand. Sir, with reference to this delay of orders that happened because of these logistical issues and which you believe that you said that you will spillover in the Q2, et cetera. Do you believe any part of it, which was with reference to this pent-up demand, which across the globe, everybody stocked up heavily. And therefore, probably yes, one, you would -- so that kind of that pent-up demand, which could have been catered has been lost, something of that? So do you believe? Or is just, okay, it's a normal orders that were being catered? Because last time you mentioned that you have in next 5 months, you have last whole year's export order book kind of a thing, something of that comment had come from your side?

No, right. We had order, that's why we are saying again and again that we have a good order book. Our buyers are quite firm. They say they are waiting for the cargo to reach their respective countries. And it was from our side only that we couldn't ship it because of logistic problem, as discussed earlier with you -- as has been already discussed in this conference call.

No, my point was just to understand that, has it been like that orders has been catered by somebody else because we could not do it or something about that sort of so we could get...

No, no, excuse me -- that is why -- the goods are lying at the port I'm telling you. The goods are lying at the port if it would have been taken by someone else, how someone else can export when KRBL cannot export. It cannot be that. It means we are inefficient if somebody else is in the power to export, and we are not in position to export, how it's possible?

Okay. Okay. Okay. And sir, last 2 quarters back, there was this idli rava, et cetera, was being launched. Now with this home consumption and domestic market HoReCa segment is likely to get impacted even further, we don't know, like maybe 2 or 3 quarters more. So to match up or to cover up that how is that, that ready-to-eat or something of that side, home consumption food or anything on that side? I know your focus is more on rice, but still because this idli rava was launched and after that, nothing came up. So I'm just trying to understand, is there any strategy to kind of recoup the HoReCa loss or something of that sort?

No. We are -- yes, we have launched idli rava, and it's -- during COVID period, the sales were also good. But we are not looking at heat-and-eat segment, but we are looking at certain other SKUs, which are more on health side. Definitely, you will see in next 6 months, there are some more launches, but definitely on the health side.

The next question is from the line of Jigar Walia from OHM Group.

Sir, one thing I wanted to understand the pricing for the 1509 variety, would it be different from the traditional basmati or the 1121?

Actually, every variety are different. Otherwise, what is the use of growing different variety? Traditional is different than 1121. 1121 is different than 1509. 1509 is different than 1718. 1718 is different than -- every variety like in tea also, you have so many blend. Darjeeling tea is different than Assam tea. Assam tea is different than the South tea. South tea is different than the Kenyan tea. So see -- see whenever the varietal changes are there or a varietal, varieties of -- different varieties are there, they bound to have a different price and a different customer.

Perfect. So the price -- 15% price increase is primarily because of the change in variety, not just because there is -- would be a 15%, 20% drop in the production?

It will be because the consumption and the demand of 1121 is more than 1509. So we feel that 1509 prices will come down by 15% over this year or 10%, and the prices of 1121 will increase by 15%, 20% this year, is the estimate, is the estimate what I've discussed are correct, which we will come to know by end of August or first week of September.

Right. And sir, the kind of media reports also did mention that production is particularly down in Punjab, which could be our catchment. So are we -- do we get more linked to the catchment? Or we have the flexibility or the resources to have the procurement from the other regions as well? And -- yes.

See basmati, you all know is GI. There's -- now the matter has come to Supreme Court also.

Yes. The GI issues also.

But with GI issue from 2 places that the -- and the industry has won. From High Court from Chennai. Now the question is whatever I'm talking to you, I'm talking to you for the 7 states which fall under GI. That is Punjab, Haryana, Western Uttar Pradesh, Delhi, 2 districts of Jammu Kashmir, 1 district of Himachal and Uttarakhand. These are the 7 districts where basmati is grown, and these are the traditional areas of basmati rice. So whenever we buy basmati rice, it is not from the 1 region, we buy it from all the 7 regions.

Right. Okay. Got it. And -- okay. Now from a geographical location perspective, any thoughts that a single location works better or there would be a need to diversify given certain state focusing on from a water conservation perspective or...

Let me tell you, much has been said, much has been spoken. The matter is in Supreme Court. I would not like to -- because we are one of the parties involved in it, so we will, as a All India Rice Export Association, it will not be good on my part to advocate on our case. It would be better let the case we decided in Supreme Court. Then I'll -- we can discuss in details.

Right. Right. So one last question is on the restructuring for the energy this thing, any specific plans to use that monetization. Otherwise, it works quite well for us. It reflects in our numbers, it's all good. But if at all, I do not know to what extent you intend to monetize or unlock. But is there any use -- planned use for the cash strategy? Or it would be just to reduce the working capital debt -- as well not to have any working capital debt as well?

Yes. Yes. It is just to ring-fencing agri and energy business, and we have better operational efficiencies due to focused management in energy business. And the value unlocking is afterwards, no. But I tell you there are a lot of key challenges in doing it.

I understood. Yes, better. But right now, you'll be only subsidiarizing but that -- but even subsidiarizing will have those challenges?

No, subsidiarizing. We will be...

Will not subsidize. Only unlocking will have those...

We'll have a separate company -- separately with that entity.

The PPAs are getting honored in the COVID situations or is there...

What is getting honored?

The PPA, et cetera, in terms of the off sales...

Yes, yes, they're getting honored. But as you know that state government payments are a little bit delayed, but PPAs are at the same rate only.

The next question is from the line of Amit Agarwal, Individual Investor. As there is no response from the current participant, we take the next question from the line of Sarvesh Gupta from Maximal Capital.

So given this 10% to 15% sort of a reduction that may happen in terms of paddy growth, what is the expectation on the basmati rice prices for exports and domestic market for this year?

See, it is too early to guess the basmati prices because it is still 2 months to go, 2.5 months. So till the final prices are not -- they will be correlated to the prices of paddy, but not in case of KRBL, as you know, we are a FMCG company. Our prices are more or less fixed. We just give the promotion or discounts based on the current market prices. Therefore, it will be too difficult or it will be too early to comment that what would be the situation and what will happen to the new crop and its prices and the effect on the exports. But definitely, if the prices goes up, the prices in the international market will also go up. And if the prices go down, then the prices in the international market will go down. When we are talking of up and down in the international market, there are primarily on the private label, not on the branded product. If those up and down too much is on the branded -- or not on the branded, but they are on the private label.

Okay. But since we will be using the crop from last year, where the prices were lower, so our cost of raw materials should not go up for this year, even if the paddy prices go up for this year?

Our cost of goods sold will not go up. Yes, you are right.

Okay. Understood, sir. And sir, on this restructuring part, just one suggestion is because this might be a smaller portion. Of course, it is an attractive asset. But in my opinion, I think the best way to do it is to just sell given the lower interest rates, which are already there, you might get a good asset sale done and PPA transfer probably would also be -- so is there any problem in selling the assets in terms of the PPA asset transfer? Because this is a small portion of the overall business. Why not just focus on 1 business?

You see, the book value we have taken accelerated depreciation throughout and as per the income tax, the value of the asset is practically 0. If we sell the asset, then it will attract a 25% state tax. Suppose the asset at INR 800 crores. So it would attract INR 200 crores as tax only.

The next question is from the line of Saroj Kumar from Insult Edge Corp.

This is Sailesh Kumar and not Saroj Kumar. I just -- I'm looking for a clarification. In turn -- in this Balsharaf matter, you said, they have already won cases in High Court as well as Supreme Court. And still, ED is not releasing the shares. So don't you think it amounts to content of court itself, I mean how can ED do this misadventure? Is it something we are missing?

Anilji, would you like to answer?

Actually, I don't think so. It will be good on my part to comment on an organization like ED. I think so every business plan in the country knows the behavior of ED and how they do it and what they do it. They will never -- till there is a court order and a clean and clear court order, they will not release it. Let me tell you, we won -- see from 5 places we won a span of 2 years, when we say we won, Balsharaf won the case, Balsharaf. He already won the case. And we have put a contempt of court, which has also been noticed by the High Court and every [Foreign Language] we have won from -- Balsharaf has won from every tip to our -- every bit [Foreign Language] from all the parts as far as legal cases are concerned. Now the question is that the lawyers are waiting for these courts to open because they do not want to fight the cases on webinar. And they -- once let the courts open, then only we will further fight the cases in the court.

The next question is from the line of Dhurv Kashyap from Edelweiss.

Yes, sir, very quickly because I understand that I stand between all of you and lunch now. But Mehrotra sir, my question to you was that if you look at the progression of the net profit margin over the last 3 quarters, we have moved from about 13.5% to 14%, 14.5%, now about 16%. Are these sort of sustainable as we go along? And broadly as a company, what net profit margins are we sort of comfortable with for the financial year and the years to come?

Anoopji, would you like to answer? Or should I answer that?

Anilji would like to answer. He's asking the sustainability of a quarter?

Let me tell you that, actually basmati rice exports. And even in the domestic also, it is primarily because of the product mix pattern. See, I told [Foreign Language] that I told on CNBC team, the basmati rice is normally sold between $1,100 to $2,400. In domestic also, the rice is sold, broken rice also, which is about INR 40, INR 45, then comes INR 80, then INR 90, then INR 140. So there is a big range -- there's a big mix product pattern as far as basmati is concerned. Since most of the sales we are taking place in the primary segment, the average sale price got increased from INR 85 to INR 101 a kilo in exports and same way was in the domestic market. It will be our -- let me tell you, at most, endeavor to maintain this EBITDA and profit of margins. But as our top line increases, we have to go and look at those sales, which are at $1,200, $1,300 in the range of INR 80, INR 90 also. That is also there. But margin of profit is different than the sale price. And we will try our level best to maintain this EBITDA what we have shown now.

Sure. And my second question, sir, was that given that there is a tremendous movement on the basis of hygiene from loose rice where people open borah and sell from it will get touched by hand, et cetera, to package, right? Is there something on the communication and product front that we are doing to really accelerate this very quickly and get all the gains into KRBL?

Yes. We are doing a lot of activities in social media. Definitely, we are doing a lot of activities in social media. But I tell you, today also...

Sir, equivalent just for you is almost like the hand sanitizer -- moment for the hand sanitizer company. So [Foreign Language] is this not the time to really leapfrog our product and communication to take advantage of the tremendous desire of the consumer to have hygienic packed -- packaged products.

Yes, we are doing a lot of things. And if you look at our social media, we are doing a lot of activities. Then a lot of promotion with the retailers also. But I tell you, still, people are not going in the market. Too much of people are going in the market. So even the brand for the name sake, the brand, because of the brand name, it is being sold. But if you see at the footfall, even at Reliance, Big Bazaar or D-Mart or even retail, the footfalls are very less.

Sir, my last and final question, what has been the response to the tie-up with Swiggy and Zomato?

Not good. Frankly speaking, not good.

The next question is from the line of Raman Tiwari, Individual Investor.

Sir, I would like to just have your opinion on the domestic sales, where I was looking at your leading competitor, and they said they have gained market share. And this is as per the recent survey where they said market share has increased. This is the competitor. The market share has increased from 24.5% to 27%, and in rural markets, from 31% to 44% in Q1. So have you lost market share? I just wanted to know your opinion on it.

So if you talk of the competitor, the domestic sales is INR 200 crores. My domestic sale is INR 350 crores. So you can't compare. I mean, it's a 2x. It is out of comparison. If they do any numbers according to the data, what are the rural and domestic, I don't want to comment on that.

Okay, sir. And just one, I would like to know like this Tata Group, this is entering into rice, into dal segment with Tata Sampann. What are your views on dal as a branded commodity play? Do you in future want to enter that market? Or do you think it's too small of a market for you to think about?

No, it's a big market, but we don't intend to enter into dal market because every state, every region has a different taste and every region has a different dal. We are not into it.

The next question is from the line of Chetan Doshi from Tulsi Financial.

My first question is that in spite of all odds, our competitors results speaks for itself. Whatever has been discussed till now in spite of all the problems what are there in the market, they have performed well. They have shown the results. We are a market leader. And when you say there is no comparison, are we pricing our product very high that the consumer is not able to buy. And that is the reason we are losing sales? Or why our results are so -- see, exports, as per your figures, you have grown. So you cannot doubt that and that argument that our material is stock at Kandla. That is the reason our results are -- in sales is low. That is -- it cannot be taken well because competitor is also equally present in all the aspects, in all the segments where we operate. And second question is when we would -- as a shareholder, when the company will go back to its original position where everything was the best, including the share price.

We are working at the best only. If you talk when the share price was INR 600 our results are much, much better than that. If you talk of 2 years back, when the share price was INR 600, I think we have gone quite ahead. And as far as competition is concerned, right, domestically, we are doing much, much better than him. And as Mr. Mittal, our CMD told that this shipment was all containerized. And our -- this shipment is break bulk. So the break bulk shipment was a big hazard -- big hassle in COVID. There was no hassle in containerized shipment. And why you say that INR 350 crores carryforward will not better? Definitely, our second -- Q2 would be better by INR 350 crores. I'm expecting Q2 to be practically 2x of Q2 -- Q1.

That means INR 1,400 crores.

Yes [Foreign Language] maybe it is INR 1,500 crores here and there.

Anoop, see how can we comment, but we will do it. It will be astonishing good numbers. It should be good numbers.

A good number, but INR 350 crores will be definitely carry forward and whatever we are doing in a quarter -- so I mean, we are doing better than quarter 1. So naturally, our numbers would be quite great in quarter 2.

If we say that our performance is getting better and better day by day, why people are losing interest in our stock?

I don't think so. What you are saying, people are losing interest. I can't comment on this. How can I comment?

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for their closing comments.

Thank you, once again, for your interest and support. We will continue to stay engage. Just be in touch with our Investor Relations team for any further details or discussions. Look forward to interacting with you soon. Thank you.

Thank you.

Thank you to everybody. Thank you.

Thank you.

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