KRBL Limited (KRBL) Earnings Call Transcript & Summary

A company joining us now from the rice space. KRBL is the stock on our radar. It was a muted quarter for them. The margins contracted. The revenue growth was flat. In fact, for the full year as well for FY '22, hardly any revenue growth of around 5-odd percent. Ashish Jain, the CFO at KRBL, joins us now to talk about that.

Ashish, thanks a lot for joining us. Can you give us some trends? What are the big demand trends that you're looking at in FY '23? Do you think you can get back to double-digit growth on the top line?

Sure. Thank you, Sonia. So I think we look forward to a positive FY '23. I think a couple of things are happening. One is that the domestic rice demand continues to be buoyant. FY '22 was a record year for us from a domestic point of view. Both our volume and value sales grew by 32%. The challenge that we faced in exports are now behind us. Our principal market, Saudi Arabia, where we had some distribution challenges, those are now behind us. Our new distributor has been appointed. So we look forward to FY '23 with restoration of our exports. So with exports coming back online, the growth also should start looking far better than in the preceding year.

Ashish, could you explain to us the 2 or 3 variables which go the maximum way in terms of determining how well the business does. Distribution, of course, is an important one, which you said is fixed in the most important market for you. What are the others? And how are they looking?

Yes. So distribution, correctly, like you said, I mean, I see it only as a short-term variable. However, I think there are 3 principal drivers of performance in the rice space. The first is, of course, your volume sales, right? That's critical to sort of keep a steady pace on because rice is an inventory-based business. Unless the volumes happen, the inventories start affecting the overall financial performance. The second key area to keep in mind is the sales mix, which determines the overall realization. This becomes important because especially with our strategy of aging rice. As you know, we purchase rice in the harvesting season, which is principally in October to December part of the year. And then we kind of age this rice and sell it across the next few quarters. So therefore, the cost does get locked in from a rice perspective. So it's important that we maintain or improve the realization so that the margins happen. And the third, of course, is the efficiency in buying. KRBL now has decades of experience in rice buying, and that's one of the core competence of the company. So these 3 aspects, so namely ensuring that the volume sales continue to tick. Second is ensuring that the sales mix gives you an optimal realization. And third is the efficiency of buying and ensuring you have enough inventories. Those are the 3 key drivers in my view.

Okay. What does all of this mean in terms of your expansion plans? You have some new -- earlier, you had indicated that there's some greenfield expansion that you're looking at. When will that come on stream? And what will the capacity be post that?

Sure. So we have a stated strategy of augmenting our product portfolio. A key element of that is bring into the non-basmati space. So we are already present there, but to enhance our presence what we are doing is that we are setting up 3 new plants. One is going to come up in Gujrat, the second in Karnataka and the third in Madhya Pradesh. So -- and the one in Karnataka is going to focus exclusively on the non-basmati space. The idea behind this is that the India Gate brand and the overall India Gate platform offers significant benefits to consumers, which we now want to sort of port on to the non-basmati space. In terms of timing, 2 of these plants, which is Karnataka and Gujrat will come online in FY '24, which is next financial year, and the one in MP will come online in FY '25.

Okay. All right. Ashish, we leave it at that. Thanks a lot for joining us, and I hope you see some positive growth in FY '23.