KRBL Limited (KRBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to KRBL Limited Q4 and FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Jain, Chief Financial Officer of KRBL Limited. Thank you, and over to you.

Thank you, and thank you to all participants for joining us. Welcome to the Q4 and FY '24 Earnings Conference Call for analysts and investors of KRBL Limited. Today, we have Mr. Anil Kumar Mittal, Chairman and Managing Director; Mr. Anoop Kumar Gupta, Joint Managing Director; and Mr. Ayush Gupta, Head of the Domestic division as key speakers on the call. To kick off the call, Mr. Mittal will provide updates on the business industry and our overall strategy. Following that, Ayush will delve into the perspectives of our Domestic business. Finally, I will present the financial overview of the company for the fourth quarter and fiscal year '24. Once the management has concluded their opening remarks, we will open the floor for an interactive Q&A session. Please note that some of the statements made during the call may contain forward-looking information and actual results may differ from these statements. For more details, you can refer to KRBL's investor presentation, which is available on the stock exchange website and our company's website. Now I would like to invite Anil ji to share his views. The floor is yours.

Good afternoon, everyone. I'm pleased to welcome you to our quarterly investors call for KRBL Limited. Today, I want to share with you some insights into our company's performance and the outlook for the future. Firstly, let's go in the global rice landscape. According to the latest forecast by the USDA, global rice production in the marketing year '23/'24 is expected to reach around 517.3 million metric tonnes, showcasing a slight increase from the preceding year. However, it's crucial to note that rice consumption has also seen a rise, reaching 521.6 million metric tonnes in the same period. This uptick in consumption has resulted in depreciate surpassing production in the previous marketing year, thereby impacting global rice prices. Looking ahead, the projections for the upcoming year are optimistic. Global rice production is forecasted to surge by 10.3 million tonnes, reaching a new record of 527.6 million metric tonnes. This increase is primarily attributed to significant growth in tree-producing countries like India and China, which collectively contribute more than half of the global rice production. Additionally, major producers such as Indonesia, Burma, Pakistan and Bangladesh are also expected to witness larger crops. On the consumption front, USDA anticipates a further increase in global rice consumption for the year '24/'25, reaching a record high of 526.4 million metric tonnes. Notably, India is projected to lead this surge with consumption, hitting a record high of 120 million tonnes driven by government initiative and public distribution programs. However, China, the largest rice consuming country is expected to experience a decline in consumption for the third consecutive year due to reduce utilization of rice as a substitute for [ corn ] grains in feed. Now let's shift our focus to rice exports. India is positive to maintain its position as the largest rice exporter in 2025 with exports projected at 18 million tonnes, up 1.5 million tonnes from the previous year. This significant growth is filled by our larger crop and ample stocks. However, it's essential to keep an eye on the policy stance adopted by the government of India, as it could influence export dynamics. Moving on to India rice outlook, the marketing year '23/'24, India's rice production is estimated at 135 million metric tonnes, slightly lower than the previous year figures of 135.8 million metric tonnes. However, I'm sure many of you are curious about the outlook for basmati production in the upcoming year. While specific figures are not available at this time, expectations are cautiously optimistic considering the historical significance and global demand for this premium variety of rice. Turning out our attention to basmati export, India witnessed a remarkable year in terms of basmati rice exports from April 2023 to February 2024. Basmati exports rice to 4.67 million metric tonnes, marking a notable increase of 22% compared to the previous period. However, the story was different for non-basmati export, which were affected by the government of India's trade policy, resulting in a decrease of 16 million metric tonnes to 10 million metric tonnes during the same time frame. The recent Red Sea crisis has undoubtedly raised concerns globally. The crisis has disturbed one of the world's busiest maritime trade routes, impacting the flow of goods between Europe, Asia and Africa. As shipping routes are rerouting to avoid conflict areas, our increased security measures are implemented, shipping costs have risen and transit times have increased considerably impacting the logistics part of the business. Despite challenges, the demand for both basmati and non-basmati rice remains strong, and it reflected in high prices. In the period from April 2023 to February 2024, the average export realization for basmati rice was 10% higher than the previous year, while non-basmati rice saw a 17% increase. However, it's worth noting that export realization has been declining month-on-month since quarter -- third quarter of 2024. The main reason that can be attributed to this decline its realization are the geopolitical concerns in the Middle East region. The recent clash between Israel, Gaza eroded regional stability and raised economic uncertainty, jittering confidence within the business community and thereby hampering business growth. Further, payment situation from key markets such as Iran is still not streamlined, and there is still tightness of funds leading to constricted business volumes with the negatively impacted local prices in the Indian market. I will now update you about KRBL's export performance. KRBL export revenue stood at INR 292 crores in quarter 4 2024 and INR 1,345 crores for the entire financial year '23/'24. As previously communicated, our export performance has been impacted by various factors. The government restricted policy decision regarding export of rice impacted all our non-basmati export to the tune of about INR 300 crores. Geopolitical concern and heightened tension in the Middle East region has substantially delayed the payment cycle from markets such as Iran and Iraq, which contributes to nearly 40% of the total basmati export from India. We are very conservative in our approach when working with these markets and do not intend to take on unnecessarily payments and transaction risks, which might lead to compliance issues at a later date, hence it presenting fare opportunities for us in the bulk rice segments having an impact of INR 600 crores to our export revenue. Restructuring of our distribution network in some major markets has led to a temporary decline in our export number, which we believe will be declined in the next 1 or 2 quarters. We are already seeing an increasing trend in shipments and repeat orders in this market and hope to reach our expected volume soon, which will additionally, add to INR 600 crores to INR 700 crores to our top line. If all of above factors are in line, we automatically see a jump of INR 1,400 crores to INR 1,600 crores in our export revenue. Nevertheless, in order to reduce our dependence on few markets, we are aggressively working on creating and developing our presence in newer markets in order to diversify from our geographic concentration. Nevertheless, we have secured bulk orders [indiscernible] between INR 200 crores to INR 250 crores, which we anticipate shipping over the current and the new quarter. Despite challenges in our export segment, KRBL overall revenue reached INR 5,482 crores, mainly driven by robust performance of our Domestic business. We witnessed an impressive 18% increase in Domestic revenue during FY 2024. Our company reported a reported an EBITDA of INR 899 crores with a PAT of almost INR 600 crores. Looking ahead to FY 2025, we are confident in our ability to accelerate our export business, while maintaining our growth trajectory in the domestic market. Thank you.

Thank you, sir. I will now hand over to Ayush for his comments.

Ladies and gentlemen, it is an honor to address you today and share the outstanding performance of KRBL Limited in our domestic market for the fourth consecutive quarter of fiscal year '23/'24. In quarter 4 financial year '24, our India market sales once again surpassed the INR 1,000 crore revenue threshold, achieving INR 1,009 crores and marking an impressive 8% year-over-year growth. This consistent quarterly performance has propelled us to a significant milestone with annual domestic revenue, almost touching the INR 4,000 crore mark, reflecting an 18% year-over-year growth. Our success is a testament to meticulous strategic planning and diligent execution. Our market share metrics speak volumes. In the general trade business, we expanded our market share to an unprecedented 36.9% in quarter 4 financial year '24, a gain of 440 basis points over the same period last year. We concluded the year with a 35% volume market share, marking a substantial 300 basis points increase. Additionally, in modern trade, we achieved a commendable market share of 55.4% in quarter 4 financial year '24 and 41.7% on an annual basis. In the e-commerce business, we almost doubled our business to report a 400 basis points market share increase to 39%. While these output metrics are impressive, they are the direct results of our unwavering commitment to input measures. The India market is driven by robust operational metrics, and we believe that sustained progress on this front will ensure long-term sustainable growth. Our strategy to densify distribution has been phenomenally successful. We added over 150 new distributors and expanded our retail footprint by more than 45,000 -- 44,000 outlets in the exit quarter of the past fiscal year. This achievement required not only upgrading and upskilling our workforce but also enhancing our analytical capabilities to make high-yielding decisions. Our commitment to excellence extends to our supply chain capabilities, by setting up a robust CNS infrastructure, KRBL improved its supply chain efficiency, ensuring quicker and more reliable delivery of products to various market segments. This strategic move not only bolstered our ability to meet customer demands promptly, but also help the penetration of new markets, thus expanding our overall distribution network. The enhanced logistical support provided by the CNS expansion has been instrumental in strengthening KRBL's market presence and operational efficiency. Our second strategy to increase branded basmati penetration has brought 1 million new households under our branded umbrella this fiscal year alone. The overall branded basmati category welcome 2 million new households. India Gate reached an impressive 11 million households in India, further strengthening our position as the world's #1 branded basmati rice player. Our marketing campaign commanded a dominant 60% plus share of voice in the category, and the regional approach to marketing communication strengthens our brand showed by a 200 basis points increase in brand equity and a 1,000 basis points increase in trial ratio for the brand. Our third strategy of diversifying our product portfolio has made notable progress. We launched 2 new categories last year, and our entry into the regional rice category was met with positive reception, generating a remarkable revenue of INR 212 crores, an 89% increase over the past year. We exceeded our target of the segment contributing 5% to our overall India revenue in financial year '24. Furthermore, our new launch India Gate Classic Biryani Masala has seen tremendous success, adding innovation to our legacy brand, India Gate. This high margin category holds great promise, and we believe that this category will scale up significantly on modern trade and e-commerce platforms. Within the first 3 months of launch, we have been able to garner 10%-plus marketer within the Biryani Masala category in modern trade, which consist of established legacy masala brands. As the India business achieves unprecedented growth, our focus extends beyond expansion to evolution. We are committed to building functional capabilities, advancing technological competencies and upgrading our talent pool. In conclusion, KRBL Limited stands at the threshold of a new era of growth and innovation. Our achievements over the past year are a testament to our collective effort, strategic foresight and unwavering commitment to excellence. We are poised to further strengthen our market position and drive sustainable growth. Our vision for the future is clear, to be a leader in the industry through relentless innovation, operational excellence and a deep understanding of our consumers' evolving needs. We will continue to invest in our people, technology and processes to ensure that we still are at the forefront of the market. Thank you for your continued support and confidence in KRBL Limited. Together, we will achieve new heights and create a last thing impact on the industry. The future is bright, and we are ready to seize the opportunities that lie ahead. Thank you. I'll now hand over to Ashish for his comments on the financial statement.

Yes. Thank you, Ayush. I will now take you through the performance for the quarter and the year ended March 31, '24. All figures mentioned by me would refer to the consolidated financials of KRBL Limited. Total revenue from operations for the quarter stood at INR 1,318 crores, marking a growth of 3% over the corresponding previous quarter. Total income increased by 0.3%, lower than the increase in total revenue from operations, primarily because of lower other income, as the corresponding quarter last year had an income tax refund of around INR 40 crores. Domestic revenue, excluding power, increased by 8% over the corresponding quarter last year to INR 1,009 crores. Year-on-year basmati sales in the India market increased by 6%, driven largely by volume growth. On the export side, revenue declined by 12% over the corresponding quarter to INR 292 crores because of lower non-basmati sales, which were at INR 3 crores during the quarter as against INR 90 crores in the corresponding quarter last year. This decline in non-basmati shares is largely on account of ongoing policy restrictions. Basmati sales on the export side actually increased by 8% during the quarter. Gross margin in the quarter was at 25.7% as against 26.6% in the same quarter last year and was affected largely by higher basmati unit cost. EBITDA margin for the quarter was at 14.1%, same as that in the corresponding quarter. Finance cost for the quarter was at INR 14.3 crores as against INR 7.8 crores on account of higher inventory-led working capital borrowing. PAT for the quarter was at INR 114 crores or 8.6% in margin terms as against INR 118 crores or 8.9% in the corresponding quarter on account of the factors that I mentioned. I will now share an analysis of Q4 versus Q3. Revenue from operations in Q4 was at INR 1,318 crores, like I mentioned, as against INR 1,438 crores in the preceding quarter. This is on account of domestic sales, which were lower by around INR 135 crores vis-a-vis the preceding quarter, while export sales were actually higher by INR 14 crores. Domestic basmati volume sales were lower in Q3 -- lower as compared to Q3, as Q3 is the festive season, while export sales actually saw an increase in realization in quarter 4. Quarter 4 gross margin is higher on account of higher export realization and higher revenue from byproducts as well as power, while average basmati COGS remain at Q3 levels in Q4. EBITDA margin remained at Q3 levels, primarily on account of higher proportionate employee costs. Now I will discuss 2024 performance. Total income for the period stood at a record -- sorry, INR around 5,482 crores, marking a growth of 0.4% against FY '23. Revenue from operations was at INR 5,385 crores, marking a similar growth over FY '23. Gross profit margin of the company was at 27%, lower -- on account of lower export sales, an increase in paddy and rice cost during the year. EBITDA margin was at 16.4% on account of above factors, but benefited from lower export trade on sales. PAT of the company was at INR 596 crores, loan account of above factors besides higher finance costs. Now just to share the segment-wise sales performance for the full year, domestic basmati sales volume for FY '24 grew by 10% and realization by 6%. This, coupled with almost doubling of non-basmati sales, resulted in an 18% year-on-year growth in domestic revenue to INR 3,936 crores. On the export side, in FY '24, basmati sales volume declined by 20% because of lower branded sales. Basmati realization increased by around 5% to 9% for both branded and bulk segments individually, but overall basmati realization was flat on account of higher share of bulk in overall export revenue. This, coupled with policy restrictions, mentioned by Anil ji on the non-basmati side, resulted in an export revenue of INR 1,345 crores. Moving on to balance sheet highlights. Total inventory as of March 31, '24 was at INR 4,451 crores, comprising INR 1,334 crores of paddy as against INR 1,616 crores in March '23 and INR 2,955 crores of rice as against INR 2,396 crores in March '23. In volume terms, paddy stock were at approximately 306,000 tonnes and rice at 444,000 tonnes. These numbers were 407,000 tonnes and 404,000 tonnes, respectively, in March '23. Total bank debt as of March 31, '24, was at INR 460 crores as against INR 138 crores as on 31, March '23. With that, I come to an end of my prepared remarks. I will now like to hand over to the moderator for opening the Q&A session. I would just like to mention that the ED matter is sub judice, so we will not be in a position to respond to queries on this matter. So over to the moderator now.

[Operator Instructions] Our first question from the line of Himanshu Upadhyay from BugleRock PMS.

My first question was, we have been doing CapEx for the non-basmati side also or domestic brand, where are we in that CapEx cycle? And how much of a revenue contribution of that has been there in the FY '24 and any thoughts on FY '25 and some focus areas for us?

Yes, Himanshu, so I think in terms of our CapEx cycle, with respect to our planned expansion in Karnataka and in MP, the land has been acquired. Various formalities post-acquisition of land are going on, and the construction work has commenced. So that is going as per plan. I think in terms of overall non-basmati revenue, Ayush had mentioned. So on the branded side, we did about INR 212 crores in last financial year.

And this would be -- means how many varieties would be there? Or this will be 1 or 2 varieties only where this INR 212 crores?

No, this INR 212 crores comprises of about 5 to 6 different varieties of regional rice, comprising some pan-India. So there are certain varieties, which sell in the east region, some varieties in the south region, some are contributed from the north and west. So as we spoke earlier also, our regional rice strategy is to focus on the premium varieties in regional rice, which have the potential to give us healthy gross margins. So we have chosen those varieties within the India Gate brand, and we are growing them alongside.

And see, we have started with 5 or 6 varieties, would we like to continue with these 5, 6 varieties or do you think that over a period of time, we'd like to focus on 2 or 3, which we think can be maximum potential? And how do you select those 5, 6 varieties because some of your thoughts -- which are those 6 varieties where you are focused on currently?

See we were started with 5 varieties. We might want to add more over varieties as we deep dive into a particular market and get more market intel. It might be a situation that we resort back to a couple of varieties, as our focus of varieties in terms of growth. So down south, Wada Kolam and Sona Masoori raw, old is giving us great results. So our focus there and growth there is much greater than we probably other varieties that we have started focusing on. So it is going to be a journey. There might be new varieties added as the market demands and expect, and there would be certain varieties that we curtailed down because of maybe consumer trends are not favoring or product quality or gross margins are not as per our strategic alignments.

Okay. And what are the top 3 priorities for this year on domestic side, can you give them? And I'm not talking about financial numbers, revenue or profitability, but in terms of goals you have set to achieve on the other aspects or operational aspects of the business besides financial?

I think that broadly, the 3-pronged strategy that we mentioned in the past year will continue. There would be refinements on that front, but densifying distribution reach is definitely an agenda going forward, as basmati rice currently is sold only in 7 lakh outlets. And we see other staples category selling in more than 15 lakhs and certain of the categories are of course 30 lakh outlets. Our objective is to expand basmati penetration of -- branded basmati penetration to that extent. So a lot of our effort maybe from marketing, maybe from distribution is to expand the overall industry and the category and not just ourselves. And being the leader, we believe that if we are able to do an expansion for the category, we will benefit the most. So that is definitely an area of focus. Alongside, we are augmenting our product portfolio. Regional rice growth remains as a focus, but we are also evaluating and going to be venturing into newer categories apart from rice. Ready-to-cook biryani masala, as I mentioned, has given us a bright spot, and we will focus on more of these and launches which relate to the brand India Gate and add to the innovation agenda to that. But other than ready-to-cook Masala, we are evaluating other food products or categories, and we'll be doing some launches announcement soon as we have something formed up.

Okay. Okay. And on export side, we said that we want to diversify from Middle East, okay? But can you give what would be our strategy? And are we focusing on large markets or even small markets, we are fine to go for exports business.

We look at the opportunities. Whenever there are opportunities, whether it is small or big markets, we don't want to lose any of the opportunity, which is in front of us. But prior to going in diversification or finding new market, we want to stabilize ourself in the market where we were already doing very well. And in the last 2, 3 years, our business has distorted because of certain reasons, which we want -- which we would like to overcome first and then look at the newer markets.

[Operator Instructions] We'll take our next question from the line of Chetan Doshi from [ Tulsi Capital ].

As you showed the road map for Indian market, there is nothing about the export market. You don't speak at all on the -- in the investor presentation nor in this presentation also made by all the 3 gentlemen. So we'd like to know because -- since last 3 years, the sales is getting stagnated around, say, INR 4,500 crores or, say, around INR 5,000 crores. Last 3 years, I've been attending your con call wherein it was told that in next 3 years, we want to become a INR 8,000 crore company. And when the market is lucrative, when prices are at all-time high, you're not able to penetrate the export market the way it should be as a market leader. So can you just highlight something on this?

See, let me -- your question is correct that in last 2, 3 years, we have not been able to perform in the export market. And, the main reason is that, first of all, that region is disturbed because there is -- there were big markets for Iran and Iraq for us. And due to payment problems and many other problems and we don't have any agreement in Dubai to regulate that business, and we don't want to enter into any such type of business where we come into problems. So we are not concentrating too much on that until the payment problems are resolved. Yes, I'd agree there is one market, which used to give us a top line of about INR 600 crores to INR 700 crores, that has been disturbed in our top line pertaining to Saudi Arabia, and we are desperately trying to recapture that market. At present, I can say we are trying, not more than that, but God willing in second quarter of the present fiscal year, we will be able to overcome this problem.

Yes. Let's hope so. But a lot of attention needs to be given to this subject because it is affecting your bottom line in a big way.

Absolutely correct. I do agree. And as has been an investor and we've been the executor on your behalf, we are trying our utmost. It is for me and my company to ensure that my investors are happy and we are able to give the desired results.

Can we expect it by September, you have things in line?

Definitely. We are also planning that by September quarter, we'll -- definitely we will be able to do something much, much better than what we have done in '23, '24.

We'll take our next question from the line of [ Mahesh Atal from Atal Investments ].

Anil ji, I request, if I can talk in Hindi, please.

Okay, [Foreign Language]. You can talk in Hindi.

[Foreign Language] because that is one thing because Iraq, Kiran already closed. I understand there are some payment receives that we can see. [Foreign Language] India Gate was, I can say, not only, but was the major brand, which was from foreign national. Otherwise, most of the brand [Foreign Language] Now, 80% market is captured by [ Foreign Language ] and they are 20-year, 15-year brands like India Gate only. [ Foreign Language ] 2015 from 1988 up to 2015, we were doing a phenomenal job. And we were so proud of that market because every year, the increment was coming around 10%, 8%, 10%. [Foreign Language].

[Foreign Language] Definitely by September, we will open our own office in Saudi.

[Foreign Language].

We'll take our next question from the line of Keshav Garg from Counter Cyclical PMS.

Sir, we used to be the largest Basmati rice company till FY '20, then the second largest player overtook us in 2021 by revenue. And last year, they even overtook us in EBITDA. Now, sir, our network is 50% more than them. So with 50% more network, we are generating less EBITDA than losing market share. And sir, if we listen to the management commentary, [Foreign Language] We are gaining market share in India in low-margin market and high-margin market where we are losing markets. [Foreign Language] Why can't we divert the Saudi exports to the rest of the world because otherwise, what is the point in having so much of inventory?

[Foreign Language] Let me tell you my 40-year experiences, 40 years experiences that Basmati prices have always remained higher than one part during the -- what was the -- what normally they have during the start of the season. So almost basis [indiscernible] looking to our financial strength, we buy. And we know whatever we have purchasing, I should repeat it by end of the season or because we have to keep 1 year, 2 year stock of both type of level we maintain the stock. That's number one. [Foreign Language] But our problem is payment. [Foreign Language] of the same volume, same capability. Basmati's 2 markets will always remain #1 in Iran and Saudi Arabia. Now South Arabia started importing around 900 to a million tonnes. Iran is 1.2 million tonnes, 1.3 million tonnes, partially the export directly partly through Dubai. Now 2.2 million tonnes is practically 45% of our total export. [ Foreign Language ] We have to finally [ Foreign Language ] of this market. [Foreign Language] we will open an office in Saudi. [Foreign Language] So let us open an office in Saudi. We cannot even afford, let us tell you, if we have to remain the leader, we have to be present in Iran and in Saudi. These are the 2 major markets.

Sir, our exports basically have reduced from around INR 2,100 crores 4 years back in FY '20 to INR 1,350 crores last year, whereas sir if you see then India Basmati export revenue has increased by 35% over the past 4 years and 22% last year. Sir, whereas our Basmati revenues have fallen by 35% in the past 4 years. So then the question again...

You kindly calculate one thing, INR 600 crores to INR 700 crores is due to bulk exports to Iran and Iraq, you are talking about the numbers now. INR 700 crores is roughly to Saudi Arabia. Now INR 1,400 crores -- if you add INR 1,400 crores, if you refer to the level what you are talking. [indiscernible] to all the investors, these are the 2 main markets.

Sir, this year, total Basmati exports INR 48,400 crores from India year. [Foreign Language] so I'm not able to understand Basmati is the commodity [ Foreign Language ] rice is a special commodity, why cannot we divert it, it is not as the Saudi Arabia's 80% of the export market, it is something like 15%, 17%. So even if we lost market share in Saudi, why could we not diversify the [indiscernible] rest of the world?

Ketan, this is Ashish. Ketan, the numbers quoted by you are correct. I think what Anil Ji has already responded to your question and then to your comment. I think your point has been noted in terms of the efforts that are being made in terms of restoring export to be accelerated, and he's gone back on side that if the indirect distribution, we are not able to align the partner, then by September, as far as Saudi is concerned, we'll set up our own operation. Do you have any other comment or question other than that?

Sir. My question [indiscernible].

Can you join by the queue, please, as we have other participants waiting. We'll take the next question from the line of Amit Agarwal, an individual investor.

My first question is regarding rice brand oil. So last 7, 8 years back, we were talking about the launch of this product in the country. Where are we in this particular product at this stage? And my second question is that your presentation shows that in the last 10 years, we [indiscernible] double that turnover. I just want to know how much is in volume and how much is the...

Mr. Agarwal, I'm sorry, your voice is muffled. Can you use your handset mode, please?

I'm using handset mode only.

It is muffled. Okay. Go ahead with your question, please.

My second question is regarding, in your presentation, you are showing that your turnover has increased, but double our turnover in the last 10 years. So how much is this because of volume increase? And how much is this because of price increase?

Yes. So I think, Amit, if I heard you right, your first question was on the timing of the rice bran oil launch, is that correct?

Yes, yes, yes.

Ayush, can you respond to that?

Yes. So on the rice bran oil project, we have made significant progress, and we are planning a launch in the quarter 2 of this financial year. However, it's not going to be a rice bran oil launch specifically, it's going to be a healthy edible oil launch. And we're looking at a very high gross margin profile as a product within the oil category. On the realization or on the gross front...

I think Amit, what you are asking for is that over the last 10 years, what has been the increase in value versus volume, right?

Yes, yes, yes.

So I don't have 10-year old data with me right now, but I'll get back to you separately.

Okay. And regarding this oil market, how much turnover are you expecting from this new product launch?

We've made some projections and calculations. And by year 3 of launch, we are expecting about INR 200 crores to INR 250 crores revenue.

Sir, are you setting up the plant in Punjab or like which [indiscernible] in this plant?

Yes. We are going to be setting up a plant in Punjab.

We'll take our next question from the line of Ketan [indiscernible], our retail investor.

I'm coming back to the exports market topic. I understand that Iran, Iraq, Saudi are big markets, and we cannot ignore them. I'd like to understand what is your view about the markets of U.S., Europe, Australia and all these markets? Because I understand that these markets also could be bigger, and we don't want to reach [indiscernible] on the top 3 markets that you mentioned. But at the same time, how are we progressing on the other markets where they may be begin potential, but right now the revenues from these markets is very less for us.

Let me tell you, if we leave the other -- these 3 major markets then the exports to the rest of the world is 50%, which includes Far East, Middle East and your Pacific side, East Africa, West Africa, U.S.A. and Europe. So this is the total [indiscernible]. We are doing extremely fine in Australia. We are also being extremely fine in the whole of Middle East except Saudi Arabia. America, we are not able to increase what should be the increment, but we are doing the export. There, the major share is of our competitors, which are having a good share in America. Otherwise, leaving America, as far as white rice is concerned, we are really doing fine in Europe, East Africa, West Africa, Middle East and in Far East also.

Okay. So just again, in terms of U.K., is U.K. a big market for us?

U.K. is a value [indiscernible] to the Europe, including U.K., most of the rice, Basmati exported is brown rice still. I think after the FDA, the white rice expansion would be phenomenal. As on date, the white rice, what we do to Europe is 4 containers, 5 containers each every country, and we are doing fantastically. So let me tell you one thing that my nephew, Akshay, is looking after the [indiscernible] side of the business and is really doing [indiscernible]. Recently, he was in Europe and we have made certain very good contracts, I think. So that is why we are desperate. We are also [ Foreign Language ] what should we do? So we are trying to establish new markets and expanding our market where our requirement is less or small.

Okay. And last question from my side. I understood from your comments that the large distributor that we had in Saudi, we had appointed him for maybe a year or so, and the engagement was not for a longer period. So correct me if I'm wrong. And linked to that is, what I want to ask is, now whatever the new distributor that we are evaluating are looking to appoint, again, our engagement would be for a shorter period to start with? This is my question.

See, normally online distributors are for a minimum period of 1 year and maximum for 2 years, otherwise throughout the world, we revised the agreement every after 2 years. So that engagement was also for 2 years, but it couldn't perform. The first year is it never performed. We gave the opportunity to perform the next year. Next year also, it didn't perform. And therefore, we had to consolidate the agreement, and we wanted to -- we went, I have with other people, but they are not able also to perform.

We'll take the next question from the line of Nisarg Vakharia from NV Alpha Fund Management LLP.

Yes, sir, two questions. The first is that you just recently mentioned that the distributor was not able to perform. Can you help us understand what does that mean? Because over the last 4, 5 years as you said that the local private-label brands are sort of taken shelf space versus you, so who are they sourcing Basmati rice from? And where are they sourcing rice from? And how easy is it to displace the local brands and again come back into the shelf space?

You're talking of the distributor which we have discontinued?

Yes, sir.

I think I've repeated this six, seven times. When you say he is not able to perform, let us say, we conclude that in a year, minimum you have to buy -- you have to sell 60,000 tonnes a year. And he's not able to do 20,000 tonnes, so we call it that he's not able to perform as per the agreement, as per the terms and condition. One year, he doesn't perform, we can visualize that he was new guy [indiscernible] second year also, okay? You reduced the quality from 68 to 48 or 50. Next year, we couldn't do more than 10,000 tonnes. So these are the reasons of nonperformance of what can be done [indiscernible] the value.

That I understood, but I sort of asked you a deeper question that when you lose shelf space, somebody else has replaced you, right?

Yes.

So how easy is it to displace those guys back and then get self space again, because 4 years is a reasonably long time to lose market share is my point.

You're absolutely correct. This time around, either we are going to do ourself or we are appointing some very strong distributor. So for the shelf placement, we will have to pay more to the retailer. And we have to do more labor, more efforts. Let me tell you, till date, everybody is asking to different vendors where is India Gate, where is India Gate? But as you rightly said, those shelf spaces have been occupied by our competitor. And we will have to face a hard time to recapture that.

Okay. In context to that, sir, the private label brands that exist versus India Gate in Saudi Arabia and these markets, they are sourcing Basmati rice from which country, Pakistan or India?

It is still India. India is 85%, 15% is Pakistan, [indiscernible] but its 90% and 10% in Saudi Arabia.

Got it. Okay. Second question, sir, for domestic. You've done a very good job. If you see your volume growth from 2014 to 2019, the CAGR from 2020 to '24 is almost double of that, which is quite nice after COVID, I'm seeing specifically. And we've done almost 15% CAGR, wiht data I have. So I have seen this data. Can you please help us understand what has lead to the dramatic increase in volumes in domestic operations post-COVID? And can this run rate continue? Because I think out of the 15% CAGR growth, 6% is price growth?

What was the last part?

2 points. One is that [indiscernible] how much of it is volume.

Thank you for that question. I think post COVID, broadly a couple of things happened. One is definitely the HoReCa business resumed back. The tailwind on the HoReCa business was normalization of GST across India. Earlier, there was a GST charge only on branded products while unbranded products were exempted of GST. So that created a lot of baggage on branded products to compete in the market. But after 2019, when the GST regime got normalized, I think the big push was received by us, especially because we were in the quality, branded space and the HoReCa business. And obviously, HoReCa overall has seen a very -- I would say to stupendous growth in terms of outdoor heating, in terms of travels, in terms of spending otherwise. So HoReCa business has grown for us considerably over the past 5 years. Another tailwind that we've seen in the India market is consumption patterns increasing. So I kind of mentioned in my earlier speeches as well that India used to be purely a metro phenomena when it came to Basmati rice consumption. Almost 60%, 65% of Basmati rice was consumed only in the metro cities. Over the past 5 to 7 years, this trend has changed. Now about 60%, 65% of consumption of Basmati rice, branded Basmati rice happens in the Tier 1 and Tier 2 cities. So that tells you about the expansion of Basmati rice consumption within the India market. And we've kind of ridden that wave of growth, but we've also outperformed the category growth in a lot of ways that has showcased through our gain in market share. Just last year, we've gained about 300 basis points market share to finish the year at 35% in general trade. So we've done distribution expansions. We entered new retail outlets. We've done a lot of work on the household penetration in terms of effective communication and marketing strategies. So it's a mixture of a lot of things across the spectrum. Even supply chain capabilities have been enhanced over the past couple of years to be able to fulfill to this evolving consumer needs.

Just in context to this, see the addressable opportunity from unbranded to branded is infinite, right? We can't even put those numbers on paper. So when you say 35% market share, what does it mean?

That's part of the packaged branded segment.

Packaged? Then Okay. And can we not have like 10% to 12% volume growth considering that now we have Blinkit, Swiggy at least in the urban cities. I don't think many people go and buy rice from the general provision store, lose. Everybody orders on these platforms. So can the volume growth be higher than what we are doing today?

I think that's our aspiration. We are planning at least a 15% to 18% volume growth on consumer packs, and about an 8% to 10% volume growth on bulk pack year-over-year and 15% to 18% in consumer pack is on the back of e-commerce and modern trade, which are growing even higher. But model trade and e-commerce still as a percentage of sales is about 20% to 25%. 70%, 75% is contributed by general trade. So that's the reality of Indian retail ecosystem, and I think it's quite a good tailwind and a good story for us unfolding going forward as well.

One small question, if I can squeeze in. Just wanted to understand if you open our office in Saudi Arabia, see, there are 2 forms of distribution networks. One is India, where you have to go to every general provision store and crack that or you have like U.S., where the distribution network is very consolidated. So you can easily achieve scale. So Saudi Arabia falls in which bracket?

No, no. As far as the Saudi is concerned, it's like America only. Every business is done in a professional manner. And I believe we are the 90% consumption is up Indian rice. There is no question whether it is [indiscernible] or whether it is modern trade or anywhere -- it's totally professional way of doing business.

We'll take our next question from the line of Anuj Sharma from M3 Investment.

Just one quick question related to the previous one. What is the economics of setting up our own channel in Saudi?

Well, we have not [indiscernible] out. We are -- we are on a watch of a good distributor only at present. But if we are not able to get any good distributor in next 3 months, then we will make with it and see how we can establish our own office, then we will try to establish our own office.

Okay. But if suppose we come down to plan B, I'm just trying to understand what are the negatives or downside of setting up our own channel? Is it the breakeven? Or is it the possibility of success or failure?

See, I think from an economic standpoint, it will definitely be a much better deal because we will be surpassing all the middlemen margins and working directly. However, there will definitely be a question of credit exposure in the market that we will be exposed to. But I think broadly, the question that needs to be answered is the capabilities front. Having a distribution, having your own distribution in the foreign market requires a lot of network, requires a lot of local know-how and capabilities. Being a manufacturer, being a brand company, I think that's not what our core capability lies, which is setting up our own distribution network. Having said that, if the need arises and if that's what we want to do, we will put all our energies towards developing that capability. So there's more at risk on the softer side of things rather than the economic. It definitely would favor the decision, but I think it's more about the capabilities that need to be there -- to be able to enter the market.

We will take our next question from the line of Yash Dantewadia from Dante Equity.

Can you just shed some light on the distribution dynamics in domestic versus foreign exports? Basically, cash and carry percentage, if there is any, how much is it in the Indian distribution versus the export distribution? I don't know anything about exports. I don't know anything about your Domestic business. In terms of the payment terms, can you just shed some light on that? Because like the previous participant said even if you penetrate the domestic -- even if you penetrate the Saudi market by yourself, you'll have a hard time collecting payments in understanding the credit dynamic there. So how is that different right now?

See, in the domestic market, while there is a significant credit requirement in the market from the retailers. But having a strong brand for India Gate, we are -- our credit exposure to our distributors is very limited. Our distributors mostly pay us on advance payments and avail the cash discounts that we offer them. And hence, our credit exposure in the domestic markets are quite limited. When it comes to channel dispersion, 75% to 80% of the business is contributed by the general trade, while 20% to 25% business contributed by the modern trade and e-commerce platforms. And we have distributors across cities and states in India, and that number is closing about to 750 distributors now. In the export markets, it's quite a diversified portfolio depending on the market requirements. There are certain markets like America, which will be more dependent on organized retail and ethnic markets. And we -- and so every market has a very nuanced distribution network depending on the product because Basmati rice is also a niche product and an ethnic product. So depending on the spread of the market, depending on the penetration of the product in that market, the distribution network varies. However, our strategy currently is that for every country, we have 1 authorized distributor, who serves various segments of the market. In certain countries, we have also had a separate distributor for our consumer pack and we have a separate distributor for HoReCa.

Right. In Saudi, with your previous distributor, did he pay cash or credit? What was the payment terms?

Let me tell you, as far as Basmati is concerned, the Government of India came out with a notification that Basmati can be exported either against CAD or against the letter of credit or under ECGC guaranteed payment. So these are the 3 modes. So there is no question of giving any credit in case of Basmati as far as Government of India notification is concerned.

No. But if you go and set up your own domestic office in those countries, then that guarantee won't be valid, right?

That will be still valid. We will come out from that problem. But the question is in every country, whether it is Europe, U.S.A., Middle East, Far East, African continent, the same principle, which is in India [indiscernible] there also. There are payment problem with the [indiscernible] with the HoReCa. So you have to be intelligent enough to give credit -- limited credit and to whom to be given that credit as far as local business is concerned.

Last question regarding the margin. For example, in your domestic market, in the last 3 years, how much have you grown in e-commerce, question number one. And within that question, how does your margins differ? Now if you go through a distributor and e-commerce is selling directly, can you just explain if your margins are going to go up if the e-commerce penetration goes up? Are your margins going to go higher or no? And if yes, by how much? And how much you are expecting e-commerce to grow in India? Because I see a lot of Big Basket, Jio Mart, et cetera, et cetera. And obviously, that penetration is going to grow a lot in the next 3 years, 5 years. So are your margins going to be supported by that growth? And how much are you expecting that portion to grow? These are the two questions.

All right. I think in the past 3 years, I would say the e-commerce business has quadrupled for us. So we were at about INR 50 crore revenue and we just closed a INR 200 crore revenue on e-commerce. And we see that number. We also had forecast this year of upwards of 30%, 35% in terms of growth rate on this front. So e-commerce business, because of the penetration, that digitization is happening across India. And because of the convenience from a e-commerce perspective, I think this channel is seeing a lot of penetration and acceptance from the consumers. So we are very positive on the e-commerce front. In terms in of margins, definitely, it's a direct serve channel from our end to the retailers. However, there are a lot of cost of doing business with such retailers because it's a consumer-facing business. So there is a need of a lot of promotion. There's a need of a lot of advertising on the platforms, and there is a heavy investment on that front. If I compare it to general trade, I would say it will be just slightly better in terms of overall cost of doing business. So we are maintaining healthy margins as we are doing in general trade when working with e-commerce.

Also, you said U.S. market share, can you just share that number again, please? Actually, it was distorted. My line was distorted. U.S. market share, KRBL versus your competitor?

I don't have U.S. one.

No. So I don't think [indiscernible] market share. U.S. market share, I think we have 7% of the total share of the U.S. market.

Grown in the last 3 years? Or has it gone down?

It's the same. It is almost the same. Neither it is increasing nor it is going down.

We take that as the last question for today. Thank you very much, members of the management team. Ladies and gentlemen, on behalf of KRBL Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.