KRBL Limited (KRBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the KRBL Limited Q1 FY '27 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, sir.

Good morning, and thank you for joining us. Welcome to the Q1 FY '27 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 India Business as key speakers on the call. To begin the call, Mr. Anil Kumar Mittal will share updates on the business industry and our overall strategy. Following that, Ayush will provide insights into the performance and outlook of our domestic business. Finally, I will present the financial overview of the company for the first quarter ended June 30, 26. 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 this call may contain forward-looking information, and actual results may differ from these statements. You can refer to KRBL's investor presentation available on the stock exchange website and our company's website. Now I would like to invite Anilji to share his views. The floor is yours.

Good afternoon, everyone. Thank you for joining us today for KRBL's Q1 FY 2027 earnings call. I sincerely appreciate your continued trust and confidence in the company. This has been an unusual quarter for our industry, and I want to give you a full picture of it. I will take you through a global rice balance, India's production and export outlook. The final outcome of the 2025 Basmati crop in India and in Pakistan, how prices have moved over the last quarter and up to date and the effect of the best Asia conflict on trade and logistics. Let me begin with global right outlook. As per the USDA latest estimates released on 12 August 2026, global rice production in '26, '27 marketing year is expected to decline to approximately 537 million metric ton against about 546 million metric tons in the marketing, we are now ending. At the same time, global consumption is expected to rise to approx 543 million metric tons from about 539 million metric tons. The bulk of the increased funds from India where domestic consumption alone is projected to grow by around 3.5 million metric tons with production falling and consumption rising, global ending stocks are expected to draw down from record levels. This is a meaningfully tighter world balance sheet than the market was pricing at the start of the calendar year, and it should keep the rice market firm rather than soft. Against the tighter balance, India's position is unchanged. India continues to command close to 40% of global rice rate and despite lower domestic production USDA forecast India's rice exports to approximately 25 million metric ton in '26, '27, about 1 million tons higher than the previous year. USDA projects, India size production in the coming marketing year at approximately 150 million metric tons against about 154 million last year. India will comfortably remain the world's largest size producer. Domestic consumption is projected to rise from around 124.5 million metric tons to nearly 128 million metric tons. Government rice stocks remains very substantial as close to 3x the buffer loan as at 1st April 2026. We were able -- everyone is watching is the monsoon as of 5th August cumulative rainfall was running about 11% below the long period average. And IMD has revised its seasonal forecast down to approximately 90% of normal with below-normal rainfall expected in both August and September. The Northwest, which is our basmati belt is amongst the deficient region with [indiscernible] is are running well below normal through June and July. This voice shortage nationally was about 27% below last year in early August. And non-India pay acreage as on 7th August was around 4% lower over the last year. What this means, the basmati belt is largely [indiscernible] indicated. So in our growing regions, a rainfall which it shows a first as high pumping and input costs other than the -- rather than as lost accurate. Nationally, [indiscernible] area has fallen more than the cure average and the deficit of the magnitude carries real yield risk for a longer duration varieties are vested in October and November. What I would say is that the [indiscernible] shelf monsoon on top of an already depleted pipeline are used for firm not soft credit prices into the new crop. Let me now turn to Basmati crop. The 2025 crop has fully played out and we have complete visibility. It was in the hand a difficult crop acral going into the season was healthy across Punja Parana and Western pads, Rajasthan in parts of Multipart. And adoption of newer past resistant Posarac continued to improve. But the flood is a [indiscernible] and early September 2025 destroyed the crop outright on approximately 2 large factors of table land, on which around 60,000 network was basmati. Assessments put the decline in Punjab as was the output at 20% to 25% and Mondi arrival in the worst effected test it ran about a quarter below the previous year. Quality was the second issue. Some [indiscernible] and partially effective long carried higher merger greater discoloration and lower milling poverty, while an effective [indiscernible] delivered good grain length and Aroma. The result was a crop that was not merely smaller, but sharply segmented with a wide spread between genuine export grade material and everything else. Quality, segregation mattered more this season done in many years, and this is precisely where a company with our sourcing network and our aging discipline and its position. The consequences was visible in price right through the year. Basmati opened week in October 2025, [indiscernible] 1509 in Punjab was trading around INR 2,500 to INR 3,200 per [indiscernible], well below the previous year and then drive steadily as the 2 side of the crop became apparent. By February 2026 [indiscernible] Mandi was in the range of INR 4,300 to INR ,700 per [indiscernible]. By May, all crop availability at the major northern trading centers have effectively run out with no material replacement until the new curve, which arrived in October. Pakistan's 2025 crop ended in a very different case from where it began. [indiscernible] so most of the crop being wiped out. The final assessment put basmati damage at only 5% to 6% and Pakistan's own economic survey in June reported price production actually up 2.8%. The supply came to impact their competitiveness did not. Through the quarter, Pakistan basmati [indiscernible] such a premium for around USD 100 per ton to comparable Indian material on pitas benchmark with a flat currency, giving them no relief and their government answering with the beauty drop at rather than a price cut. The result was pretty stable, purchased authorized exports for the year ended June 2026 about 26% in volume and 32% in value. Our prices did not buy the volume. India's competitive has not been eroded. It has been reinforced. For India as a whole, FY 2026 was a record year by volume with Basmati exports of 6.52 million metric tons was INR 50,128 crores and non-basmati exports of 15.01 million metric ton was INR 51,892 crores. India today accounts roughly 385% of the world Basmati, which brings me to the defining feature of the quarter under review. On 28th February 2026, the conflict involving Iran and United States and Israel escalated sharply, and the Strait of Hormuz have been practically partially open since then. This matter to our industry more than almost any other because the Middle East takes close to 3/4 of Indian basmati exports. The immediate effect was physical between 4 and 5 lakh tonnes of Indian basmati was trended. Some at Indian port and some in transit at the peak of the disruption. Freight went vertical, container rates from the west coast of India to the Middle East dose more than tenfold from roughly USD 500 to as much as USD 5,000 per container. Cargo has continued to move through [indiscernible] for UAE bound volumes, Gina and Saudi Arabia and Salalah for onward movement into Qatar, Kuwait and Bahrain, but branch shipment [indiscernible] to 14 days of target and several hundred dollars per container in handling. India basmati export volumes in the first quarter reflected all of this approximately 1.5 million metric ton against 1.7 million in Q1 FY 2026, with the Middle East down about 11% year-on-year. But the price side moved the other way. Basmati realizations for the quarter were approximately 20% higher year-on-year and 13% higher sequentially. This was a volume shop caused by logistics, not a demand shock caused by buyers. That brings me to the current geopolitical position, which is materially better than what was where until now, the commercial target through the state had begun to resume this seems to be the most promising reopening since February. Through the disruption period, imported across the region brought hand-to-mouth and deferred forward commitments as confidence in transit returns. Inquiry levels and order book begin to rebuild. The Gulf markets have now absorbed 2/4 of the constrained supply. Inventories have been drawn down materially and that shop will have to be replaced. Our customer relationships remain intact, our brand hold their share position. And we have both the inventory and the balance sheet to serve that demand as soon as the routine reliable. Now turning to KRBL's performance about exports revenue for Q1 FY 2027 stood at INR 244 crores against INR 455 crores in Q1 FY '26, a decline of approximately 50%, that decline is entirely a Middle East story as approach to every other region, taken together grew 27% in the quarter. I would ask you to hold those 2 numbers alongside each other because between them, they described at what happened where we could ship, we grew where the route was low, we could not. Overall revenue for the quarter was INR 1,496 crores lower by about 6%. The company reported EBITDA of INR 372 crores on a profit after tax of INR 261 crores, the stronger quarterly profitability in the company's history. For the balance of 2027, our position is this the export shortfall of the first quarter is a timing issue, not a structural one. Our customers are intact. Our order pipeline is intact. The nation inventories have been drawn down. And our non-middle export business grew 37% to the disruption, provided shipping condition in West Asia continued to stabilize. We expect export volumes to recover progressively from the second quarter and we are maintaining our guidance and meaningful export growth for the full year. On Saudi Arabia demand remains consistent, and we continue to ship through wholesalers under our interim arrangement, our third for a long-term distribution partner is ongoing, and we are being deliberately selective in the market for this important cost of appointing [indiscernible] partner fares the cost of taking more time. Our strategic priorities are unchanged. First, disciplined procurement prioritizing low merger, high recovery body to protect both margins and brand quality, which will matter spatially in a season where the monsoon has been efficient, such in continued demonization and expansion of our branded portfolio in India and internationally. Third, deepening our position with large global buyers using India's pricing competitiveness relative to Pakistan. The fourth operational efficiency and disciplined capital allocation. Operationally, this was a demanding quarter on the export side for reasons entirely outside the business award a close shipping lane and the freight market that at its pet made well boundary uneconomic. We delivered our strongest ever quarterly profitability, though it is not an accident. It reflects a domestic business that absorbed the shops procurement strategy that protected margin and the sport book diversified enough to grow wherever the routes stayed open and the balance sheet is strong enough that we were never forced to sell into weakness. I would like to thank all our shareholders, customers, partners and employees for their continued support and confidence in KRBL we remain committed to delivering sustainable long-term growth while maintaining the quality and leadership associated with the India [indiscernible] brand. Now I will hand over to Ayush for the domestic business update tend to once again. Thank you, and good afternoon, everyone.

I will take you through the performance of our India business for quarter 1 financial year 2027 and provide an update on the structural initiatives underway. Domestic revenue, excluding power stood at INR 1,221 crores, growing 14% year-on-year. The composition of the quarter was mixed. Our consumer pack and regional rice businesses performed well, while branded rice volumes saw a modest decline due to lower bulk pack sales. During the quarter, rice commodity prices moved upwards, allowing us to take appropriate price increases and resulting in higher realizations. The short-term increase in prices led intermediaries to defer back purchases while waiting for greater price stability. We, therefore, see the decline in [indiscernible] largely as a postponement of volumes rather than any structural weakness in demand. Demand remains stable, and we expect these purchases to progressively materialize over the coming quarters. For financial year '27, our outlook remains positive, and we are confident of delivering approximately 10% growth in domestic volumes. This will be supported by continued growth in consumer packs, the expansion of regional rights, normalization in bulk packs and stronger execution across channels. Let me now update you on our 4 strategic priorities. Our first priority is democratizing distribution. India Gate is present in -- is present across approximately 3.3 lakh retail outlets and reaches INR 1.2 crore urban Indian households. Our focus is not too early on adding outlets. We are improving the quality of our distribution through deeper direct coverage, stronger outlet execution and greater availability in underpenetrated tons. Our distributor management system has now been successfully rolled out across our top 190 distributors. These distributors contribute approximately 65% of our consumer pack business in general trade. Active adoption of the system is improving visibility, governance and execution discipline across the business. Our second priority is remodeling the supply chain. Fill rates in organized trade are now averaging approximately 19% with average purposing of around [indiscernible] from the receipt of a purchase model. While this represents a significant improvement, our benchmark is clear. We are working towards fill rates of at least 95% with servicing including 72 hours. Modern Trade delivered healthy growth during the quarter with rice volumes growing 6.5% and value growing 13% while maintaining strong gross margins. At the same time, competitive intensity remains elevated and our market share performance in parts of modern trade needs improvement. We have identified the gaps and are responding to sharper assortment, pricing, availability and account level execution. Our focus is on delivering growth while protecting the long-term strength and profitability of the portfolio. E-commerce continued to be one of our strongest performing channels, delivering approximately 50% primary sales growth during the quarter. India Gate exited June with approximately 41% market share in e-commerce, maintaining a yield of around 10 percentage points over the next largest competitor. The e-commerce operating model has also evolved significantly. The team now owns the complete channel P&L, including sales, gross margins, contribution margins and investments. pricing, performance marketing, availability and city level execution are being monitored through an integrated dashboard. This is enabling faster decisions, stronger accountability and more productive deployment of investments. Our third priority is investing in the India Gate brand. During quarter 1, we continued to evolve both our communication and the media through which we engage with customers. Our April Fools' campaign, used contemporary humor and popular culture to communicate the aging credential of India Gate Classic. It has generated more than 45 million engagements. Our Mother's Day and Father's Day campaigns moved beyond conversional greetings and build conversations around the Indian values of beauty and sacrifice. Together, these campaigns generated more than 90 million views. Beyond reach, these campaigns represent an important evolution in our marketing approach. Our communication is becoming more consumptive in its tonality more relevant to today's audiences and better suited to the new age media platforms on which consumers spend their time. These are long-term brand-building investments. We do not evaluate them based on immediate sales conversion, where purpose is to strengthen the relevance, salience and enduring equity of the India Gate plan. Our fourth priority is building our portfolio beyond rights. During quarter 1, we launched India Gate Light [indiscernible] across 22 cities in North India. OA is a natural adjacency for India Gate. It is a large stable category with relatively low branded penetration, while the branded segment is growing strongly. Our right to win in this category comes from our sourcing capabilities, supply chain strength, distribution reach and most importantly, the trust consumers place in the India Gate brand. The initial response from retailers and consumers have been encouraging. We will scale the category in a disciplined manner based on consumer adoption, repeat purchases and the quality of the economics. Our Masala portfolio also performed exceptionally well during the quarter, delivering 74% value growth year-on-year. This category plays a distinct role in our portfolio, price is primarily a monthly basket purchase, whereas Masala are consumed across different yields and recipes. They can therefore help us into more households, increase the frequency of consumer introductions with India Gate and very deeper engagement with the brand. Our proposition is anchored an authenticity of taste and flavor. We are focusing on popular regional recipes that are often complicated to prepare at home but where consumers increasingly expect a restaurant-style experience Building on the success of our [indiscernible], our newly launched ready-to-cook Masala range have received a strong initiatives. At the end of quarter 1, our Masala portfolio has reached an annualized revenue run rate of approximately INR 9 crores. We are targeting an annualized revenue run rate of approximately INR 25 crores by the end of the financial year '27. Regional drive also continues to be an important growth opportunity. Demand has been established and product quality has been streamlined. Our focus is now on ensuring the regular supply and operating stability. Our new facility at [indiscernible] is expected to become operational by the end of quarter 3, supporting the next phase of growth in this portfolio. [indiscernible] commerce is particularly promising for regional rights. The category remains highly fragmented among regional brands, while platforms increasingly require trusted brands that can offer consistent quality and professionally service a complex, fast-moving channels. Underlying all 4 priorities is a broader organizational transformation. Our objective is not merely to deliver market share gains in a particular quarter. We are preparing KRBL for its next stage of growth by building a more process-led, technology-enabled and data-driven organization. This includes stronger processes and accountability, end-to-end supply chain excellence, order-to-cash transformation better use of dashboards and analytics, faster decision-making with robust governance and a strong culture of ownership and performance. To conclude, domestic revenue grew 14% in quarter 1, supported by higher realizations and healthy performance in consumer pack and [indiscernible]. The softness in bulk pack was largely due to the timing of purchases while underlying demand remains stable. Our outlook for financial year '27 remains positive. We are confident of delivering approximately 10% domestic volume growth while sustaining profitable growth in the India business. I'll now hand it over to Ashish for his comments on the financial side of this.

Thank you, Anil, and thank you, Ayush. I will now take you through the performance for the quarter and financial year ended 30th June '26. All figures mentioned by me would refer to the consolidated financials of KRBL Limited. Total income for the quarter stood at INR 1,560 crores, lower by 3% over the corresponding quarter last year. Domestic revenue witnessed growth of 14%, driven mainly by an 11% increase in rice realization. Export revenue declined by 50% due to lower exports to the Middle East region, partially offset by higher exports to the other regions, which grew by 37%. Other income was higher at a total of INR 64 crores in the quarter as against INR 32 crores in the corresponding quarter due to INR 18 crore higher gain on sale or realization of investments INR 9.5 crores ForEx gain and INR 4.4 crores higher interest income. Gross margin for the quarter stood at 36.3% compared to 25.7% in quarter 1 FY '26. The reasons for this movement are the price increase, as mentioned earlier, lower private label exports in the current quarter and higher other income, partially offset by higher COGS. Excluding other income, gross margin in Q1 FY '27 was at 33.51% as against 24.15% in the corresponding quarter last year. EBITDA margin for the quarter was at 23.8% versus 13.9% in the same period last year, broadly following the gross margin trend, but partially offset by higher proportionate employee costs in the quarter. PAT for the quarter was at INR 261 crores or 16.7% in margin terms as against INR 151 crores or 9.3% in the corresponding quarter. Let me now share a comparative analysis of Q1 versus the preceding quarter. Revenue for operations was at was INR 1,496 crores, like I mentioned, lower by 2% on a quarter-on-quarter basis, mainly due to lower exports to Middle East region, while domestic revenue remained flat. Other income was higher in the current quarter as there were MTM gain and interest income and investments along with ForEx game. Gross profit was higher primarily due to higher other income higher power revenue and better bass materialization, slightly impacted by higher basmati COGS. Following the trend in gross profit and further improved as there was MTM loss of investments and ForEx revaluation loss shown under other expenses in the preceding quarter -- moving to the balance sheet. The highlights are as follows: our total inventory as of June 30. This includes INR 286 crores in paddy inventory versus INR 354 crores as of June 30, '25 and INR 2,481 crores in rice inventory versus INR 2,438 crores as of June 30, '25. On a volume basis, as of June 30, '26, paddy and rice inventory stood at 71,000 tonnes and 389,000 tonnes, respectively, compared to 91,000 tonnes of paddy and 392,000 tonnes of rice as of the same date last year. Total cash plus investments was at INR 1,841 crores as of June 30, '26 as against INR 1,281 crores on the same date last year. The increase is driven by lower net working capital requirement and higher internal accruals in the period. With that, I come to the 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 as the ED matter subdued this, we will not be in a position to respond to queries on this matter. So over to the operator now.

[Operator Instructions] The first question comes from the line of [ Shivam Gupta ] with Trinetra Asset Managers.

I want to know like can you please give us on the update on Saudi Arabia as the [indiscernible]. I want to update on this Saudi Arabia entry as the in correction and where transition process has completed?

See, as far as Saudi is concerned, we are searching for a good distributor because we feel that the past problems whichever has a are due to selection of a wrong partner, which has led us about 1.5 years behind then going ahead with the process. So we are very cautious in determining a good distributor. And as soon as there is a piece in that region, we are sure we have located 3 and 4 distributors and we have to finalize one of them, but we are waiting for the piece to arrive in that region.

Means you are still doing direct bookings?

As far as the entity is concerned, we have deferred that program. And we feel that a distributor will be a much better choice than going forward. our own office over there.

Okay. And second, with the 18% U.S. import duty now settled, are you seeing any pickup in U.S. basmati volumes or it's still not focused market for KRBL?

The U.S. market is stable for us, and we have done a pretty good business over there in last 3, 4 this quarter. But let us see the impact is if we are going to discuss within ourselves and with our distributors and different channels. what would be the reaction of their buying pattern after the duty increase.

The next question comes from the line of Balaji Vaidyanath with NAFA Asset Managers.

If you could give us some color on the export market in the sense that if there were to be a scenario where the inventory depletion happens, as you had mentioned in your opening remarks, but the freight cost doesn't come down as much as what we anticipate. Do you see a situation where there is restocking, which is being done by the importers at such a high level in terms of price hikes, Will they be able to do that? That is question number one. Question number two is we have already seen almost 1.5 months in the July, August, September quarter. While I'm not asking for specific numbers, directionally, how is the export number looking for us in the September quarter?

Yes. So regarding Middle East, what I would say is that see the benchmark price that was earlier set by all the governments in the Middle East region was that even after the world, the local government was not allowing us to increase prices on the shelves. But now after the local rate increases, the benchmark prices have increased -- so now we are able to pass on the extra freight cost and also the rice pipe increases. So if this freight rate continues like this for another couple of months, so we will be able to pass on those prices already. And what was the second question?

Quarter 2 outlook.

So quarter 2 outlook, again, as we said in our remarks, the route is now partially opened and shipments are going. Although we are seeing a lot of container problems like space availability and equipment availability, so the movement is still a little slow, but we see that the demand is picking up.

So sequentially, there is a chance that the numbers could be higher?

Yes, yes, we'll see better numbers because I think bulk business will also resume in the second quarter to some extent. So yes, export numbers will be much better.

But it could get offset due to this little bit of Saudi business that we started doing last year on our own. So to that extent, it might get offset because we have changed once again our strategy from going direct to trying to look for a distributor again?

So that direct distribution is still on. So we are just doing it parallelly. By the time we find another distributor, we are still going parallelly with the wholesale distribution. So that model is still continuing. So we don't see any change in that model until we find the new distributor.

My last question on domestic is if you could mention 2, 3 states where you have had a significant win in terms of market share and not specific numbers, but directionally significant win in market share and 2, 3 states where you would have probably seen a drop in market share overall?

Yes. Frankly, as a brand, India Gate, we enjoy market leadership position, I would say, across 75% of the states that are available in India. Off the top of my mind, I wouldn't know exactly in quarter 1, which markets have increased market share and where we have declined. But overall, our market share in traditional trade market have declined by about 2 percentage points over quarter 1 last year.

The next question comes from the line of Chirag Singhal with First Water Fund.

Congrats on great set of numbers. First question is on the margin outlook for this year. So we have done almost 21% EBITDA margin during the quarter. So what is your outlook for the rest of the year?

Yes. Chirag, this is Ashish. In our view, the margin of quarter 1, while they are at a high level, but these are clearly not sustainable. These have arisen because of 2 main reasons. One is very high prices during the quarter. And also we had some MTM gains on our investment portfolio. The way we see the rest of the year is that I think a lot will depend on 2 factors. One is how quickly exports scale up. Like Anilji had mentioned, we have an order book, but we are simply not able to supply it to many parts of the world. As and when that sale materializes, that will be -- that will help in improving the margin. And the second also is the upcoming paddy season, right? So I would -- we would watch these factors very closely. In general, the margin should be slightly better than that of last year is our view right now.

Could you quantify the gains? And also on the MTM investment gains, that is part of other income, right? I'm looking at operating EBITDA.

Yes. So I think in terms of quantify, I would say about 1% to 2% better at an overall real level at an EBITDA level.

So last year, we have done 15%. So you are saying 16% to 17%.

Yes, I would say between 17% to 18% is what we are looking at right now.