Q1FY23 CONCALL NOTES:
•SALES GROWTH TO CONTINUE: We have an excellent order book and our first quarter results are already with you. Both domestic as well as exports sales are showing remarkable progress and this growth trajectory will continue in the times to come.
• SAUDI MARKET: In Saudi Arabia, we are expecting with the current arrangement that our top line will increase by minimum Rs. 300 to 400 crores extra over the past performance. This Rs. 400 crores definitely will add up in the top line, besides we are yet to decide for another distributor for HoReCa segment and general trade, which we believe we would be finalizing somewhere within September-October and that will add, in this financial year, to about Rs. 300 crores. So, we are expecting Rs. 700 crores jump in the Saudi top line itself this year.
• IRAN MARKET: In FY23, definitely we will have a respectable share in Iran because a good channel has been emerged and that channel is a legal channel to export to Iran. We are quite confident that our share in the next 3 quarters will be quite impressive as far as Iran shipments are concerned.
• SPILLOVER OF REVENUE TO Q2: In the current quarter, Saudi numbers are there, but there were certain payments which could not come. So, they are not reflecting. Otherwise, this number would have increased by another Rs. 70-80 crore.
Yes, there is a spillover of other countries, which I’ll not like to discuss, but there is a spillover. The total spillover may be up to the tune of Rs. 150 crores.
• BASMATI PADDY SCENARIO: When we talk about rice, we should keep in mind that there are two different commodities, i.e., basmati rice and non-basmati rice. There is no linkage whatsoever between the two as far as production, price and markets are concerned.
As regards basmati rice, the sowing is good and according to the field survey, the production of basmati rice will increase by 25% in crop year 2022-23. This is mainly due to high prices witnessed by the farmer last year. Recently, we witnessed that the early crop which comes in the month of July-August that is 1509 basmati rice fetched a price of Rs. 32,000 to 33,000 per metric tonnes giving the farmer a revenue of Rs. 70,000 per acre whereas non-basmati with the new MSP will fetch the farmer around 62,000 per acre, which certifies that the price of basmati paddy, in spite of 25% hike in production, will still remain firm and the export prices will also fetch good prices
• FRIEGHT AND LOGISTICS CHALLENGES ARE LARGLY BEHIND: We are now starting to see the situation ease out with freight levels coming down and availability of containers, labor, transportation, and warehousing space are considerably improved. There is no impediment as far as logistics are concerned except that freight rates though they have come down but still are on the higher side. But it does not affect to the industry anymore since the freight charges are built up in the pricing.
• NEWER PESTICIDE COMPLIANT BASMATI VARIANTS: This is to confirm that during this Kharif Season, IARI has distributed seeds of 3 new varieties of basmati rice which possess inbuilt resistance to bacterial blight and blast disease, as I had mentioned you last year as well. IARI has supplied seeds to farmers of improved 1487, 1885, and 1886 rice varieties in which 2 genes have been inserted, which could withstand the attack of bacterial blight and blast disease that adversely impact the crop yield. Three varieties would gradually replace the existing basmati rice varieties of 1121, 1509, and 1401 which are cultivated in more than 90% of about 2 million hectares of aromatic and long-grain rice grown areas. The above program of IARI will multiply the seeds this year which will result into a commercial crop during the crop year 2023-24. This will give a big leap to basmati exports practically in the EU and the USA, including few countries in the Arab world. Though the restriction of pesticide residue is nothing but a non-tariff barrier, the challenge which was accepted by the Indian exporters and now we have come up with the new varieties to ensure that Indian basmati rice is fully compliant.
Q: We are not that good in the US market. And you said with new varieties, the pesticide residue level will be complied. So, what would be our strategy for the US market? Anil Kumar Mittal: Definitely, not this year but next year, when the commercial crop comes of compliant rice, definitely our share will increase not only in America but in many other markets where there is an obstacle of being non-compliant. I am quite sure that we will do much better in these countries when the compliant rice is available in abundance.
• UNITY BRAND: Unity brand has grown by more than 100% to Rs. 150 crores in quarterly revenue. Consumer pack continues to grow in healthy double digits year over year in volume terms. Unity brand has historically been primarily a HoReCa brand. More than 85% of revenues still come from the HoReCa segment for that brand.
• GST ON UNBRANDED PRODUCTS: And I would like to add one thing due to the recent GST notification where the taxability on the branded and unbranded has become equal and we are now at a level playing field. We used to pay 5% tax while others chose not to pay. Now I have changed my packing from Unity 25 kg to 30 kg. As per Government notification, above 25 kg, there is no tax for everybody whether it is a registered brand or a non-registered brand. I hope, with this, our HoReCa sales will improve very much.
• Overall, rice sales realization increased by 13% while volume increased by 7% over the Q1 FY22.
• We must be following first in, first out. (FIFO), so by that method, you would have paddy prices over the last season as well? Ashish Jain: No, we don’t follow FIFO. In our case, the fixed products are valued on a net realization basis while the raw material is at cost.
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