Stock Picks From Rice Industry (Basmati) By HDFC Securities

Industry Overview

Rice is one of the most crucial food crops in the world and a staple diet for nearly half the global population. Over 90% of the global rice output and consumption is centered in Asia, wherein the world’s largest rice producers, China and India, are also the world’s largest rice consumers. High domestic consumption and restrictive trade policies of several countries for rice have restricted the international trade of rice to only 6-7% of the production. Food security objectives and the need to provide income support to domestic producers are the main reasons cited by countries to restrict rice imports. Among the several varieties of rice, Basmati is considered the most superior in terms of product characteristics and, therefore, the most premium.

Rice is the most important food crop in India contributing to more than 40 percent of total food grain production and cultivated/consumed across the country. Rice is predominantly a rainfed crop planted in the kharif season after the onset south-west monsoon rains during June through August.

Basmati rice constitutes a small portion of the total rice produced in India. By volume, the share of Basmati in total rice production is around 6% (as of FY2016), but by value, Basmati exports account for 60% (as of FY2016) of India’s total rice exports and its exports have increased at a compounded annual growth rate (CAGR) of 13% from Rs. 10,890 cr in FY2010 to Rs. 22,718 cr in FY2016. The proportion of Basmati export in India’s total exports was at around 1.3% in FY2016 and it remains an important constituent of the Indian export basket. (Source: ICRA)

“Basmati” is long grain aromatic rice grown for many centuries in the specific geographical area, at the Himalayan foot hills of Indian sub-continent, blessed with characteristics extra- long slender grains that elongate at least twice of their original size with a characteristics soft and fluffy texture upon cooking, delicious taste, superior aroma and distinct flavor, Basmati rice is unique among other aromatic long grain rice varieties.

Agro-climatic conditions of the specific geographical area as well as method of harvesting, processing and aging attribute these characteristic features to Basmati rice. Owning to its unique characteristics the “scented Pearl” lends a touch of class that can transform even the most ordinary meal into a gourmet’s delight.

Varieties

The main varieties of Basmati rice as notified under the seeds Act, 1966 are Basmati 386 , Basmati 217 , Ranbir Basmati , Karnal Local/ Taraori Basmati, Basmati 370, Type-3 (Dehradooni Basmati), Pusa Basmati-1, Pusa Basmati 1121, Punjab Basmati-1, Haryana Basmati- 1, Kasturi and Mahi Sugandha. Pusa Basmati 1121 developed by the Indian Agricultural Research Institute (IARI) and released for commercial cultivation in kharif season of 2003 is the most widely used variety as it requires less water, matures early and yields 19–20 quintals of paddy per acre as compared to 9–10 quintals for traditional tall basmati.