Release Date: November 03, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 16% year-on-year to INR 309 crores for the quarter.
- EBITDA grew by 37% year-on-year, reaching INR 36 crores.
- Significant progress in export markets, with a 20% year-on-year increase in export revenues.
- Proprietary brand sales accounted for approximately 11% of overall sales, growing by 91% year-on-year.
- Improvement in cash flow from operations, standing at INR 253 crores during H1 compared to INR 71 crores in the corresponding quarter of the previous year.
Negative Points
- Cyclone in June and export restrictions on basmati rice below USD 1,200 per metric ton impacted shipments.
- Conflict in Israel added to the challenges faced by the company.
- Inventory levels have gone down substantially, raising concerns about catering to international needs.
- Gross margins have come down to around 21% for the quarter.
- Challenges in domestic market visibility and distribution, with some regions like Kolkata facing availability issues.
Q & A Highlights
Q: Our inventory levels have gone down substantially. How are we going to cater to our international needs given this reduction?
A: The inventory level as of March was very high, around INR 400 crores. Limited procurement followed, and sales continued, leading to minimal closing stocks by September. With the new season beginning, we have started buying a lot, which should benefit us in the subsequent quarter. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: How are we managing the security of our dispatches to African countries, given the difficulty in realizing payments?
A: We are strictly into basmati business and have long-term relationships with countries like South Africa and Kenya. Payments are either through letters of credit or advance payments. We play very safe by ensuring payments before delivery. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: What is the current export and domestic sales mix, and how do you plan to increase domestic sales?
A: Currently, exports account for 90% and domestic sales for 10%. We are hiring teams to increase our domestic market presence. The recent MEP episode highlighted the need to focus on domestic sales. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: What is the average realization for Q2, and how does it compare to the previous quarter?
A: The average realization for Q2 is INR 90 per kg, up from INR 85 in the previous quarter, reflecting a 5-6% increase. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: How do you see the overall scenario of rice production in the country, especially in key states like Himachal, Punjab, and Haryana?
A: Satellite data projects a 15% increase in the paddy crop this year. The crop size is expected to be higher in the entire GI area, including Punjab, Haryana, Western UP, Uttarakhand, Himachal, Delhi, and J&K. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: How do you plan to increase the visibility and availability of your branded products in the domestic market?
A: We are strongly planning to increase branded sales in India and abroad. Efforts are underway to ensure higher visibility of our brand across India. (Ankit Setia, Whole Time Director)
Q: What are your expectations for gross margins going forward, given the current procurement and market conditions?
A: Gross margins are expected to normalize and increase in the coming quarters due to strategic procurement at competitive prices and deferred sales from buyers. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: How do you view the impact of the U.K. FTA on your business, especially regarding duty reductions?
A: If duties are reduced or eliminated, it will significantly benefit our business. We are advocating for equal duties on both brown and white rice to encourage our industry. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: What is your strategy for increasing branded sales, and how do you plan to balance it with private label sales?
A: Our strategy is to gradually increase branded sales without burning money. We aim to establish strong distributor networks and leverage online sales to grow our brand visibility and sales. (Rajeev Setia, CFO, Managing Director, Executive Director)
Q: How do you see the future of rice prices and yields, especially with new pest-resistant varieties?
A: New pest-resistant varieties with higher yields are expected to ensure a stable supply and potentially lower prices. The current year's crop is already 15% higher, indicating a positive outlook. (Rajeev Setia, CFO, Managing Director, Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
