Hope you are doing well.
Did you know? Basmati is unique to the region and is legally protected as a trade name. “Basmati” is protected under “The Geographical Indications of Goods (Registration & Protection) Act, 1999” of India, which prevents any rice grown outside of the Indo Gangetic area from being called Basmati.
KRBL, LT Foods, Chaman Lal Setia are some of the major listed companies from the Basmati rice industry. They are also the the leading processors and exporters of Basmati rice.
We have recommended LT Foods and Chaman Lal Setia to our members.
Basmati rice industry has witnessed the downfall of several listed players and only a few companies have been performing well.
To understand more about the industry, we went through the con-call of KRBL and have shared the details below from the Q2 FY 23 con-call transcript of the company:
Before that, few days back, we released our New Stock Recommendation for Alpha and Alpha + Members
It's a 1000 crore market cap stock, one of the largest players in its segment, has great operating performance track record, expanding aggressively and available at only ~10 times pre-tax earnings
You can get it along with other recommendations, by subscribing HERE
KRBL - Notes from Q2 FY 23 con-call transcript
Source: Chaman Lal Setia Q3 FY 23 presentation
- Basmati rice industry data
- The Basmati penetration in India is at 42%, the packaged penetration hovers around 20%
- Whether it is domestic or exports, basmati consumption increasing year over year by 6%-7% in a normal way
- Domestic can grow much bigger because the consumption of basmati rice is just 3% as compared to non-basmati rice. We consume around 95 million tonnes of non-basmati rice, whereas basmati rice is just 2.5 million tonnes
- Saudi Arabia used to import only 700,000 tonnes. In the last 2-3 years, they have gone up to 1 million tonnes plus
- Iran is always a big buyer. Iran can import from India around 1.6-1.7 million tonnes also. Their own production is depleting day by day
- Iraq used to produce a lot of rice in their country. Day by day, their own production is coming down and they are becoming more dependent on basmati rice
- America used to be a market of 60,000, 70,000 tonnes. In 6 months only, they have imported 100,000 tonnes
- The only drawback today or the setback to Indian Basmati is the European countries. With the new type of seeds and the new type of experiment which the scientists have done, we will be able to cater to the market of European Union, which would be a pesticide free rice
- European Market for Indian basmati rice, 400,000 tonnes. 98% of this volume is in the shape of brown rice because there is no duty on brown rice. White rice has a duty of EUR 160 tonne, EUR 170 per tonne
- When compared with the production of Kharif season 2022, which was 112 million metric tons, the production this year is lower by 6% at 105 million metric tons, out of which basmati is around 7.5 million metric tons
- In the last 10 years, India's rice production has grown at a CAGR of 2.4% per annum, whereas India's rice consumption has grown at a CAGR of 0.9% per annum
- Last year, India exported around 21.21 million tonnes of rice, out of which Basmati exports were 3.95 million tonnes
- This year, in the first half, India has exported around 2.6 million tonnes of basmati rice as compared to 1.95 million tonnes exported during the same period last year. Exports have grown by almost 46% in value terms, amounting to Rs 17,896 crores as compared to Rs 12,295 crores in H1 FY 22
- India exported around 60% of the total basmati rice to 4 countries such as Iran, 600,000 tonnes; Saudi, 407,000 tonnes; Iraq, 130,000 tonnes, UAE, 175,000 tonnes, confirming that majority of basmati export is to Middle East, including Persian Gulf
- Current basmati scenario, the crop was expected to be higher by around 15%-16% over last year. With the delayed monsoon in the month of October, basmati crops got slightly damaged. The overall crop, now after mapping and cross-field surveys, should be either higher by 5%-7% or maybe equal to last year
- The prices of new paddy crop have opened up slightly higher than expected levels. But still, we feel that looking at the prevailing price during April, August 2022, the current crop prices are still lower by 12% to 15%, depending upon the varieties
- If we look at the opening price of last year, we are higher by 10%-15%. That is my cost of paddy this year compared to last year would be higher by 15%-20%
- There were rumors that basmati prices will take a jump due to floods reported in Sindh area of Pakistan. No doubt the basmati and non-basmati crop in field area got badly damaged to the tune of 70%, but the production of basmati rice in Sindh area is very minimal compared to Punjab region of Pakistan, which is witnessing a good harvest
- Irritants in exports were the ocean freight rates and the availability of containers, both the issues have been resolved. The freight rates have come down to 1/3rd, and they will further come down by another 10%-15% compared with their peak about 9 to 12 months back
- The freight rates for USA and Australia have not come down compared with other destinations which are also expected to reduce in the coming months
Disclaimer: Out of the stocks mentioned above, I have personal investment in LT Foods and Chaman Lal Setia. This is not a recommendation to buy/sell any of the stocks mentioned. These notes are as announced by the companies on exchanges and only for the purpose of information and education.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Details of Associate: Not Applicable
Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.
We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.
Disclaimer: You can access it here - LINK
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – Yes, in LT Foods and Chaman Lal Setia
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No