After following this industry for 5 years, I think it goes on like this -
- If basmati crop is increased, then paddy prices decrease, leading to higher gross margins for KRBL (As was the case this year)
- And vice-verse, If crop is lower (as might be because of floods), then paddy prices become higher, and thus gross margins are reduced.
As KRBL is mostly in branded space, They can’t adjust prices too much (both on the upside or downside), so movement in basmati rice price (If rice price goes higher due to lower crops in both India and Pakistan) will only be captured in the bulk exports segment. Even here, the delta between rice and paddy price movements will decide if its positive or negative for KRBL
About ageing rice-
From what i have observed in operational performance or krbl in 5 years, ageing rice doesn’t much matter in terms of margins. It’s mostly direct correlation of paddy prices movement.
(Learned this the hard way, when two years ago paddy prices rose, and management was confident of maintaining margins, but it didn’t happen)