KRBL- The King of Basmati rice


(Dinesh Sairam) #271

The upper limit of terminal growth rate is the probable growth rate of the Economy after 10 years. I don’t think it is unreasonable to think India will grow at 5% 10 years from now.


(Kumar Saurabh) #272

That happened due to some patent stuff Rules where they did not get their brand registered. This link should give you detailed explanation : https://www.pressreader.com/india/hindustan-times-delhi/20170707/282106341671214


(Chandrasekar) #273

Unregistered brands will be paying 0%GST.


(Indie) #274

All India Rice Exporters’ Association and other brands had written to the FM for clarification on the GST issue. I could not find the latest update on news media.



(kauban) #275

KRBL - Q3FY18 - Result Update_15-03-2018_10.pdf (421.2 KB)

according to this update from Axis Securities, GST is now charged at 5% on KRBL’s products after clarification from the govt.


(kanvgarg123) #276

If you listen to their concall, they have mentioned that 5% GST is charged on their products and hence there was a fall in India income.


(rupaniamit) #277

@shreys spent 5 minutes on Riceland’s website but didn’t see any capacity specification…also seems like its privately owned…may be KRBL is world’s largest “basmati” rice miller and Riceland is world’s largest for non-basmati rice…that’s my guess


(shreys) #278

@rupaniamit
Many thanks for trying to help me discover the truth.
I’m inclined to agree with your hypothesis that Riceland is the largest non Basmati rice player while KRBL is the leader in Basmati rice.
Riceland is a farmer association owned company. I think the Indian equivalent is AMUL.


(rskothari) #279

Thank you for your reply. I appreciate it . I have one more query even though it is discussed earlier. Discount rate taken by you in your calculation takes valuation to higher side. Why not we take 10% or 12% which can be opportunity cost or minimum expected return from investment. If we consider 10% then the stock becomes expensive.

Are we not very optimistic about the stock considering the fact that we are taking 5% as terminal growth rate, low discounting rate and 0% Margin of safety.

My queries may sound idiotic. I am learning from such discussions.


(1.5cr) #280

I think a standard PE is the best way to value krbl. As it has a number of products and keeps launching new products. Take into account the growth prospects, moat, fmcg re-rating opportunity and longetivity. The mgmt. is of higher quality than average so account for that too. In that case I personally believe that 20-25x is a fair valuation for the business. I could be wrong as well since im a new investor.


(Dinesh Sairam) #281

Can you kindly post in this thread? I’ll be more than happy to respond there.

I feel like we’re hijacking this thread with general Valuation discussions. Thank you.


(rskothari) #282

Thank you for taking me to right thread for my queries.


(bullbuffet) #283

Many members have posted some questions to which i have definite answers so posting.
GST is applicable on KRBL products @ 5%. This was clearly clarified during q2 conf call. Unorganized Rice sellers have 0%.
The share of market figures given by KRBL are more accurate and i have experienced their overall accuracy on market size and nos over a period of years as compared to its peers and other Analysts.


(shreys) #284

If I may, I’d like to ask you why you think the management is above average?
In the public domain there’s usually very little information available to be able to establish an impression regarding the leadership.


(1.5cr) #285

Look at the business and how they have scaled this difficult business. Inspite of rough years they have still paid dividends sometimes even from debt if you were to analyse their cash flows, that would be a fair assumption. Their relationships with farmers clearly shows their care for their products and quality of the same. Now launching new innovative products like quinoa etc. Its easy for them to get comfortable with their leadership position and sit back.


(GSrikan) #286

From the discussion on the brands, we can probably derive that, the old advantage of brand is still very much present but not as strong as earlier in pre-amazon times. So, we need to make sure that KRBL is not milking its moat of better quality by charging too much premium like Gillette did. If customers feel the premium is too high for the difference in quality between KRBL (ex: India gate Classic vs Daawat’s premium product) & its next best competitor, then there is always danger of customer moving to competitor’s brand based on Amazon reviews. Since Basmati is cultivated only in India & Pakistan, I guess, it will not be very difficult to track amazon ratings of the KRBL’s and competitor’s products.

Although, it is bit far away in future to affect KRBL, but certainly of relevance.

The new generation does not care much about finer points of quality & taste too much.

Out of the four non plain Basmati rice products KRBL has, I believe, sprouted Brown Basmati rice could be one product to look out for. There is lot of talk of growing number of health conscious people looking for variety of healthy food alternatives. The regular brown rice is not palatable. The brown basmati rice is certainly better than regular brown rice. With sprouted brown rice, it becomes easier too cooking too and should be easier to eat (brown rice is harder even after cooking).

The three other products Quinoa, chia seeds & flax seeds, KRBL will not have any competitive advantage over HULs or ITCs or private labels of other Super Market chains as far as my novice understanding.


(shreys) #287

Yesterday, at a family gathering, for the first time, I had a preparation made from rice by India Gate. The product is called India gate Super rice. It costs around 160 rupees a kilogram. It was indeed, a fine product. Throughly enjoyed it. However, there was also rice from DMart, which, if not better was as good as Super.
Dmart Basmati is available for around 70 rupees a kilogram. For a middle class person like me, I sure enjoy India Gate rice but I don’t possess the wherewithal to pay more than twice the price of Dmart’s rice. So, basically, the premium was not worth the experienced utility, for me. Just my thoughts.


(Bheeshma Sanghani) #288

The export volume trends indicate increasing consumption over the years with some fluctuations. 2012-2013 - 345cr kgs, 2014 - 375 cr kgs, 2015 - 370 cr kgs, 2016- 404 kgs , 2017 - 398 cr kgs , 2018(est) - 414 cr kgs.

Source : Apeda website


(1.5cr) #289

Can krbl maintain their 20% opm? If we value the company on 15% opm the company looks expensive… any insights?


(vchhajed) #290

What if the growth rate is greater than the risk-free rate? Like in this case the actual recent sales growth is 10.62%. How can we work the valuation then?