Also, I was assuming KRBL can sell it to subsidiary, and then resell it to end customer. Obviously subsidiary might take a loss which they might rationalise at group level.
Is that possible ?
Anyway it seems the impact is very low and transient.
What I feel is it’s not only about exports…If curbing the export results in price drop in domestic market it “may” hit margins of KRBL in HoReCa and lower price variants of basmati rice…Just a possibility and I don’t have any data to backup this
Many have received message from NSDL today regarding the debit of KRBL shares blocked for buyback. Company has bought little more than the eligible limit from those who had offered more shares than their eligibility criteria . Expect payin for the same to happen soon
My buyback order accepted and received the payment in bank account today.
KRBL accepted more than the eligible limit of shares in my case.
I got 45% of my shares accepted for buyback. Offered all 245 shares I had and 111 of them got accepted.
Yup acceptance ratio is 45℅ for me as well
For Small Shareholders (value less than 2 lakhs) acceptance ratio is 45% and for others its around 6%.
Hey everyone,
KRBL is cylical business and depend deeply on rice prices globally. I want to know how to track Rice in India or International price.
Thankyou
Arbitration proceedings have been filed against KRBL in Delhi high court on 7.10.23 by AQM ( Al Qurashi Marketing company ltd ) . AQM was appointed distributor for Saudi Arabia since 2022, this company also claims 33.5 million dollars from KRBL.
KRBL will be fightimg this petition and also believes that the claim is bogus as AQM have not performed their obligations under the RDA ( Retial Distributorship Agreement)
The honorable high court has not given any relief to AQM as hearing was postponed to undisclosed date.
The share price of krbl was down substantially in today’s trading session
The management had mentioned in their last concall about the termination of the RDA with AQM as they were asking for large credit which was against company policy.
1)If this is the only matter for contention than AQM is fighting a losing battle as the terms must be mentioned in the RDA.
2) If there is more to this that management is not disclosing than the legal battle will take a toll on KRBL
Hopefully KRBL comes out of this as a winner and the investors specially small investors have something to cheer about
Disc : Not sebi registered, have a small position in KRBL
Is anyone has idea how long KRBL will suffer because of this litigation and how serious it is? It would be really painful to loose market share to competetor if things get delayed significantly.
@PraveenKG
There was a recent concall held by KRBL and many questions were raised on this topic, the following are my personal observations
- Saudi is a 1000cr potential revenue (yearly) market for krbl
- since fallout with the distributor there are no sales coming form saudi ( its been almost 2 quarters )
- management has assured that the case filled is a bogus case and are hopeful of revolving it in current quarter
- The management in their last cooncall were confident of finding a new distributor by 15th aug 2023 but that has not happened and are still inprocess of finalizing a new distributor
- With volatility in rice prices, exports dropping, the rice ban imposed by govt taking a toll it is important that the management resolves the distribution issues in saudi and comes out winner in the litigation matter as soon as possible
To add to your statementsthe market size of 1000 cr ,there will be margin erosion as well as exports have better margin.
I think the worst part is how Lt foods is riding the super cycle while krbl is not able to ,these are small windows where cyclical companies can increase cash reserves and as investors for us are handsomely rewarded with increase in share price
Story of KRBL
Stock seems to be at comfortable valuations right now. India Gate is a renowned and powerful brand.
Q1FY2024:
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Export: another subdued quarter for export market. Overall revenue degrew by 47%. The key reasons are attributed to the continued Saudi issue and unavailability of bulk opportunity during the quarter. The base quarter had 200+ cr of bulk deal which was not materialize during this quarter. Other than Saudi market, there is growth of 75% YoY on export renenue.
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Europe will play as a key market outside middle East. Post FTA with UK, there can be a huge opportunity with current custom duty is 175Euro/ton.
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Domestic: First quarter with 1000+cr sales. Strong growth of 14% during the quarter. Branded market share reached 35%+ in domestic market.
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Margin: margin shrink sharply to 14.1% from 19.1%. this is is attributed to higher paddy cost and lower export sales
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Guidance: No guidance on normalisation of sales in export market. Domestic to grow at min 10%. Q4 export to be significant better compared to Q3
Great business but has faced continued challenge right from VVIP chopper to Saudi distributor to now another Saudi distributor. But two things which has changed in recent years are increased focus in the domestic market and second is the active participation from the gen next. From the con calls it seems they understand the business and have the hunger to push for the growth which might be missing the earlier gen.
Disc: Invested
Sharing my notes on KRBL
Negatives
- Brand - India Gate is not a FMCG brand. It offers 20% margins to retailers which means it cannot be compared with FMCG players.
- Market Share of Competitor - Dawaat is equally penetrating brand in India. Both companies share roughly equal market share in branded Basmati rice. KRBL is not a clear leader here.
- Ageing Rice - KRBL talks about aging rice and comparing it with wine. But fact is that India is mass market with price conscious customers, happy to buy cost effective products. This also shows up in krbl numbers for India, where only 10% volume comes from India gate classic , its most valued product.
- Exports - During last few years, there is always one reason or other for exports not working out in the middle east. It may be distributor issue in Saudi or sanctions in Iran. This hits profitability hard when exports constitute 40% of revenues and are high profit margin segment.
- Legal cases by ED in scams - This is well known to all and has been a drag for the stock during last few years.
- Management Over-optimism - MY read based on management concalls is that management has track record of over commitment and under delivery. However, if we remove the time lag, they deliver at the end
- Distributers - In middle east which is highest margin geography for KRBL, distributors are very powerful. They command there own brands and ask for exclusive distribution in entire country. KRBL is facing multiple issues to appoint Saudi distributor for retail and HoReCa since last many years.
- Selling price of branded rice is not independent on ongoing paddy prices for current year espically among price conscious customers.
- Growth - Pace of growth will not be very fast, as migration of people to branded rice is gradual and takes time. CAGR of 8% probably is optimistic.
- In inflationary environment, Indian cost conscious customers, trade down. Basmati is not a mass market product in that sense.
Positives
- Negligible debt / Strong balance sheet in capital intensive industry, that needs inventory built up during 6 months in a year is a feet in itself
- Buyback (350 Cr) during depressed stock price.
- Long term trend - Migration to branded rice is a long term trend in India that will be exploited in this industry by only two players.
- Focused on Margins - Runs operations focusing on margins, not on volumes.
- Execution & Scale - KRBL has immpeccable track record of executing in extremely difficult industry, and with execution they have gaind sale that’s huge. At this sclae they can generate even ROCE even at thin profit margins. At this scale, its difficult for any competitor to enter in this industry.
- Advertising costs as a percent of sales is miniscule, its difficult for new player to compete without burning money.
- Processing plant - KRBL has Largest rice processing plant in the world currently running at 50% capacity. Economies of scale will kick in at higher capacity. Difficult for anyone to compete on this parameter.
- Adjacencies - Plans to grow by tapping adjacencies like regional branded rice, and investing in the same. This may prove out to be good growth engine in future.
- Customer stickiness to brands, once they start using it, they dont shift to other brands easily.
- Branded Exports is more profitable than domestic business but unpredictable. KRBL does have grip here but it is not able to perform during last few years.
- Threat from FMCG players - No other FMCG company able to crack branded rice industry. Everyone has tried their hands and moved on.
- Paddy buying - Cash rich balance sheet allows KRBL to buy paddy at opportune price with minimal debt. Again, this relates to the execution capabilitites by KRBL.
- Unity, Horeca brand, for biryani scaled up very well, which now commands 750 Cr revenue.
- Pricing power - Though perceived as commodity, KRBL does have some pricing power
- FSSAI & GST - Introduction of FSSAI standards for basmati and introduction of GST on non branded basmati, are positive for KRBL in long run.
- Competitor - LT foods looks to ME as low margin (EBITDA 9% vs KRBL 18%) and debt laden company. Its competition with KRBL is in India. KRBL commands 35% of its revenues from Middle east where LT Foods has negligible presence. At the same time LT foods generates 35% of its revenues from USA (Royal Brand) where KRBL is very weak.
Facts
- 10% Basmati produced in India is sold by KRBL
- KRBL holds a ~25% market share in the branded Basmati exports from India and a ~30% share in the branded Basmati sale in the domestic market.
- India rice consumption is 92 million ton, out if which 2 million ton is basmati consumption
Points to ponder
Growth will command investing in inventory, which means profits will be plowed back in inventory. Generally speaking, inventory is the easiest place to bury all frauds. If investor trust the inventory numbers that company claims, then business produces good ROCE on incremental investments.
KRBL is in negtive spot since last 5 years due to ED Scam case which looks like will take life long to resolve, it looks to me that even the last KRBL bull has left the market.
Disclosure - Have tracking position, biased and may turn blind. I may buy or sell KRBL without informing the forum. I am not a SEBI registered analyst.
I have a interesting observation and I need your inputs.
Based on the annual reports and Investors presentation, both KRBL and LT Foods claim to have market share in branded basmati rice in the range of 30% to 35%
However, KRBL claims to have domestic sales ~3500 Cr (FY23) vs LT calims to have domestic sales of ~ 1750 Cr (FY23).
How is it possible for KRBL to have same market share as LT, but have double sales numbers?
One other question, which regions (North, East, West, South) or States do KRBL dominates in India?
Based on anecdotal evidences, I always see Dawaat dominating…
will also like to get the inputs, currently studying these companies. Trying to bridge numbers: FY23 volume share for LT Foods: 29.6%. KRBL Ltd: Traditional trade: 32.5% and Modern Trade:58%. Do not know what will be amalgamated number, second major difference: Price realisation. LT Foods : ~Rs60 per kg, KRBL: ~74 per kg. However, still not able to bridge the numbers.
If you compare the number of outlets of KRBL vs LTfoods you can see that KRBL has double in that part also…so revenue wise it looks justified. Also KRBL mentions about Nielsen as their source for market share…not aware any such disclosure from LT foods