Hi Community,
Can anyone explain to me why it’s taking so long for a company like KRBL to find a partner in Saudi Arabia- Is there some resistance from the government?
They have been delaying it for last two quarters, which is hurting their business drastically.
Hi,
I dont think its due to government…in fact their of appointing distributor is more than 2 qrt old. They have been scouting for long, they are not getting someone who does business on their terms. After long they did appoint one, but that disbt. didnt perform as per the agreement and in fact sued KRBL. That didnt hold, the relationship is no longer in place and they are back to square one in terms of finding a new distb.
Disc: invested
From what I recall from the investor transcripts, It’s due to KRBL policy of offering no credit to distributors and they don’t want to compromise on it which makes it difficult.
How come no one is discussing the impact of Houthi Pirate Red Sea Shenanigans, do you feel it’s adequately priced-in the current price?
Company already having distributor issue, not sure how long it will take to resolve matters.
Is there some place I can track the status of the VVIP chopper scam case where KRBL was allegedly involved. I Googled but couldn’t find anything meaningful. Thanks
After bad set of numbers and unable to finalize the distributor for Saudi market, management skipped earnings call itself this time? Escaping from responsibility?
yeah, there’s also some receivable issue in Iran, CFO was low for FY24. Company is sitting on all time high inventory.
AGM is on Sept 13, 2024.
Disc: Exited my position fully
The management has been nothing short of utter disappointment.
Look at performance in comparison of LT foods… A perfect case study on the importance of management.
For 4 years, management is giving one excuse or another for shortfall in performance.
I have sold my position which I held for nearly 4 years after last quarters disaster numbers.
(Maybe they’ll get saudi distributor…maybe…but i cant trust the management anymore)
I have also exited after being really hopeful for a few years. My worry is that they are sitting on huge inventory but always complain of margins being under pressure due to high cost of purchases. It doesn’t make sense. If prices of paddy go up, they should be making better margins , not lower - as the spreads on earlier inventory should increase. Something is fishy in their inventory numbers and that might be the reason they didn’t hold the concall ( other than the Saudi business not returning for good)
worst time to Exit this stock… its only a matter of time before gov is forced to lift the export ban and drop/ get rid of the minium export price on basmati… post maharastra / haryana election…
I am doubling down on this…
just looking at all the pessimism on this thread…
Disc: invested
Just my thoughts, we are in a bull market. LT foods and Chaman Lal setia posted good numbers and share price also reflects in their case. But krbl, being industry leader, is not able to post good numbers and the share price is also going down.
Disc: Patiently holding it for many years hoping for turnaround.
My View on KRBL Limited (Mcap: ₹7200 Cr)
Govt allows white rice export with $490/ ton MEP which is positive for rice producers but krbl is major exporter for basmati rice for which ban was not in place so didnt affect the company that much. The real big move will be when krbl starts its exports to Saudi as and when they solve the distribution issues there, hopefully it happens sooner
Disc : Not sebi registered. Not a buy/sell recommendation
KRBL posted flat set sequentially, and couldn’t find anything cheerful about from the management commentary as well. As usual Saudi business yet to pick-up, although few initiatives are already taken. From personal scuttle-but and observations, i can see KRBL products now back in most of the stores (saudi) but seems its an overcrowded market now with intense competition. Mgt., expects stable recovery in margins only by Q1, FY26. The edible oil launch by Q4 is something to watchout for; apparently its a thin margin business comparing its existing products.
The following are few highlights from the concall, found bit interesting:
European Market: Management anticipates robust export business from Europe due to favorable market conditions and ample compliant stock availability in India. They expect to conclude significant deals with European buyers starting in mid-December.
Inventory Management: Plans to increase inventory levels to capitalize on lower basmati paddy prices. This strategic move aims to secure raw materials at favorable costs and ensure sufficient aged rice stock for future demand.
Expansion Beyond Basmati: KRBL is experiencing steady growth in its business of specialty and aged non-basmati rice varieties. Their focus on value addition and premium segments is contributing to the scalability of this business.
Edible Oil Launch: The company is on track to launch its edible oil product in the domestic market by the end of Q3 or the beginning of Q4 FY25, aiming for a 3-5% market share in the first year.
Land Bank: KRBL confirmed no plans to monetize its land bank as it’s fully utilized for operations and storage
| Key Performance Indicator | Q2 FY25 (Cr ₹) | Q1 FY25 (Cr ₹) | Q2 FY24 (Cr ₹) |
|---|---|---|---|
| Total Revenue | 1270.48 | 1220.91 | 1214.18 |
| Operating Profit | 123 | 117 | 195 |
| PAT | 102.67 | 86.56 | 153.14 |
| EBIT Margin | 10% | 10% | 16% |
| EPS | 4.49 | 3.78 | 6.70 |
Earnings Quality and Revenue Trends:
Q2 FY25 vs. Q2 FY24: Revenue grew by 4.6% year-on-year, indicating positive momentum.
Q2 FY25 vs. Q1 FY25: Revenue shows a sequential increase of approximately 4%, suggesting a consistent upward trend. This aligns with management’s comment that “every quarter having better numbers” is expected going forward.
Margin Pressure: Q2 FY25’s operating profit margin (OPM) is 9.7%, significantly lower than Q2 FY24’s 16%. This aligns with management’s acknowledgment of margin pressure due to high-cost inventory carried over from the previous year when paddy prices were higher.
Expected Margin Recovery: Management anticipates the margin pressure to persist for another two quarters but expects a return to 15% plus gross profit margins by Q1 FY26. This is contingent upon the sale of high-cost inventory and increasing contribution from higher-margin branded products.
Non-Recurring Items: A one-time provision reversal benefited the comparative base in Q2 FY24, impacting the year-on-year margin comparison. Identifying and adjusting for such non-recurring items is crucial for assessing earnings quality.
Note: Post is AI filtered from multiple reports including concall recording, investor presentation and Q2 results. Consider errors/omissions.
Disclaimer: Invested and Biased. Less than 3% of PF, No transactions in past 30 days. Post purely for study purposes. Consult your advisor before any investment decisions.
I am writing this post to clear my thinking about the company at this point in time.
KRBL is a leader in branded basmati rice in India. It is one of the few companies in the sector that has survived during last 2 decades and is able to grow profitably. While all other FMCG players have left the field, it is the only survivor in branded basmati rice along with LT foods, with 35% market share at present.
During last 10 years, it is able to grow its India sales by 4X. Branded rice has long term tailwind in India and I believe KRBL will take its share over time riding on this tailwind.
On the flipside, decimation of its export business in Saudi Arabia (high margin segment) has impacted profitably margins and profitability has not moved since last 5 years.
Moreover, last 5 years had been pretty difficult for the company. Allegations from Enforcement directorate (ED) had affected market sentiments about the company adversely, and these issues have made this company untouchable in investment community.
My analysis suggests that company is clean, but on the wrong side of political game. Why do I say so?
Above incidents goes in favor of the company to a observer like me.
However, trust broken takes time to build again, sometimes years.
On other side, I may be wrong completely with my analysis and missing something big. Time will tell.
At current price (PE 12) it offers margin of safety, but you can say it is the same case since last 4 years 
It’s share price was always offering margin of safety, but the company remains uninvestible for investment community.
For those further interested can go through this blog, very interesting analysis:
Disclosure - invested and biased. Not a SEBI registered analyst. This is not a buy / sell recommendation.
