KRBL sees no impact due to export curb on basmati rice
The Agricultural and Processed Food Products Export Development Authority (APEDA) under the Commerce and Industry Ministry has restricted exporters from shipping basmati rice on credit. Speaking to Hiral Desai and Deepanshu Bhandari of BTVi, KRBL chairman and managing director Anil Kumar Mittal says the move comes after representation from trade after non-receipt of the credit from many companies. KRBL, the world largest rice miller and exporter of basmati rice, has not been affected by the move as all of its exports are against either letter of credit (LC) or cash against documents (CADs). KRBL, which owns the “India Gate” basmati rice brand, is also looking to export non-basmati rice to China, he said.
HIRAL: The government has initiated a curb on basmati rice exports on credit. What's the kind of impact will it have on the rice industry?
ANIL: Actually, the restriction was put up by the Ministry of Finance sometime in August. The reason was that there was a representation from trade because many of the credit allowed to exporters were not coming back. And it was a big amount which Indian exporters are yet to receive from Iran and various other countries. That was one of the reasons for the representation was made. The government agreed that export of basmati rice will only be allowed either against a bank guarantee or it is covered by Export Credit Guarantee Corporation (ECGC).
HIRAL: Has the restriction any way affected your company as well?
ANIL: No. Our total business is against either LC or CAD. There is no pressure on us. But there are plenty of companies, which were doing business with Iran and other nations. We will come to know about the impact in November because till that month Iran has imposed a restriction on any type of rice imports into their country. So, we will come to know about the impact of the restriction only in November.
DEEPANSHU: There has been report that China may allow import of Indian non-basmati rice. Is that an opportunity you are looking at?
ANIL: There are chances of exporting non-basmati rice to China. For that, we are trying to understand the phytosanitary regulations. They are still not been finalised. Once it is finalised, a delegation has to go to China to start the export of non-basmati rice. The chances are quite bright.
HIRAL: What is the kind of exposure you have in non-basmati rice in the total product portfolio? How much of non-basmati rice do you export?
ANIL: At the moment, non-basmati is a small share of our total product portfolio--may be 2-3 per cent. And primarily we do not deal much with non-basmati because the margin of profit is very low. The business of non-basmati has a maximum bottom line of 2-2.5 per cent. That is one of the reasons why we are not involved in the non-basmati rice. Actually, we are a branded player and we mainly export basmati rice and non-basmati rice under our own brand where there is a respectable margin.
DEEPANSHU: There is some pressure on exports of basmati rice. What's the pricing trend for basmati rice and what's the outlook in the domestic market?
ANIL: From first week of October, the new crop will start coming. There are various rumours. We expect it to open at around Rs 19,000-20,000 a tonne. If the prices open at Rs 19,000-20,000 a tonne, then the export price will be not less than $770-780 a tonne FOB. The supply in the domestic market at this moment is slow because of the heavy rains. There has been panic among distributors because water was getting into the godowns. The roads to West Bengal and Assam were affected. By first week of October or from Navaratra, all the business will get regularised.
HIRAL: Going into your Q1 results, we find the earnings dipped to Rs 800 crore as against Rs 996 crore but profits increased Rs 80.4 crore from Rs 73 crore. Has the improvement in profits due to price gain or is it a volume game?
ANIL: Last year, we had a good very contract with the Iraq. That was one reason why the bottom-line showed a remarkable improvement. But this year, we are doing fantastic in our own branded segment especially in America, Australia, Middle East and Far East. So the Iraq contract impact will definitely show up. In spite of that we are doing fairly well this year.
DEEPANSHU: You also have a presence in energy sector. How much does it contribute to your books? What's the outlook and update on the energy business?
ANIL: As far as the energy business is concerned, the main reason for foraying into that segment was to take advantage of MAT. For the last 7-8 years we were falling under MAT and the internal rate of return (IRR) was 22-23 per cent. Now because of the current power pricing and the output, the IRR is falling below 22-23 per cent and so we are no more interested in power sector.