Khushi Ram & Behari Lal (KRBL)
History
BASMATI The world’s most precious rice strain
Grown only once a year in the Indo-Gangetic Plain beneath the Himalayan sub ranges.
The fertile alluvial soil, fresh and cold air and the sweet water from the ranges contribute primarily to the uniquecharacteristics associated with the grain.
The Basmati is longer, lighter and fluffier than standard white rice, and does not stick together.
Basmati also is geographically indexed.
Basmati growing areas are Uttrakhand, Punjab, Haryana, Uttar Pradesh, adjoining areas of Jammu, Kashmir, HimachalPradesh and Delhi.
Quite like Wine & Scotch, it gets better with age. Under good conditions it keeps well for up to 10 years. Old rice cooks upfluffy, with separate grains and releases a pleasant aroma.
The consumption is typically based on recipe, eating habits, health needs and cultural geographical usage.
Businesses of The Company
It is core business of the Company
Agri Division
Diversified Business of the Company
Energy Division
01
02
With a 129 year heritage and an existence since 1889, KRBL Ltd. is India’s first integrated rice company with acomprehensive product chain.
Agri Business
Under this segment, the company is doing the business of basmati rice and value-added products.
KRBL still lead the industry ranking in terms of Basmati Rice production and trade, both within and outside thecountry.
Largest in the world
Agri Business
Agri Business
Consumer pack
segment
Bulk packaging segment
Super premium segment
Distribution Channels
Traditional ModernE-
Commerce
Consumer Pack Segment
The Company sub-segments its consumer pack segment into India Gate brand and other brands which include Bemisal, NurJahan and Doon.
Sales in 2016-17 increased by 28.66% in volume terms and by 25.55% in value terms.
This premium segment was created with the rationale of capturing market share from the huge unbranded Basmati Rice Market
Bulk Packaging Segment
The Company’s two key brands in the segment i.e, Unity and India Gate
Sales grew by 26.9% in volume terms and by 43% in value terms In 2016-17.
The segment caters to the requirements of institutional buyers such as hotels, restaurants and caterers.(institutional buyers include StarGroup of Hotels, The Leela and ITC Hotels.)
Super Premium Segment
This is a new segment created by the Company for building consumer perception. This category comprises KRBL’s most premium and health-oriented products.
Sales volume from this category grew by 19.36%, while in value terms it grew by 10.48%. (target to grow this segment by 35% in value term.)
Products newly launched or re-launched within this category include: India Gate Quinoa, Brown Basmati Rice, Brown Rice.
Agri Business Segment
Distribution Channels
Modern Trade
Modern trade distribution channel, the Company has enhanced its presence to 6,500 stores.
Initiatives undertaken by the Company towards retail activation and dominating shelf-space,has resulted in improved same-store sales and category share.
The Company’s strong business development team undertakes significant research and analysisto identify the right city, right catchment area and right store.
E-commerce
Viewing the huge scope of opportunity from the online distribution network, the Company hasfocussed on strengthening its e-commerce channel.
The Company tied-up with major players like Big Basket, Grofers, Amazon, Shopfilo, JBL, andFlipkart among others.
Quality
ControlResearch &
Development
Seed
Development
Contact
Farming
Procurement
Ageing
&
Storing
Milling
01
02
03
04
05
06
07
How Company Run The Business
Value-added Product
Cattle Feed
Burning Husk
Rice bran Oil
Paddy Husk
Other Products under Agri Segment
Organic Basmati Rice
The company's organic basmati rice farming had initiated in 2004 with 23 basmati ricegrowers in the fertile Ganges river belt.
Presently, the company's organic project is spread in an area of about 5000 Acres withdedicated 800 farmer families.
A team of more than 65 members in Agri division is dedicated to the task of providingproper extension services to the farmers.
The company anticipates expanding the organic basmati operations to the tune of10,000 acres within a period of 5 years.
Sesame Seed Pulses Seed
Product Portfolio
Market Share
Energy Division
This division has not only helped the Company in becoming self-sufficient for powerrequirements, but it has also opened up a new revenue stream.
KRBL strengthened its green energy portfolio to 129.35 MW in 2016-17 from 102.05 MW lastyear.
Long-term power purchase agreement for 13 & 20 Years with MSEB, AVVNL, TEB.
Plant Location
Management
Anil Kumar Mittal
The visionary behind the success of the company, Mr. Mittal is the Founder Chairman of KRBLLimited. He has been instrumental, in turning the company into a global brand and the leader inthe Indian Basmati industry.
He was the President of the All India Rice Exporters Association and the Vice President of theBasmati Rice Farmers & Exporters Development Forum.
He has been a Board Member of the Export Inspection Council as well as Basmati DevelopmentFund.
Arun Kumar Gupta
An expert on the Basmati paddy supply chain management and the paddy milling technology, Mr.Gupta has steered the company into a growth trajectory.
He holds various eminent positions in various reputed organizations, one of them being anExecutive Member of the Basmati Rice Farmers & Exporters Development Forum.
Management
Anup Kumar Gupta
The financial architect and the chief strategist of the company, Mr. Gupta hasadded immense value to the company’s financial stability.
He has been the Executive Committee Member of All India Rice ExportersAssociation.
He is currently, the Chief Mentor of Basmati Rice Farmers & ExportersDevelopment Forum.
Share Holding Pattern
Promoters58.81%
MF/DII/Banks, 0.12%
FII/FPI/FDI, 12.11%
Indian Public / Others, 28.95%
Farming around Industry The year 2016 turned out to be a record year for paddy production post two years of poor outcome which was marked
with El Niño weather anomaly.
India is the second largest producer and largest exporter of rice.
The key Basmati Rice producing states in India includes Jammu and Kashmir, Punjab, Haryana, Uttarakhand, andwestern Uttar Pradesh.
In 2016-17, the Basmati Rice production is likely to decline by over 18% from 9.8 MMT in 2015-16 to 8 MMT driven bya sharp decline in acreage.
Haryana and Punjab are likely to account for nearly 40-45% production followed by Uttar Pradesh at 10-15%.
Middle East is the world’s largest Basmati Rice Market.
Saudi Arabia imported the largest quantity of Basmati rice from India in FY17 followed by Iran, UAE & Iraq.
Basmati Rice is exported to 156 countries out of which KRBL exports to 75 countries and is the market leader in the importantBasmati consuming markets in the branded segment
Export of Basmati
The overall shipment of rice from the country increased by 3.94% from 10.41 MMT in 2015-16 to 10.82 MMT in 2016-17.
Value Realization
Industry Players
Risks
Rice, being an agricultural commodity, is prone to plant diseases that can damage the crop.
Low rainfall and improper climatic conditions can adversely impact rice plantations
Fluctuations in the market prices of paddy can lead to inventory losses
Declining economies of major importing countries and currency fluctuations adverselyimpacts international/export business
Economic Risk
Raw Material Risk
Premiumness and Quality Risk
Competition Risk
Foreign Exchange Risk Cost Risk
Regulatory Risk Product Concentration Risk
Opportunities
The Company’s strong in-house R&D capability facilitates it to consistently drive quality and operationalexcellence across its business segments.
Being the largest manufacturer of Basmati Rice seed, KRBL has the capacity to handle 20% of India’s totalBasmati production.
Integrated Value Chain & R&D Capabilities
Strong Farmer Relations & Dealer Network
Evolving Lifestyles and Consumer Preferences
Global Market Expansion and Increased Consumption
Changing Quality Consciousness and Consumer Perception
Financial
Profit & Loss Statement
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 CAGR
Total
Sales1631.35 2080.38 2910.46 3159.68 3428.12 3149.03 14.06%
EBITDA 209.82 311.88 460.13 527.68 543.16 653.82 25.52%
EBIT 165.31 261.32 402.48 474.99 493.11 598.99 29.37%
PBT 95.30 184.21 326.46 394.11 429.70 537.58 41.34%
PAT 73.05 129.88 255.15 321.75 337.08 399.43 40.46%
Profit & Loss Statement Margin
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
EBITDA 12.86 14.99 15.81 16.70 15.84 20.76
EBIT 10.13 12.56 13.83 15.03 14.38 19.02
PBT 5.84 8.85 11.22 12.47 12.53 17.07
PAT 4.48 6.24 8.77 10.18 9.83 12.68
In (%)
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
P/E 6.63 4.05 4.59 12.18 15.61 23.57
ROE(%) 10.19 15.66 24.44 24.29 20.76 20.94
ROCE(%) 19.64 28.25 31.78 30.12 26.68 28.33
Current Ratio 1.34 1.40 1.44 1.54 1.78 1.79
Quick Ratio 0.28 0.24 0.28 0.29 0.30 0.25
D/E 1.22 1.01 1.26 0.97 0.67 0.55
Debtors Days 22.28 26.83 35.80 30.22 37.18 42.20
Inventory Days 221.13 198.37 202.58 184.98 219.11 273.70
Creditors Days 25.87 17.84 19.81 17.16 20.03 30.53
Other Financial Data
Peer Data
Company Price
Market
Cap (in
cr.)
P/E P/B D/E ROE ROCE
KRBL 443.35 10,441.95 23.25 4.65 0.57 23.46% 21.44%
LT Food 91.90 2963.26 20.98 3.88 2.46 19.69% 15.40%
Kohinoor
Basmati64.25 227.48 - 0.83 3.16 - -
Chamanlal
Setia152.45 781.18 18.80 4.38 0.30 30.06% 37.73%
Source : Screener(as on 27th April, 2018)
Investment Rationale
Huge entry barriers for new entrants
Investment Rationale (other than industry triggers)
Strong demand in the Middle East
Iran may resume purchases of Basmati rice
Opening up of Chinese markets for basmati
Rising disposable income leading to shift towards premiumisation
Strong market share in Middle East countries Higher realization than industry average Diversification in Renewable energy/ Captive power Integrated operations resulting in minimum wastage In house R&D facilities
Disclaimer:
This report has been prepared by CONCEPT Securities Pvt. Ltd. and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been
compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation
of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information
purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer
or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to
or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would
be contrary to law or regulation or what would subject CSPL or its affiliates to any registration or licensing requirement within such jurisdiction. It should not be considered to be taken as an offer
to sell or a solicitation to buy any security. CSPL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. CSPL
and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or
(b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed
herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and
opinions. CSPL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken
on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income,
etc. CSPL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make
sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. CSPL or its analysts did not receive
any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither CSPL nor Research
Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking
or brokerage service transactions. CSPL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has
not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any
compensation/benefits from the Subject Company or third party in connection with the Research Report. This report is intended for non-Institutional Clients only. The views and opinions
expressed in this report may at times be contrary to or not in consonance with those of Institutional Research or PCG Research teams of CONCEPT Securities Pvt. Ltd. and/or may have different
time horizons CONCEPT Securities Pvt. Ltd., SEBI Reg. No.: NSE-INB231203531, BSE-INB011203537, SEBI Research Analyst Reg. No.: INH000002715, CIN - U25199GJ1995PTC024306