Here's why world's largest basmati rice exporter has its eyes on non-basmati space

Data released by the Directorate General of Commercial Intelligence and Statistics (DGCIS) in April showed that export of non-basmati rice was the top forex earner across all agri-commodities during the last financial year. India exported non-basmati rice worth $6,115 million in 2021-22, up 27.4 percent against $4,799 million recorded in the previous year.

While the Indian rice market is primarily dominated by unorganized players, the organized sector – which targets the Tier 1 and 2 cities – is primarily run by KRBL, LT Foods, Kohinoor Foods, Adani Wilmar, Amir Chand Jagdish Kumar, among others. The leading packed rice brands are India Gate, Dawaat, and Kohinoor.

According to a report by KRBL, world's largest rice miller and exporter, the company’s volume market share in the basmati space stood at 35 percent, compared to 19 percent of LT Food, 5 percent of Adani Wilmar and 3 percent each of Aroma and Shree Jaina in Q3FY22. Non-basmati rice market is mainly controlled by localised players.

KRBL had last week reported a weak set of numbers for the fourth quarter of financial year 2022 with its gross margin falling to 31 percent against 32.8 percent last year. Revenue rose slightly by 1.38 percent at Rs 987 crore against the Rs 974 crore for the same period last year.

EBITDA, or earnings before interest, taxes, depreciation, and amortization stood at Rs 163 crore, down from last year’s Rs 209 crore while net profit was at Rs 109 crore against the Rs 138 crore last year.

The numbers were weak for the full year as well with gross margins down to 28 percent against 31.3 percent, EBITDA down to Rs 705 crore against Rs 846 crore and net profit down to Rs 460 crore from Rs 560 crore. Revenue was up by 5 percent to Rs 4,211 crore.

The company’s rice realization increase — 22 percent over Q4FY21 — was offset by 25 percent increase in input cost, impacting gross margins while the inventory was lower as paddy purchase went down in the third quarter.

However, Jain says that the company looks forward to a positive FY23 as the domestic demand remains strong and the challenges no longer remain in exports.

Speculations had risen in the last two weeks that the government was looking to ban rice export like wheat and sugar exports. However, reports now say that the Centre has started pushing rice export with no expectations of restrictions anytime soon owing to a large domestic harvest and relatively lower global demand.

According to Jain, the three principal drivers of performance in the rice space are volume, sales mix and efficiency in buying. Distribution is only a short term variable, he says.

“The first is, of course, your volume sales. That's critical to sort of keep a steady pace on because rice is an inventory based business… The second key area to keep in mind is the sales mix, which determines the overall realization… And the third, of course, is the efficiency in buying,” said Jain.

India is the second-largest producer of milled rice after China. It is the largest shipper of rice globally with 35.8 percent of world’s total rice exports, as per data from Observatory of Economic Complexity (OEC).

In 2020, India exported rice worth $8.21 billion, followed by Thailand ($3.88B), Vietnam ($2.74B), Pakistan ($2.14B), and United States ($1.92B).