A report from Bloomberg hints that the government is contemplating an export ban on non-Basmati rice to control the rampant inflation. The idea of a ban on rice export is hard to imagine, given India’s share of over 40% of global rice market. But the idea isn’t new.
India has banned broken rice in 2022 which protected the domestic prices. A 20% duty was also imposed on shipments of white and brown rice, in response to the rising food staple prices, triggered by Russia’s invasion of Ukraine.
A Thai rice, a benchmark for Asia, has soared to the highest in almost two years. A strong demand aided with stockists storing grains ahead of festivals have put pressure on central banks of countries to control more price hikes.
Indian government has also taken account the effect of the El Niño conditions that have developed in the tropical Pacific for the first time in seven years, as per the World Meteorological Organization. This threatens to bring drought to many rice-growing regions, majorly China, India, Vietnam, and parts of other Asian countries.
– LATEST UPDATES FROM LISTED RICE COMPANIES:
–KRBL
– Reported highest ever revenue for FY23 of Rs 5,456 Cr, PAT of Rs 701 cr; Gross margin at 26.5%
– FY23 export of Rs 1,931 cr vs Rs 1,451 cr in FY22
-Sales impacted due to higher basmati unit costs, higher share of bulk non-basmati sale in exports
– Export business more margin-accretive (~5%) than domestic; Market share of 25% in export market and 30% in domestic market
– ADANI WILMAR
– Kohinoor Brand crossed Rs 100 cr sales in FY23 (brand was acquired in May 2022)
– Launched value-added product in Rice, Kohinoor Hyderabadi Biryani Kit in ready-to-cook category.
– Reported 7.2% market share in Indian rice market
– LT FOODS
– FY23 revenue stood at Rs 6,979 crore; up 28% YoY
– Gross Profit at Rs 2,402 crore; up 31% YoY
– PAT stood at Rs 423 crore; up 37%YoY; Market share at 29.3%;
– Acquired 51% in Jasmine rice brand ‘Golden Star’ in the US in 2022
– Company to grow value-added products, ready-to-cook, and ready-to-eat categories.
WHAT TO EXPECT IN DOMESTIC MARKETS?
| Parameters | Value |
| Rice produced in 2022 | 135.5 MT |
| Rice exported | 22.26 MT |
| Expected decline in revenue from export ban | ~$10-11 billion |
| Decline of revenue of listed companies | ~Rs 5,000 -5,500 Cr |
Domestic markets have seen inflation rise in June period at 4.81% CPI levels, and food inflation at 4.49%. India’s southern peninsula, the eastern region, and the Deccan Plateau continue to face a below-normal monsoon. With the Kharif sowing remains lower than last year for crops like rice and pulses, rice exporters are bracing for a higher rice grain acquisiton costs, spurring increases in their selling prices.
This augurs well for farmers who sell directly to co-operatives and government collection centers. Listed companies will also feel pressure of the rising prices, giving early signs in curb of export revenues starting Q2FY24. Thus, we iterate a ‘SELL’ position on KRBL, while assigning a ‘HOLD’ position on Adani Wilmar and LT FOODS respectively.
To receive the latest EZ Wealth updates, follow us on Twitter, Facebook and Instagram.