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April 2024

Rice miller stocks in focus; KRBL, LT Foods soar 6% on positive biz outlook

The impact of El Nino on Basmati production is minimal due to the irrigation methods employed, utilizing both canal and groundwater sources

Shares of rice miller and basmati rice exporters were in focus as they rallied up to 6 per cent on the BSE in Wednesday’s intra-day trade, in an otherwise subdued market, on positive business outlook. In comparison, the S&P BSE Sensex was down 0.11 per cent at 65,710 at 12:14 PM.

KRBL, which owns India Gate, flagship and the world’s number 1 basmati rice brand, surged 6 per cent to Rs 431.55 in the intraday trade today. The stock was trading close to its 52-week high level of Rs 449.40 touched on December 14, 2022.

Shares of LT Foods, too, rallied 6 per cent to Rs 179.40 in the intraday trade today. The stock had hit a 52-week high of Rs 194.15 on August 1. The company’s flagship brands include ‘Daawat’, one of India’s most consumed Basmati brands, ‘Royal’, North America’s No. 1 Basmati player, and many more.

In the past six months, the stock price of LT Foods (up 78 per cent) and KRBL (up 24 per cent) have outperformed the S&P BSE Sensex, which has gained 9 per cent during the period.

Last week, the Government of India issued notification, wherein minimum export price of Basmati Rice has been set as $1200 per tonne, and export below the said limit will be put on hold and evaluated by a Committee being formed by the Government.

In this regard, LT Foods said the said limit does not have any impact on the exports for the company, as it mostly exports premium and aged rice in its own trusted brands i.e. DAAWAT and Royal, export price of which is mostly over and above the said minimum export price limit.

Also, as per the management, the impact of El Nino on Basmati production is minimal due to the irrigation methods employed, utilizing both canal and groundwater sources. In the past, during the occurrence of El Nino in 2015, Basmati production remained unaffected.

“Therefore, the company do not anticipate any adverse effects on Basmati production. In fact, they expect a higher crop yield next year, as farmers received significantly higher prices, around of 30 per cent to 35 per cent more than in the previous year,” brokerage firm Ventura Securities said in a stock update.

Meanwhile, India’s rice segment is set to see steady growth in the coming years. As per the United States department of agriculture (USDA) estimates, despite possible El Nino in 2023, India Rice production in 2023-24 is estimated at 134 million tonnes (MT), 2 MT lower than previous year while domestic consumption and residual is estimated at 114 MT vs 112.5 MT.

Despite 20 per cent export duty on some non-basmati rice, Indian Rice prices are lower than its competitor in the global market which ensures continuous growth in export revenue. India has enough surplus rice production to meet export demand. Overall, these forecasts indicate a positive outlook for India’s rice industry, with steady growth anticipated in the years to come, KRBL said in its FY23 annual report.

The production for basmati rice is expected to remain stable at 10 MT for marketing year 2023-2024. Exports could see robust demand from significant markets such as the Middle East and the USA owing to good realisation from basmati paddy in FY23, and Punjab government is planning to increase basmati sowing area by 20 per cent in FY24. This will ensure enough basmati to fulfil the basmati demand in domestic and export markets.

Further, Indian Agricultural Research Institute has developed new improved varieties which have resistance to bacterial blight and blast disease. This will result in better yield with lesser use of pesticides. These new varieties boost Indian Basmati exports in the countries with stringent pesticide norms, KRBL said.

India has been the world’s largest exporter of rice since 2012. Currently, India exports more rice than the combined shipments of the next three largest exporters – Thailand, Vietnam and Pakistan. The USDA, in its April 2023 crop outlook, has stated that India’s prices are the most competitive among global suppliers and its total supply of rice is at a near-record high. QR Code

Published Date: September 6, 2023

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