Contents:

Investment Thesis: Page 2-4

Annexures
Exhibits: Page 5-6
Financials: Page 7
Interview transcripts: Page 9-17

KRBL An undisputed leader in the Basmati rice industry

Recommendation BUY
4 year IRR 15.6%
Key Take-away
KRBL has created wide moats around its business, through a) developing highest capacity to process rice ~1mn
MT of processing capacity b) highest ware-housing facility ~1mn MT of paddy and 500K MT of rice c) backward
integration in basmati seeds ~35% market share d)access to 250K hectares of contract farming e)more than
6.6 lac retail touch-points (>4x of nearest competition) f)well managed balance-sheet. I believe KRBL is poised
to gain further market share in the domestic business, while continuing to strengthen its presence in global
markets I factor in 11.0% of CAGR in topline and 15.0% of CAGR in EBITDA over FY16-21E. I recommend buy
rating with an expected IRR of 15.6% over a 4 yr investment horizon.

Industry overview

India is the second largest consumer of rice and the largest exporter of rice.
Out of Indias total production of 160mn MT of rice, basmati constitutes 5.6% of output.
India produces ~75% of worlds basmati output rest being produced in Pakistan.
Out of the total 8.7mn tonnes of Basmati produced in India, c60% is exported.
The largest importers are
o Saudi Arabia (imports have been growing at c8% CAGR in FY06-16, ~23% of exports from India
in FY16)
o Iran (which is a largely unbranded market prone to regulatory risks, ~17% of exports from
India in FY16). Iran imposes import ban on all forms of rice for 3-4 months in a year to
protect its local rice crop
o Rest of Middle East contributing ~35% of exports from India
o UK market is ~5% of Indias exports and USA is ~3% of Indias exports
Domestic market has seen steady increase in consumption of Basmati rice ~1.4MT in 2010 to 2.6mn
MT in 2015. Market growth potential remains huge as basmati consumption is <2% of total rice
consumption in India.
About ~35% of basmati sold in India is branded (branded basmati sales in India were ~14% of total
consumption in 2010) with growing disposable income share of branded basmati is also expected to
grow further.

Operations of the Basmati Rice Industry

Basmati Rice is largely a Kharif crop.

While non-Basmati rice can be produced up-to 3 times a year (in states that are well irrigated) and atleast 2 times a year (in states like TN that have water shortage), Basmati is grown only once a year.
The seed of the Basmati crop is important as it determines the yield of the crop apart from other
environmental factors. KRBL, apart from other government agencies is into seed manufacturing.
Once the Basmati paddy is harvested, it is brought to the Mandi by the farmer. Basmati rice is
independent of MSPs and MEPs set by government.
While companies are involved in contract farming, it is not mandatory for the farmers to sell or the
company to buy from each other.
Paddy bought from the Mandi is stored for ~18-36 months before milling to produce Basmati Rice.
Companies can also buy paddy/brown/unpolished rice of different maturities from each other.

The paddy can also be steamed instead of letting it age naturally to get the benefits of ageing. While
this is a common practice in non-basmati, it is not the case in basmati rice.
Since rice and paddy are essential goods, they are not subject to excise tax. They however do see levy
of VAT and Mandi tax varying between different states.
While the conversion of paddy to rice seems the most straight-forward, the strength for any company
comes from the proper execution of the same.
Profitability of the company is not dependent on just the quality but also the companys ability to
buy paddy/rice at the right price and store in conditions that are favourable for the ageing of rice

Company overview

KRBL is the leader in basmati rice in India with 30% market share in the branded segment.
The company has seen a volume growth of c13-14% CAGR over FY12-16 in both exports and domestic
markets with realizations close to 1.5-2x in exports vs India.
Its world class manufacturing plant at Dhuri (processing capacity of 150MT/hr) and Ghaziabad
(45MT/hr) provides it with Asias largest capacity.
Owned warehousing, contract farming, backward integration coupled with a strong management
inclined to keep the brand equity intact works in favour of the company.

KRBL - From strength to strength

Company has created high moats around the business through
Ability to store large quantities of paddy ensures quality: The company has a warehousing capacity of c1.5mn
tonnes of paddy and rice together. This gives the company the ability to age paddy an entire season. Further, it
de-husks the paddy and stores the brown rice for another season before it is finally converted into rice for its
premium brands. No other company in the market has storage of this size. This also provides a sufficient
barrier to entry as basmati rice is stacked in piles of 16 vs 42 (for non-basmati). It would therefore require 3x
the space required to store a similar amount by a non-basmati player. Indias largest non-Basmati player only
has storage for c0.98mn MT. Competitors typically rent godowns which compromises on quality and also
increases cost of production.
Backward integration source of invaluable market knowledge: The company manufactures c35% of the
seeds used in Basmati production. The rest is supplied by govt. institutes or are re-used seeds of the previous
crop. This equips the company with information necessary to predict the size of the crop. Coupled with a sense
of demand in export market, the company can make a reasonable estimate of the prices of paddy and rice.
Further, strong technology ensures they do not over-pay for the same crop across Mandis. Not just this, sale of
seeds helps in building a connect with the farmers - a source that can be tapped into when necessary. KRBL
also has ~250K acres of contract farming which is sufficient to source ~0.5mn MT (c80% of its sales) of paddy.
LT foods the second largest player has ~160K acres of contract manufacturing.
Strong balance sheet a rarity in the business: The company has a very low net debt to ebitda of ~2.2x with
an interest cost of c5-5.5%, lowest amongst peers. Also, the companys interest coverage ratio is c8 times. In
comparison, LT Foods has net debt to ebitda of ~4.3x.
Wide distribution network and solid brand equity: KRBL has c6.6lakh retail touch points. Its nearest
competitor in the industry has c1.5lakh touch points. Channel checks indicate that India gate is unparalleled in
terms of quality and therefore a price premium is justified. The market share in India and Middle east alike for
India gate brands is testament to its quality. KRBL has ~25% market share in branded exports from India.
Ahead of curve capex: Having acquired Asias largest milling plant in Dhuri, the company has a capacity of
~1mn MT/ year. At c60% utilization of this capacity in FY16, capex is largely behind for the company.
Competition is hovering around c83% utilization and may not be able to scale up easily given the weakness of
balance sheet.

Lack of threat from larger FMCG players: Despite financial strength, distribution reach, non-perishable nature
of the commodity the space has been devoid of competition from the larger FMCG players. ITC, Pepsico, HUL
have attempted to enter this market in the past. However, they had to sell off their businesses as the rice
business requires a fair amount of hands-on understanding of the commodity markets from the management.
KRBL has become the leader in this industry: KRBL is arguably the best player in the Basmati rice industry.
Strong balance sheet, unparalleled product quality and well thought out supply chain gives it an advantage
that is hard to match.
Strong performance despite raw material risks: KRBLs performance has been strong despite the cyclical
nature of the business. Over FY12-16, the companys sales have grown c20% driven by a volume growth of
c13% and EBITDA has grown c23% CAGR.
Expect EBITDA CAGR of 15% in FY16-21E: Given 1Q17 performance, I assume a c25% growth in volumes in the
domestic business. The company estimates lower acreage of Basmati in 2016 leading to c20-25% increase in
prices in 2H17. I estimate a c13% improvement in domestic realization in FY17. Exports for FY17 should see a
decline of c30% in-line with 1Q17 trend given lack of one off order from Iraq in FY17.
The company has raw material stock from 2014 and 2015 (low paddy price environment) which has helped
input prices go down. Since both 2015 and 2016 saw low paddy prices with 2016 seeing the lowest at
cINR18000/MT, the gross margin benefit should continue until FY18. 1Q17 saw gross margins of c65% and
EBITDA margins of c20%. On a conservative basis, in FY17 margins should be atleast c18.5% as the raw
material and realization benefit should only improve from here on.
Beyond FY17, I expect volumes to grow at a rate of c9% until FY21 with ~3% improvement in realization on the
basis of long term inflation for basmati. At these estimates, the stock trades at c10.9x EV/EBITDA FY17E.
Valuations at discount to leaders in consumer segment: KRBL is the market leader in branded basmati
business and has high competitive advantages which ensure its leadership position. I argue that the stock
deserves re-rating given consumer companies operating in sectors which have hurdles such as commodity
price dependence / high working capital / risk of regulations trade at much higher multiples than KRBL
currently.
Companies like Marico in large caps, Hatsun Agro, Bajaj Corp, Agro tech foods in mid caps trade at much higher
multiples. Even if KRBL were to trade at 40% discount to these companies, it should still trade at 12x 1yr fwd
EV/EBITDA.
However, even on factoring in 10.9x EV/FY21 EBITDA (the current trading multiple) at exit 4 years from now,
expected IRR is ~ 15.6%
Company
Marico
Bajaj Corp
Agro Tech Foods
Hatsun Agro
Titan

Description
Market leader in coconut oil segment
Market leader in almond oil segment.
Market leader in edible oil segment.
Tamil Nadu based dairy manufacturer.
Leader in branded Jewellery.

Median
KRBL

Market Leader in branded Basmati

Risks: Adverse regulations in exports.

Market Cap in INR M FY16 EBITDA Margin RoCE

EV/1yr Fwd EBITDA
375,053
18.2%
27.10%
28.29x
60,121
31.2%
34.30%
18.37x
13,057
6.8%
6.50%
20.13x
51,273
8.8%
14.30%
18.90x
370,784
8.3%
15.40%
28.40x
60,121
64,721

8.8%
15.6%

15.4%
17.7%

20.13x
10.93x

Annexures
Exhibits
Exhibit 1 KRBL is the largest company amongst its peers in terms of sales, most profitable, along with solid
balance-sheet.
Figures in INR M
KRBL
LT Foods
Kohinoor Foods
Amira Nature Foods
Chaman Lal Sethia Exports

Mcap
Net Debt
EV
LTM Revenue LTM EBITDA EBITDA Margin Total Debt/EBITDA EV/ LTM EBITDA P/LTM E RoCE
64,720.6
11,248.4
75,977.9
31,781.2
5,286.7
16.6%
2.2x
14.4
18.3
17.66%
7,607.0
15,255.1
23,205.0
29,234.3
3,592.1
12.3%
4.3x
6.5
10.2
9.00%
2,206.1
9,551.1
11,757.2
12,997.3
1,228.4
9.5%
7.9x
9.6
208.2
4.90%
17,943.8
12,707.0
32,993.5
37,406.1
4,645.0
12.4%
3.0x
7.1
8.3
9.50%
2,771.1
(263.7)
2,507.4
4,673.4
577.3
12.4%
0.4x
4.3
7.6
27.20%

Exhibit 2 KRBL is trading much below consumer sub-segment leaders

Company
Marico
Bajaj Corp
Agro Tech Foods
Hatsun Agro
Titan

Description
Market leader in coconut oil segment
Market leader in almond oil segment.
Market leader in edible oil segment.
Tamil Nadu based dairy manufacturer.
Leader in branded Jewellery.

Median
KRBL

Market Leader in branded Basmati

Market Cap in INR M FY16 EBITDA Margin RoCE

EV/1yr Fwd EBITDA
375,053
18.2%
27.10%
28.29x
60,121
31.2%
34.30%
18.37x
13,057
6.8%
6.50%
20.13x
51,273
8.8%
14.30%
18.90x
370,784
8.3%
15.40%
28.40x
60,121
64,721

8.8%
15.6%

15.4%
17.7%

20.13x
10.93x

Exhibit 3 Big gap between top player in segment and others seen in many other segments.

Company
ITC Limited
VST Industries Limited
United Spirits Limited
Radico Khaitan Ltd.

FY16 EV/EBITDA
20.3x
13.0x
39.0x
9.2x

Exhibit 4 Larger players like ITC / PepsiCo havent been able to crack this market
Company
ITC
HUL
PepsiCo
Cargill
Mc-Cormick- Kohinnor JV
Bush Food Overseas
Tilda

Date
Description
Mar-08 Brought in Aashirwaad brand basmati - but didn't continue with it for long.
Mar-16 Sold Gold Seal Indus Valley and Rozana to LT foods. Annual income ~INR
510M. Purchase ~INR 250M.
Mar-08 Sold Seasons brand to LT Overseas
Apr-08 Exited Nature Fresh Basmati Brand
Mar-15 JV to supply packaged products broke down in 2015
Jun-15 Private Equity investment by Standard Chartered in 2012. Subsequent sale
to Hammad Foods. Currently embroiled in litigation.
Jan-14 Has the highest market share in UK market (~48%) and has been bought by
Hain Celestial.

Exhibit 5 KRBLs pricing very competitive

Basmati Biryani Rice Price Comparison

KRBL
LT Foods
Kohinoor
Unbranded

Brand
Price / KG
India Gate Classic
205
Daawat Biryani
199
Gold Basmati
180
Biryani
130

Exhibit 6 Largest storage space a key differentiator

Exhibit 7 No major capex ahead given low capacity utilization

Exhibit 8 Retail touch points ahead of peers

Exhibit 9 Income statement

(Rs mn)
Domestic Volumes (MT)

FY15
FY16
FY17E
FY18E
FY19E
FY20E
FY21E
3,28,636 3,48,752 4,35,940 4,79,534 5,27,487 5,80,236 6,38,260

Growth (%)

6%

25%

10%

10%

10%

10%

39,856

45,000

46,800

48,672

50,619

52,644

-23%

13%

4%

4%

4%

4%

1,44,805

2,42,990

1,70,093

1,78,598

1,87,528

1,96,904

2,06,749

68%

-30%

5%

5%

5%

5%

51,622

39,856

45,000

46,800

48,672

50,619

52,644

-23%

13%

4%

4%

4%

4%

5,91,742

6,06,033

6,58,132

7,15,015

7,77,140

8,45,009

25%

2%

9%

9%

9%

9%

63,020

53,092

54,823

56,678

58,601

60,594

62,662

-16%

3%

3%

3%

3%

3%

31,972

34,281

36,394

40,787

45,735

51,308

57,591

7%

6%

12%

12%

12%

12%

5,258

5,331

6,782

7,701

8,289

9,420

10,706

16%

16%

19%

19%

18%

18%

19%

3,217

3,371

4,520

5,240

5,657

6,541

7,579

(Rs mn)
Shareholder's funds
Borrowings
Capital Employed

FY15
13,257
12,815
26,198

FY16
16,246
10,920
27,360

FY17E
20,766
8,570
29,529

FY18E
26,006
8,521
34,720

FY19E
31,663
9,261
41,118

FY20E
38,203
6,742
45,139

FY21E
45,783
4,592
50,569

Net Fixed Assets

Net Current Assets
Inventory

6,396
22,818
18,597

7,750
21,162
17,442

8,674
22,641
18,073

9,041
27,661
22,684

9,364
33,987
28,550

9,641
37,985
32,029

10,850
42,491
35,951

Domestic Realization (INR/MT)

51,622

Growth (%)

Export Volumes (MT)

Growth (%)

Export Realization (INR/MT)

Growth (%)

Total Volumes (MT)

4,73,441

Growth (%)

Total Realization (INR/MT)

Growth (%)

Net Sales
Growth (%)

EBITDA
EBITDA margin (%)

PAT

Exhibit 10 Balance Sheet

Days

Debtors
Days

Net current Liabilities

Trade Payables
Days

Net Working Capital

Application of Funds

283

246

250

280

310

310

310

3,400

2,536

3,385

3,793

4,254

4,772

5,356

39

27

34

34

34

34

34

4,486
1,551

2,932
1,422

3,145
1,632

3,342
1,829

3,592
2,079

3,845
2,333

4,131
2,618

24

20

23

23

23

23

23

18,332
26,198

18,231
27,360

19,497
29,529

24,320
34,720

30,395
41,118

34,139
45,139

38,360
50,569

INT E RV I E W R EC OR D S

Rakesh Mehrotra CFO, KRBL Ltd

Adish Shankar Owner, Sri Lalitha Agencies, (Indias largest non-basmati rice player based in Andhra
Pradesh)

Ankit Setia Owner, Chaman Lal Setia Exports, a listed player in the Basmati Rice space

Name not to be disclosed Investment team member of Agri focused Private Equity Fund

Daniel Stockist, Basmati Rice in Tamil Nadu

Rupa Rice trader, Telangana

Ashish Shrivastav Distributor, Tilda Basmati Rice

INT E RV I E W R EC OR D : KR B L

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Rakesh Mehrotra
KRBL Ltd
Understanding the company, inventory management, growth
prospects, plans for exports and guidance
Poornaa Venkatesan
2nd Sept 2016; 5th Sept 2016

Key insights
Being seed manufacturers gives the company an advantage in terms of connect with farmers,
information on acreage and higher yields.
Company differentiates from competition all through the supply chain seed, inventory management,
storage, processing, distribution and also balance sheet strength
Company owns its warehouses while competition doesnt.
Cash conversion cycle probably the highest for KRBL. Despite that has the strongest balance sheet
Margins in international slightly ahead of margins in domestic.
To focus more on domestic going forward as much of the market is unbranded
CY16 should see stronger realization as there is 20-25% drop in acreage.
Threat from players like HUL/ITC negligible.
When raw material prices are low, the difference between basmati and non basmati reduces. Those are
times when domestic market grows like in FY13. This is expected to repeat in 1HFY17.
Average age of rice and paddy with the company: 5-10% of 2013; 30-40% of 2014 and balance is 2015
crop.
Average price of rice inventory is cINR 30,214/MT (15% lower YoY) and paddy is cINR23,000/MT (c7%
lower YoY)
Company does not sell at a loss whenever a quote is given, the price is based on the higher of cost of
inventory or market price.
KRBL is investing in power plants as this helps in achieving lower tax rates.
UK and Europe have import taxes on finished product imports. So it is hard to export fully processed
Basmati rice.
Impact of GST expected to be positive for the industry. If taxes increase it will increase across the board.

Seed manufacturers - distinct advantage; farmers are provided help with soil and other activities
until the paddy is brought to the mandi (incl packaging, transport etc)
In the mandi, KRBL is the winner most of the times. The contract farmers can bring the rice to the
Mandi for sale to anyone else. But the middle man will favour KRBL
Basmati rice has very limited supply; prices dependent on global demand
Differentiate from competition at every level:
At the seed level - seeds are high yielding;
At the mandi - have the finest systems in place so that buying is at a uniform price (not
higher/lower in any place)
Quality check: at farm then mandi then godown - most competitors dont have such a storage
facility and therefore have to hire godowns therefore quality suffers, costs increase
Ageing is done for 18-24 months - cost of funding can be very high
KRBL has 4-5% borrowing cost as 60% borrowing in fx; 6.75% pa on CP which is 40% of debt
Any export sale - the inflow is hedged as soon as order is firm; KRBL takes packing credit against
forwards (all cos will take this but given the good credit rating KRBL get better rates)
Not interested in playing the dollar depreciation story - not in the speculation business
Most companies that have made losses have been lured by exchange gains

200Cr of fire loss yet to be booked by LT foods as insurance has rejected the same
Cash conversion cycle is probably highest for KRBL as they actually hold stock and dry it for 2-3yrs
In 5 years looking at more of domestic: International is 100% branded; people import from
companies in India and brand it leading to higher competition
UK Europe US are key; Russia and China picking up
From the time basmati sales opened up - ME has been the biggest market; Basmati rice is the
staple food for them; Their own population consume it, not just Indians or Pakistanis
Since Middle east imports everything except crude oil, they will always import the best of things
To focus more on domestic going forward
7mn MT of basmati rice produced - 4mn is exported; 3mn is domestic (70-80% of this is broken)
Price vs head rice: 3/4 rice is 40%; 1/2 rice is 50%, 1/4 price is 60% cheaper; so prices can be
between Rs150- Rs60/Only 3% of rice consumption in India is Basmati
30-40% is branded while 60-70% is unbranded
Since market leader will be able to gain share - expect growth in India
27% of domestic sales comes from South India
Economic power is needed for countries to be able to afford Basmati
Iran bans all rice imports to ensure sale of its local crop - Happens once in a year for 3-4 months
Basmati rice is also a once a yr crop
Basmati rice is 2-3x more expensive than the rice of Philippines and Vietnam. This suggests that
they arent a competition
Lower oil price is leading to some pressure. KRBLs sale has been same
Present in 75 countries in the world
CY2013: Rs 40/kg for paddy as demand from Iran came and farmers made a bumper crop
CY2014: More area under Basmati; demand didn't increase, so paddy was sold at Rs 28/kg
CY2015: Good crop year; demand did not go up; prices came down c15/ kg and farmers have made
losses
CY2016: 20-25% lower area under irrigation; prices are expected to pick up
At any time carrying 3 years of stock; prices of end product based on 2013 price/kg; as RM of lower
cost is being used margins are picking up
Prices of full rice is the same in India and abroad
Iran (less than 2% sales) is unbranded market and there it will be rebranded; LCs of Iran not valid
and advance payment not possible for companies there
Many projects under consideration: Rice bran oil currently sold to Saffola; Quinoa;
1500Cr to build a plant of the size at Dhruvi
ITC/HUL: Can't enter. Have to be involved in the day to day activities of the business. And need to
know tricks of trade
Paddy is naturally aged for 8-9m until the new paddy arrives. Then it is dehusked and stored as
brown rice until it is processed. Only the unity brand is steamed for processing immediately.

INT E RV I E W R EC OR D : SR I L A LI T H A EN T ER PRI S E S

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Adish Shankar
Sri Lalitha Enterprises
Understanding the rice industry and Basmati rice space
Poornaa Venkatesan
2nd Sept 2016; 4th Sept 2016

Key insights
Company's can buy Paddy from the mandi (which is usually just harvested) or buy rice (1yr or 2 yr) from
fellow millers
A company will buy rice instead of paddy (while people may think this does not make use of economies of
scale) because sometimes paddy prices are still high while rice prices are lower due to low demand. It
becomes economical to buy rice over paddy
Having the right inventory is important - storage facilities is therefore key. KRBL has an advantage in this
aspect
Amira, REI Agro, LT Foods are not names highly regarded in the agri community
The management and the ethics of KRBL is widely respected and the premium commanded by their
products is justified

International business in non basmati is not a high margin business. It depends on whether the
company is selling its brand or the buyer's brand
There is seasonality in this business - Marriage season in domestic and Ramadan in ME are periods
of high consumption of rice
Paddy is aged. For basmati this can be aged for c2-3 years before milling. The longer the better
Company's can buy Paddy from the mandi (which is usually just harvested) or buy rice (1yr or 2 yr)
from fellow millers
Fellow millers will sell incase they have payables that require liquid cash or if they do not have
storage facilities
A company will buy rice instead of paddy (while people may think this does not make use of
economies of scale) because sometimes paddy prices are still high while rice prices are lower due
to low demand. It becomes economical to buy rice over paddy
The whole business is therefore about buying rice and paddy at the right price and selling at the
right price
A dip in prices (26 to 18) in 2015-16 saw farmers shifting to other vammrieties of rice and this is a
common phenomenon in rice industry as farmers do not have the liquidity to wait for 2 years to
make a bumper crop
But once the acreage comes down and price open strong, the next year will see higher acreage for
basmati rice and push prices down. There are cycles but strong/bad demand may sometimes
elongate this
Since having the right inventory is important - storage facilities is key. KRBL has an advantage in
this aspect
Their unity brand is not aged naturally but steamed (steaming simulates actual ageing)
Sugandhi, Sharbati, 1509 ad 1121 brands are mixed by other players (such activities are not
followed by KRBL)
Contract farming does not mean that the company is forced to buy from the farmers or the
farmers are forced to sell to them.
Company's choose based on soil conditions and taste/aroma of the rice and farmers are free to sell
in the mandi to whoever they want
Amira, REI Agro, LT foods are not names highly regarded in the agri community

About KRBL:
The management and the ethics of KRBL is widely respected and the premium commanded by their
products is justified
Launched the very successful 1121 seed variety
Also sell liquid glucose whose prices are determined by sugar prices
Invested in captive power plants that provides low cost of power
Financially the strongest
Brand strength is unparalleled.
Other companies are focusing lesser are invested in real estate etc. The second generation is not
as interested in the rice business.
Distributor margins are very low

INT E RV I E W R EC OR D : C H AM AN L AL S E TI A EX P OR TS L T D

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Ankit Setia
Owner, Chaman Lal Setia Exports
Competitor Study
Poornaa Venkatesan
5th Sept 2016

Key insights
Believes the best way to do business is to not hold too much inventory.
They buy inventory in the market 2 yr old rice and then process it to sell
The company is debt free and is funded by the promoter.
ROCE of the company is c50% and that cannot be seen in any other player
Believes there is some amount of window dressing of KRBLs financials as the company showed growth
despite the entire industry seeing lower turnover in FY16
Very hard to get a sense of domestic and international margins.
Middle east demand saw a pick up as these are countries that have families with c15-20 people. To make
rotis for such large families is very difficult hence these are largely rice eating countries.

INT E RV I E W R EC OR D : P R IV A T E EQ U IT Y PR OF E S S I ON AL

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Name not disclosed

Agri focused PE
Investor Interest
Poornaa Venkatesan
2nd Sept 2016

Key insights
Lots of things to be monitored given commodity exposure
Different companies have different catchment areas Tilda in UK, KRBL in India and Middle East, LT Foods
in USA
There is scope of growth in Domestic business from conversion to branded rice
International business has inherent risks from countries imposing import bans eg Iran
Working capital management very important. KRBL has somehow managed to do this the best
KRBL is only focused on rice despite the size it has achieved. Most bigger companies have diversified into
other products.
Competitive intensity is high. But nothing to match India Gates brand equity

INT E RV I E W R EC OR D : ST OC K IS T

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Daniel
Stockist
Supply chain
Poornaa Venkatesan
2nd Sept 2016

Key insights
Distributors sell to him and he sells to smaller retailers
Has all forms of Basmati rice - India Gate, Postman etc
Another brand called Double deer is also growing strong in South but KRBL is by far unbeatable
1 in 2 bags of basmati rice entering Chennai is of India gate.
More of eating out and conversion to Roti (wheat) in the nights from Rice
Strong growth for the last 20 years in Basmati Rice. However could not quantify
Company's refrain from selling directly to hotels as they dont pay back in time. So its typically done by
middle-men
Basmati lead time is longer than normal rice. Ponni rice comes twice/thrice a year. Karnataka has 3 times
since there is a lot of water in the state
Sales to distributors from KRBL has a credit period of 1 week at max
Distributors sell on cash
Exports is a different ball game as buyers sometime refuse to pay back claiming loss of stock in water
Stockists only get a margin of c2-5%

INT E RV I E W R EC OR D : R I CE TR A D ER

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Rupa
Rice Trader
Margins
Poornaa Venkatesan
5th Sept 2016

Key insights
She sells to customers at near whole sale prices.
Distributors get c3-4% margins. Wholesaler margins are around 10%, out of which she sells at c3-4%
margin so as to ensure repeat customers
MRP has c25% margin inbuilt for the retailer. Hence the discounting in the market is not the company but
retailer driven
India gate has a specific kind of customer who never shift to other forms of rice
There are other brands at lower price which have similar quality to that of India Gate
KRBL created a sort of shortage for its brands when the prices crashed so as to get the same realization

INT E RV I E W R EC OR D : DI ST RIB U TOR , T IL D A

Interviewee
From / Designation
Main theme of the interview
Interview Conducted By
Date

Ashish Shrivastav
Distributor
Margins
Poornaa Venkatesan
5th Sept 2016

Key insights
Markets: Middle east is KRBL while UK and Europe is Tilda
Domestic market is largely broken rice so margins will be lower.
Cost of production of head rice, and broken rice is the same as it comes from the same process
Believes UK is not a market that KRBL can crack