Part - I KRBL- King of rice can be the king of our portfolio?
This blog is segregated into 3 parts for an easy read. Please read all 3 parts to get a clear view of KRBL Limited. ( Well! thanking you for patience and perseverance).
The first part is all about facts and figures (Industry Structure).
The second part consists of Megatrends and All about the company.
The third part consists of Moat Analysis, Porter Five forces and Relative Valuation
So let’s start with part-I
Industry trend
· The consumer food market continues to evolve at a rapid scale. The importance of a healthier and sustainable food ecosystem continues to food and beverages increasing importance today than it was ever before. Within the consumer food space, the global rice market is valued at approximately $275 billion and is projected to grow at a CAGR of 0.88% during 2019-2020. Rice is the staple food for more than half of the world’s population and more than 500 million metric ton of rice is produced annually, across the globe.
· It is the second-most important cereal crop after maize and ensures food security for numerous developing countries in East Asia and the Southeast Asian regions, with India being among the leading rice producers in the world.
· Global consumption of rice has increased on a year-on-year basis, especially of basmati and regional rice of the total global rice industry, Basmati accounts for around 2.1%, valued at $9 billion and is projected to grow at a CAGR of 7% in the next 4 years and is estimated to reach $11 billion.
· The consumption of Basmati rice is primarily led by the Middle East, accounting for about 45% of the global consumption of Basmati Rice.
· At present, India contributes to about 80% of the world’s share of Basmati rice production. The superior taste and aroma of basmati rice remain a key driver for its increasing preference across diverse consumer groups.
· In India, other factors such as rising disposable income, desire to consume superior quality food drives growth in the basmati rice market.
· Food consumption patterns and preferences are undergoing significant changes. As dietary patterns change, lifestyles evolve and health awareness grows, food habits are transforming.
· With the growing incidence of lifestyle-related diseases like diabetes, obesity, etc., consumers worldwide are showing an interest in preventive instead of curative lifestyles.
· As a result, the demand for healthy, nutritious and convenience food has grown manifold. Companies operating in this space, are therefore geared to deliver innovative products to meet changing customer preferences.
· The Health and wellness foods industry is pegged at around Rs. 10,352 crore and is projected to grow at an average rate of 10%.
· The overall rice market is 500 million tonnes, out of which 7.5 million tonnes is that of Basmati.
· Approximately 80% of the entire market that exists for Basmati is catered by India. The overall production by India i.e. 6.50 million out of which 4.5 million tonnes is exported and the remaining is consumed in India.
· The trends in both Indian and International markets are changing and are thus creating a huge opportunity for an increase in Basmati consumption globally.
· In India, the demand for hygienic and packaged products is increasing and also 40% of the Basmati market is branded and thus the remaining portion also opens up huge opportunities for players like us in India.
· In the International markets, a lot of new ethnicities are switching to Basmati from other rice varieties
Initiatives by Govt.
· The Government revised its allocation for the Pradhan Mantri Kisan Samman Nidhi Yojana (PM-Kisan) and allocated 1,42,762 crores in 2020-21. Since its launch, the PM-Kisan has benefited more than 10 million beneficiary farmers.
· The Government of India has come out with the Transport and Marketing Assistance (TMA) scheme to provide financial assistance for the transport and marketing of agriculture products to boost agriculture exports.
· The Government of India is going to provide 2,000 crores (US$ 306.29 million) for the computerisation of the Primary Agricultural Credit Society (PACS) to ensure cooperatives are benefitted through digital technology.
· Intending to boost innovation and entrepreneurship in agriculture, the Government of India is introducing a new AGRI-UDAAN programme to mentor start-ups and to enable them to connect with potential investors.
· The Government of India has launched the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) with an investment of 50,000 crores (US$ 7.7 billion) aimed at the development of irrigation sources for providing a permanent solution to drought.
· Further, the government has allocated 600 crores for promoting farm mechanisation, 500 crores each for the PM-Asha scheme and the setting up of 10,000 Farmers Producers Companies (FPOs), while 220 crores for PM Kisan Samman Nidhi (farmers pension scheme) for the next fiscal.
· For agriculture and research development, the government has provided an 8,362.58 crores budget for 2020-21 fiscal, up from 7,846.17 crores in the revised estimate. The top 5 Rice producing countries in the world are China, India, Bangladesh, Indonesia and Vietnam.
Yearly revenue growth of rice production (CAGR Growth of 5.82%)
· India is the second-largest rice producer in the world after China, India today produces nearly more than 23% of overall global rice production.
· Growing at about 4% over the last five years, the Indian rice market is primarily dominated by unorganised players because of the presence of several local players and the easy availability of rice through small retail stores which are also called Kirana stores.
· Presently the highest rice producing states in India are Punjab, Andhra Pradesh, Uttar Pradesh, West Bengal, Tamil Nadu, Bihar, Chhattisgarh and Orissa. Together, they contribute almost 72% of the total area of rice production.
· India’s total rice production during FY20 is estimated to have stood at a record 117.47 million tonnes, 9.67 million tonnes higher than the five years’ average production of107.80 million tonnes.
· non-basmati rice commands a larger market share compared to basmati rice as the production of basmati rice is limited to only seven states and is considered in the premium price segment.
· Rice is the dominant staple food for about 70-75% of the Indian population. Due to varied consumer preferences across regions and population classes, more than 4,000 rice varieties are grown in India.
· Since the vast majority (90%) of farmers are small (less than 2 hectares holding), about 45-50% of production is retained by farmers for their consumption (locally milled) and seed use.
So this is all for KRBL part I, I know it’s boring!.
The next part will be surely interesting for you, I promise!
Where is my part II- I think it’s here