China has allowed import of basmati rice from India; this move is seen as a big boost for rice exporters like KRBL and Kohinoor. China is a major rice consuming country, so it is seen as a very promising market.
Anil Mittal, chairman and managing director of KRBL told CNBC-TV18, the company is already in contact with many importers in China, but expects revenues from exports to China to start flowing gradually. "China is not as big as the market in Middle East or Europe or America, it can be good revenue earning, but it will take time and the effect will not be immediate," he said.
Meanwhile, KRBL expects sales to be around Rs 1,800 crore and profits to jump 4-5% in FY13.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: Could you tell us how large this opportunity is for exporters like you and what is the kind of realisations you are expecting from these exports?
A: China is going to be a very promising market for India and especially for KRBL. We are already in touch with many importers in China. But it is not as big as the market in Middle East or Europe or America, it can be good revenue earning, but it will take time and the effect will not be immediate, it will gradually increase.
Q: Is it some kind of a quota or some kind of restricted import permission?
A: The details are not yet known, but I think it is open because import of basmati rice into China is not that easy compared to other countries because they already consume Thai fragrant rice and it is different than basmati rice. But we are sure it is out of that quota system because we are not expecting a huge quantity, maybe in first year it may jump to around 15,000-20,000 tonne.
Q: What is your anticipation at your end? How much may your total exports or revenues go up by in FY13?
A: We are expecting topline of around Rs 1,800 crore and there will be a jump of around 4-5% in the bottomline.
Q: What are you expecting your procurement prices - considering that we appear to have had a bumper harvest, would your procurement prices for paddy have fallen, how much was the procurement price and therefore will you improve all margins at least in the first half of FY13?
A: This is a booming year for basmati rice exporters and we should take the full benefit of it. During the procurement season in October-November, the paddy prices were quite low, which comparatively have jumped up by around 25-30%. But we have been selling the rice since October upto now, we have plenty of stock still to sell at high prices. Therefore, the bottomline should increase by 5-7% and our exports and our topline will also be touching around Rs 1,800-1,900 crore.
Q: There is also talk in the market that the government on its next revision of the minimum support price (MSP) of a paddy could raise it by 20-25% and it is becoming sort of a certainty that because ahead of the election here there could be some of these steps, what is your expectation and does that impact you in anyway?
A: As far as the MSP for non-basmati is concerned, the prices are fixed after consulting production prices. Every year prices are increased by 5-7% to 10% and this year also the government is going to increase the price between 7% and 10%. But, as far as basmati is concerned, there is no control of the government on the MSP or on the price mechanism, it is a market driven price and it is a total free trade, there is no control of anybody on this rate.