KRBL Ltd. is hopeful of a recovery in the coming quarters despite a muted performance in the second quarter of the ongoing fiscal, said Ashish Jain, chief financial officer of the India Gate Basmati rice producer.
According to him, the company's internal efficiencies and a reduction in paddy prices will help margins recalibrate to earlier levels.
In the quarter ended September, KRBL's Ebitda margin fell to 12.1% compared to 18.2% in the year-ago period. Gross profit margin declined to 23.7% from 29% on a year-on-year basis, while net profit margin nosedived to 7.9% from 12.3%.
Net profit in the quarter under review slipped 32% YoY to Rs 103 crore from Rs 153 crore a year ago.
Talking about the restoration of margin in the upcoming quarters, Jain acknowledged that it was difficult to predict the time it would take for them to improve. “So difficult to comment on the timing in terms of the number of quarters, but we do see the margin restoring."
However, he identified two key factors that would contribute to the company's efforts in restoring it.
“One of the factors that drives our margin is our export revenue, because that typically comes at a higher margin. That has seen a steady run rate of about Rs 250 crore to Rs 260 crore per quarter for the last four quarters,” he said.
“We are putting in place some action plans whereby the export revenue should pick up, and that should have a positive impact on the margin,” the top executive added.
Pointing out that paddy prices have also declined over the past few months, Jain explained, “On the cost side, with the current season, our paddy cost should recalibrate itself to lower levels, which will again be a positive (in terms of margin).” He asserted that the company's margin will improve on the back of these factors.
While most of KRBL's revenue comes from the Basmati rice segment, the company is also looking for new opportunities in the non-Basmati category.
At the same time, the rice exporter also announced several new product launches, including biryani masala, which, according to Jain, received a positive response.
“From a longer-term point of view, we continue to look at new opportunities that make sense to us,” he said.
Outlining the key factors that the company looks at before venturing into a new product category, Jain said, “It should be a growth category, it should allow a healthy margin, and it should be a product that benefits from KRBL's strengths, which are our capability in sourcing and our end-to-end supply chain and also our brand.”
According to him, in the next two years, the revenue share of non-Basmati products will increase. “On the domestic market, we definitely hope to see non-Basmati contributing at least 10% of overall revenue in the next couple of years,” he said.
Shares of KRBL Ltd. closed 2.39% higher at Rs 274.10 on the NSE on Thursday, while the broader index Nifty 50 closed 0.11% down at 23,532.70.
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