RICE PLATE - THE BEST DISH IN TOWN?

By Ruma Dubey

While you tuck into your delicious biryani or eat the humble rice plate – just remember – you are probably eating rice which is set to rule the world! Yes, India has held the mantle of the largest exporter of rice in the world, beating China and even Thailand and Vietnam.  

While we wait with a lot of trepidation for the Q3FY17 earnings number to come, rice companies could beat the heat, not just because people do not stop buying rice in India due to demonetization but also because as small blip in the domestic markets could be made up for by exports.

Two factors which are pointers to this fact. Firstly, in Dec’16, China opened up its markets for Indian exporters. It has agreed to import rice from 14 Indian companies and this includes the who’s who of the best rice companies  - LT Foods, who are the makers of Dawat brand, KRBL of India Gate brand and Kohinoor Foods amongst the listed companies. China is the world’s largest importer of rice and till dec’16 did not allow imports of basmati rice as the Chinese prefer the low aroma, sticky, shorter grain of rice from India. Yet, India used to export to China some 4000 to 5000 tonnes of basmati rice every year via Hong Kong. Now, post this go-ahead from China, India will export to China directly and this is expected to be a big game changer for these 14 companies but not in FY17 but from FY18 when the full impact will be felt.

ICRA has put out a report saying that in current fiscal basmati export value will remain more or less at the same levels as in FY16 and in FY18, expects 10% growth to Rs.25,500 crore. Realizations from China are expected to go up in FY18 and with China opening up, basmati sowing is also expected to go up in FY18 season.

The second reason for exports pick up is that starting 1st Oct, the Govt has opened the eastern and north-eastern border for transport of basmati rice through land route to Bangladesh and Nepal.  Both neighbours have been consistent importers of basmati but only through sea to Bangladesh, despite the large land border. With the opening of transportation through LCS, this export would get a fillip.

ICRA has said that export demand, which has remained subdued for last two years, is expected to witness a pickup in the coming months when a majority of export orders are received. This is expected to push up the realisations in H2FY17 and FY18.

Those in the know say that large rice exporters are sitting on inventory which is low priced and they are expected to stand to gain. The industry has been through some tough times last two years, due to financial stress on account of supply exceeding demand, both domestic as well as international.

This is good news for companies like KRBL, LT Foods and Kohinoor Foods and mainly Lakshmi Energy Foods (listed on NSE) which is mainly a non-basmati rice processing company.

All in all, looks like an aromatic rice plate is getting ready, on the slow flame. Best to get your plates ready to spoon in!