Basmati exporters' scrips rise on high shipment, price outlook

More exports are forecast this year, as Iran is expected to restart its import after two years

A better outlook for export and price realisation has stocked bullish sentiment in the shares of basmati rice marketing companies over the past fortnight.

These share prices have risen by nine to 14 per cent in this period. More exports are forecast this year, as Iran, the largest buyer of aromatic rice from India, is expected to restart its import after two years. Experts also say the price realisation per tonne, down after FY14, is likely to improve.

"Iran was a major buyer until a few years ago. Now, they have hinted at restarting the import of basmati from India," said Gurnam Arora, joint managing director, Kohinoor Foods, one of the largest exporters of basmati.

China has also registered a little over a dozen Indian companies, to start buying basmati. "We have started the process for appointing local distributors. As their food habits different (the Chinese prefer sticky rice and basmati is non-sticky), it will take some time to start export," said a senior official at one of the largest basmati exporters.

A recent report from ratings agency ICRA forecasts steady growth in India's basmati export for the next few years. In 2016-17, it is estimated at almost four million tonnes, similar to FY16. However, improvement in realisation is expected to push the value of export to around Rs 23,000 crore in FY17, from Rs 22,718 crore in FY16. ICRA's estimate for FY18 is 4.03 mt, worth Rs 25,800 crore respectively.

"Basmati rice has seen growing demand in the domestic market for the past few years. Export demand, subdued for two years, is expected to witness a pick-up in the coming months. Most of the large exporters, holding relatively lower priced inventory, are expected to benefit. While paddy prices have inched up in the current procurement season, this would be comfortably covered by growth in realisations," said Deepak Jotwani, assistant vice- president, ICRA.

In the past two years, there was excess paddy supply and weak international demand. Average export realisation declined from Rs 77,988 a tonne in FY14 to Rs 56,149 a tonne in FY16.

The government's recent demonetisation and the resulting cash crunch has led to deferringment of paddy procurement by some millers and traders. However, this impact is expected to be short-term and steady demand would lead to a pick-up in buying in the March quarter, says ICRA.