LT Foods, KRBL, Chaman Lal, GRM slide up to 6% on basmati rice export curbs

Shares of rice exporters such as Chaman Lal Setia Exports, LT Foods, KRBL, and GRM Overseas dropped up to 6 per cent in Monday's intra-day trade after the government placed export curbs on basmati rice over the weekend. 

The government halted exports of basmati rice valued below $1200 per tonne late Friday (effective till Oct 15), a day after levying a 20 per cent duty on parboiled rice that will kick in from Oct 16. 

On Friday, LT Foods, which owns the popular basmati rice brand Daawat, lost 6 per cent. 

But on Monday, the stock rose 2 per cent after the company clarified that the measure does not have any impact on its exports as the export price of its major varieties (premium and aged rice in its own brands-Daawat and Royal) is mostly over and above the $1200 per tonne minimum export price limit. The company’s exports for 60-65 per cent of overall revenues. 

KRBL, GRM Overseas and Chaman Lal Setia, meanwhile, dropped over 3 per cent, 4 per cent and 6 per cent, respectively, to their respective intra-day lows. 

Analysts believe companies with a strong foothold in the branded basmati rice space will see marginal impact even if in the short-term, the stocks will be kept under check.  

Certain companies are better positioned to weather the storm. LT Foods, primarily exporting under its brand, will see minimal impact. Similarly, KRBL will likely see minimal disruption, as a significant portion of their exports surpasses the $1200/tonne threshold, according to Anirudh Garg, Partner and head of Research at Invasset PMS. 

“While short-term fluctuations may occur, our long-term outlook remains bullish for these companies. Their presence in the branded category provides a crucial buffer against the adverse effects of this export limitation. It's worth noting that most shipments for the ongoing crop season have already been fulfilled, mitigating the overall impact on the industry,” Garg added. 

These rice exporters (with exports making up 80-90 per cent of total revenue) majorly deal in basmati rice of various varieties with little exposure to non-basmati rice. 

For instance, Chaman Lal’s flagship basmati rice brand Maharani, which is exported to 38 countries, made up 17 per cent of its total revenues in Q1FY24. 

KRBL’s India Gate and Unity basmati rice brands accounted for 51 per cent and 12 per cent share in overall FY22 revenues. 
 

India remains the world's biggest rice exporter and accounts for over 70 per cent of the world's basmati rice production. 

The country mainly exports premium basmati rice to the Middle East and non-basmati rice to African and Asian countries. 

The government’s decision to not allow exports of basmati rice below $1,200 per tonne has been taken to restrict possible "illegal" shipment of white non-basmati rice in the garb of premium basmati rice. 

The recent curbs follow a string of measures such as the export ban on non-basmati white rice last month. The curbs are aimed to contain a domestic surge in local rice prices triggered by poor paddy production due to flooding in rice-growing states such as Haryana, Punjab and UP. 

Around half of India’s annual basmati rice exports could be impacted as a result of the recent restriction. 

India exported around 4.6 million tonnes of basmati rice in FY23. Exporters said the average free-on-board (FOB) price of basmati rice is around $1,050 per tonne. Over 50 per cent of the exports comprise parboiled basmati rice that falls within the $1,200 FOB price limit. READ

Early this month, rice prices soared to 15-year highs in Asia on concerns over global supplies as dry weather threatened production in the second largest exporter Thailand and India banned non-basmati rice exports.