ii Contents
CORPORATE Theme Introduction 02
OVERVIEW New Product Launches 04
Corporate Information 06
STATUTORY Management Discussion & Analysis 07 REPORT Directors’ Report 66 Report on Corporate Governance 108
FINANCIAL Consolidated Financials 136 STATEMENTS Standalone Financials 188
1 Annual Report 2017-18
Theme Introduction
2 Highest ever EBITDA of ` cr. , an Consolidated 792 revenues grew increase of 21% over 2016-17. EBITDA Margin by 3% to stands at 24% as ` 3264 cr. against 21% in 2016-17.
Highest ever Profit before Tax of ` 655 cr. , an increase of 22% over 2016-17. Adding Healthy Flavours Highest ever Profit after Tax of ` 434 cr. , an increase of 9% over 2016-17. PAT Margin stands at 13%.
Earnings per equity Final dividend share of ` per proposed: 18.46 230% share as compared i.e ` per 2.30 to ` per share share on face value 16.97 in the previous year. of ` 1 each.
griculture sector in However, successful companies But we do not rest on our laurels. India is still subjected are those that can overcome and As a Company, we are on a to the vagaries of the outlast business challenges and perpetual mission mode to achieve weather. This poses emerge stronger. higher growths and reach higher severe challenges to trajectories. Acompanies in the agri-food sector. So, let the FY2017-18 numbers Abrupt changes in policies or talk about our Company’s ability The journey continues with market conditions add to these to outperform challenges and FY2017-18 marking KRBL as a challenges. come out stronger. Highest ever Company that is evolving into a EBIDTA growth at 21% and EBIDTA maker of ‘healthy’ and consumer- Each year brings its own set of margin at 24%, highest ever PBT centric food products. We promise happy tidings and challenges. And increase at 22% and that of PAT more such initiatives as we continue year 2017-18 was no different. increase at 9%. our journey into the new fiscal.
3 Annual Report 2017-18
New Product Launches India
4 Management Discussion & Analysis
International
5 Annual Report 2017-18
Corporate Information
BOARD OF DIRECTORS • Risk Management Committee CORPORATE OFFICE Chairman & Managing Director Mr. Arun Kumar Gupta - Chairman C-32, 5th & 6th Floor, Sector 62, Mr. Anil Kumar Mittal Mr. Anoop Kumar Gupta - Member Noida, Uttar Pradesh - 201 301 Mr. Ashok Chand - Member Phone: 0120 - 4060 300 Joint Managing Directors Mr. Rakesh Mehrotra- Member Fax: 0120 - 4060 398 Mr. Arun Kumar Gupta Mr. Anoop Kumar Gupta • Stakeholders Relationship BANKERS Committee State Bank of India Whole Time Directors Mr. Ashwani Dua - Chairman ICICI Bank Limited Mr. Ashok Chand Mr. Shyam Arora - Member DBS Bank Limited Ms. Priyanka Mittal Mr. Vinod Ahuja - Member HDFC Bank Limited Kotak Mahindra Bank Limited Independent Non-Executive Directors STATUTORY AUDITORS Karnataka Bank Limited Mr. Alok Sabharwal M/s. SSAY & Associates Corporation Bank Mr. Ashwani Dua Chartered Accountants MUFG Bank Ltd. Mr. Devendra Kumar Agarwal Plot No. 3, 2nd Floor IndusInd Bank Limited Mr. Shyam Arora Local Shopping Complex Cooperatieve RaboBank U.A. Mr. Vinod Ahuja B-Block Market, Vivek Vihar, Phase-I, New Delhi - 110 095 WORKS CHIEF FINANCIAL OFFICER • Gautam Budh Nagar Unit Mr. Rakesh Mehrotra SECRETARIAL AUDITORS 9th Milestone, Post Dujana, M/s. DMK Associates Bulandshahr Road, COMPANY SECRETARY AND Company Secretaries Distt. Gautam Budh Nagar, COMPLIANCE OFFICER 31/36, Basement, Old Rajinder Nagar, Uttar Pradesh - 203 207 Mr. Raman Sapra Delhi - 110 060 • Dhuri Unit BOARD COMMITTEES INTERNAL AUDITORS Village Bhasaur (Dhuri), • Audit Committee M/s. S S Kothari Mehta & Co., Distt. Sangrur, Punjab - 148 024 Mr. Devendra Kumar Agarwal - Chartered Accountants Chairman Plot No. 68, Okhla Industrial Area, • Alipur Unit Mr. Ashwani Dua - Member Phase-III, New Delhi - 110 020 29/15-29/16, Village Jindpur, Mr. Vinod Ahuja - Member G.T. Karnal Road & Plot 258-260, Mr. Shyam Arora - Member COST AUDITORS Extended Lal Dora M/s. HMVN & Associates Both at Alipur, Delhi - 110 036 • Borrowing and Investment Cost Accountants Committee 1011, Pearls Best Heights-II, C-09, • Barota Unit Mr. Anil Kumar Mittal - Chairman Netaji Subhash Place, Pitampura, Village Akbarpur Barota, Mr. Arun Kumar Gupta - Member Delhi - 110 034 Distt. Sonipat, Haryana - 131 104 Mr. Anoop Kumar Gupta - Member Mr. Rakesh Mehrotra - Member REGISTRAR & SHARE TRANSFER AGENTS • Corporate Social Responsibility Alankit Assignments Limited Committee Alankit Heights, 1E/13, Mr. Anil Kumar Mittal - Chairman Jhandewalan Extension, Mr. Anoop Kumar Gupta - Member New Delhi - 110 055 Mr. Ashwani Dua - Member Phone: (011) 4254 1955/59 Ms. Priyanka Mittal - Member REGISTERED OFFICE • Nomination and Remuneration 5190, Lahori Gate, Delhi - 110 006 Committee Phone: 011 - 2396 8328 Mr. Ashwani Dua - Chairman Fax: 011 - 2396 8327 Mr. Shyam Arora - Member E-mail: [email protected] Mr. Vinod Ahuja - Member Website: www.krblrice.com CIN: L01111DL1993PLC052845
6 Management Discussion & Analysis Management Discussion & Analysis
7 Annual Report 2017-18
Global Macro – Economic Scenario
The cyclical upswing underway percentage point to 3.9%. The According to IMF forecasts, after since mid-2016 has continued to revision reflects increased global the period of economic crisis from strengthen into the current year. growth momentum and the 2007 to 2012, and the instability in About 120 economies, accounting expected impact of the recently many regions upto 2017, the global for three quarters of world GDP, approved U.S. tax policy changes. economy will show a trend towards have seen a pickup in growth in stable growth upto 2022. year-on-year terms in 2017, the Growth rates for many of the Euro broadest synchronized global area economies have been marked The World Bank forecasts for growth upsurge since 2010. up, especially for Germany, Italy, global economic growth for 2018, and the Netherlands, reflecting the however, shows growth to an edge According to World Economic stronger momentum in domestic upto 3.1% after a much stronger- Outlook Report (Jan 2018) by demand and higher external than-expected 2017, as the recovery International Monetary Fund (IMF), demand. in investment, manufacturing, and global output is estimated to have trade continues. grown by 3.7% in 2017, which is Emerging and developing Asia 0.6 percentage point higher than is estimated to grow at around According to World Bank’s January in 2016. The pickup in growth has 6.5% over 2018–19, broadly the 2018 Global Economic Prospects been broad based, with notable same pace as in 2017. The region report, global growth is expected upside surprises in Europe and Asia. continues to account for over half of to be sustained over the next world growth. Growth is expected couple of years and even accelerate Global growth forecasts for 2018 to moderate gradually in China, somewhat in emerging market and and 2019 have been revised pick up in India and remain broadly developing economies (EMDEs), upward by the Fund, by 0.2 stable in the ASEAN region. thanks to a rebound in commodity
Overview of World Economic Outlook Projections (%)
9
8
7
6
5
4 % Change 3
2
1
0 World Advanced United Euro Germany France Spain United Other Emerging China India Emerging Output Economies States Area Kingdom Advanced Market and Market and Economies Developing Developing Economies Economies Estimate 2016 Estimate 2017 Projections 2018 Projections 2019
(Source: IMF, Publication, 11 January, world-economic-outlook)
8 Management Discussion & Analysis
Global Economic Real GDP growth (%)
10.0
8.0
6.0
4.0 GDP Growth (%) GDP Growth
2.0
0.0 World1 East Asia and Europe and Latin America and Middle East and South Asia Sub-Saharan EAP China SA India6 Pacific (EAP)1,2 Central Asia the Caribbean North Africa (SA)1,4 Africa (SSA)1,5 (ECA)1 -2.0 (LAC)1 (MNA)1,3 2015 2016 2017E 2018F 2019F 2020F
E - Estimate F - Forecast
(Source: Worldbank, Publication, Global-Economic-prospects)
exports. Although near-term financing conditions or a sudden in a gradual increase over 2018- growth could surprise on the upside, rise in financial market volatility, 19. The Bank of England raised its the global outlook is still subject could trigger financial turbulence policy rate for the first time since to substantial downside risks, and potentially derail the expansion. 2008 in view of diminishing slack including the possibility of financial in the economy and above target stress, increased protectionism, and Besides, escalating trade inflation driven by the past sterling rising geopolitical tensions. protectionism, rising geopolitical depreciation; the European Central risk could also adversely affect Bank announced that it will taper As per the IMF’s estimate, the confidence, trade, and overall its net asset purchases starting Asia-Pacific region and Africa shall economic activity. The recent in January, 2018 and could be maintain high growth levels; above decision by US President, Donald continued post September 2018, if 5% in Asia-Pacific and around 4% Trump to renege on the US-Iran required. in Africa. Growth in the Middle East nuclear treaty and re-impose and South America is to stay in the economic sanctions on Iran could Exchange rates and capital flows: region of 2.5% to 3% over 2018- lead to disruptions in oil trade, As of early January 2018, the U.S. 2022. Europe and North America adversely affecting oil importing dollar and the euro remained close shall maintain growth levels of countries, mainly India. to the August 2017 level in real about 1.8%. effective terms. The Japanese yen Bond and equity markets: Market has depreciated by 5% on widening However, the World Bank report expectations of the path of U.S. interest differentials, while the cautioned that there remained Federal Reserve policy rates have sterling has appreciated by close important downside risks. Disorderly shifted up since August, reflecting to 4% as the Bank of England raised financial market movements, such the well anticipated December rate interest rates in November and as as an abrupt tightening of global hike, but they continue to price expectations of a Brexit deal rose.
9 Annual Report 2017-18
India Growth Story
The Indian economy showed was expected to touch a % Annual Growth in FY2017-18 a mixed trend in 2017-18, with record 111.01 million tonnes 7.7
the GDP growth rate registering in 2017-18, up by 1.2% from 7.6
a subdued trend in the first half the previous year’s level. 7.2 6.5 but regaining momentum in the 6.7 6.1 5.6 second half of the fiscal. The GDP In its World Economic 5.7 growth for the fiscal was pegged Outlook Update, IMF has at 6.7%, compared to 7.1% in 2016- estimated that the Indian 17. The upward momentum in the economy would grow by Indian economy is expected to 7.8% in 2019, which would continue in 2018-19, with the IMF make the country the world’s projecting a 7.4% growth rate in the fastest-growing economy in coming fiscal. 2018-19, the top ranking it briefly lost in 2017 to China. On the macroeconomic front, inflation rate, which remained The World Bank, however, below 4% from April till October forecasted India’s GDP 2017, took a sudden upward turn growth to pick upto 6.9% in from November onwards, when it 2018 and stabilize around rose to 4.88%, peaking at 5.21% 7.2% on average, in 2019- in December and decelerating to 20, as consumption remains 4.28% in March 2018. The country’s strong, exports recover, and fiscal deficit is expected to be investment revives with contained at the revised target of ongoing policy reforms and Q1 Q2 Q3 Q4 3.5%, while the forex reserve has infrastructure improvements.
reached $ 424.36 billion towards (Source: economictimes) GDP GVA the close of FY18. The repo rate has Main downside risks further declined by 25 basis points to the outlook include fiscal India’s oil import bill, while creating to 6% in the year. slippages, especially in view of the uncertainty over the country’s developments on the Iran front exports to Iran, especially that of India’s export rose by 9.8% to which could adversely impact Basmati rice. $ 302.8 billion during 2017-18, the highest growth rate in six years, Trade Deficit Widens while imports grew 19.6% to touch $ 459.7 billion as commodity prices 40 Growth (%) pushed up the value of shipments in and out of the country along with a pick-up in global trade, resulting 30 32.3 in widening of India’s trade deficit 21.8 19.6 to $ 156.9 billion in FY2017-18 from 20 $ 108.6 billion in the previous fiscal. 4.7 5.2 (Source: Dept of Commerce, ToI) 0.3 -0.5 0.9 9.8 0 India’s rice exports surged 18% from 2011-12 -1.8 -1.3 -15 2017-18 a year ago to a record of 12.7 million -8.3 tonnes in 2017-18 and accounted -15.5 for more than 25% of the global rice exports. The surge in exports came Imports ( $ billion) Exports ( $ billion) riding on the back of an increase in domestic rice production, which (Source: timesofindia)
10 Management Discussion & Analysis
2018 Inflation India (CPI)
Inflation (yearly basis for 2017-18) 2.21% April 2017 - April 2016 4.00% December 2017 - December 2016 1.09% May 2017 - May 2016
1.08% June 2017 - June 2016 5.11% January 2018 - January 2017 1.79% July 2017 - July 2016
2.52% August 2017 - August 2016
2.89% September 2017 - September 2016 4.74 % February 2018 - February 2017
3.24% October 2017 - October 2016
4.36 % March 2018 - March 2017 3.97% November 2017 - November 2016
Major Policy Initiatives In an apparent move to make the economic reform process and political funding more transparent, instead turn its focus on increasing The twin policy initiatives in the Government has initiated the spend on rural welfare schemes the banking sector – a massive political funding through bonds, and such populist measures in recapitalization programme for albeit without requiring the donors the coming months. This, along public sector banks and kick to disclose their identities. with the rising crude and other starting insolvency proceedings commodity prices, which could against a host of defaulting On the political front, the ruling lead to firming up of inflation, could companies including some of dispensation at the Centre faced pose some market challenges to the large companies under the some setbacks by losing a string of companies. The expectation of a Insolvency and Bankruptcy Code bypolls in some of the crucial North continued uptick in the GDP growth (IBC) topped a string of major policy Indian states, and BJP scraping rates in coming quarters, however, developments on the economic through after a grueling fight with offer much hope for an improved front during the year. the principal opposition party, performance in operations for Congress in Gujarat. companies in the coming year. The year also witnessed global credit rating agency Moody’s upgrading Outlook India’s sovereign credit rating for the first time since 2004, and the With the ruling country achieving a commendable dispensation at the Centre 30-point jump to join the top 100 set to enter the last lap of countries in the World bank’s ‘Ease its 5-year term and some of Doing Business’ index. of the politically crucial states such as Madhya The country’s stock market, Pradesh, Rajasthan and meanwhile, marched forward Chhattisgarh slated to go for to conquer new peaks to figure polls in the next few months, among the world’s best performing economists and political markets, posting an impressive 30% analysts are apprehensive that Y-o-Y growth. the Government may go slow on
11 Annual Report 2017-18
Agriculture Sector
Overview
With more than half of workforce being engaged in agriculture for their livelihoods and employment, agriculture continues to be a predominant sector of Indian economy, even though its share in National Gross Domestic Product has been showing a downward trend in recent years. Though the recent years has brought the as against 275.11 million tonnes the sector has been witnessing agriculture sector into high focus last year. As per the agriculture increased mechanization and area again, triggering a host of ministry figures, Rice production is organised farming, economic policy and administrative initiatives also expected to touch a record of viability of the sector continues to by the Government this year, with 111.01 million tonnes in 2017-18, be a major issue due to a host of the objective of doubling the up by 1.2% from last year’s level. factors including high intensity of farmers income by 2022. (Source: IBEF Report). labour, pushing up costs and heavy dependence on weather, casting In 2017-18, the farm and allied To give impetus to rural economy, uncertainty over both production sector’s growth was pegged the Union Cabinet, in its meeting and profitability. Abrupt policy at 3%, compared to the 4.9% held on 4th July 2018, has increased changes by Government also growth achieved in the previous the Minimum Support Prices (MSPs) adversely affect exports of Agri year, as per the second advanced of all “Kharif Crops” including that of products from time to time, though growth estimates put out by the Non Basmati Paddy from ` 1,550/- they contribute about 10% of the Central Statistics Office (CSO). The per quintal to ` 1,750/- per quintal. country’s total exports. government has also estimated This may lead to higher area under food grain production to be a irrigation for Non Basmati Paddy, The wide spread farm distress record of 277.49 million tonnes in and may result in the increase being experienced across India in the 2017-18 crop year (July-June), in prices of Basmati Paddy also. (Source: Business Standard Report, March 2018).
Gross Value Added by Agriculture and Allied activities (US$ bn)
280 CAGR: 2.75%
270
260
250
240 US$ billion 230
220 233.04 236.51 249.68 249.21 250.62 266.37 274.23 210 FY12 FY13 FY14 FY15 FY16 FY17 FY18
(Source: IBEF, Industry, Agriculture-and-Allied-Industries-March-2018)
12 Management Discussion & Analysis
Budget Initiatives Brings Hope to Agriculture sector in the Coming Year
The agriculture sector figured one of the key focus areas for the Finance Minister in his 2018- 19 Budget, proposing a slew of measures to generate higher income, produce more from same land, and realise higher price, and measures centered around farm and non-farm income. Most notably, the Finance Minister said that he wanted farmers to earn 1.5 times the cost of their produce, and that the Government considered agriculture as an enterprise.
Towards this, the Budget proposed fixing minimum support price 50% more than the cost of production for Kharif crops, a 13% increase in allocation Budget Highlights to the agriculture ministry to ` 58,080 Crores, a 10% increase in farm credit target for the year to ` 11 Lacs Crores. The government is An Agri-Market committed towards Infrastructure Fund Outlook doubling the will be started with a farmers’ income by corpus of ` 2,000 Crores The Indian Meteorological 2022. (US$ 314.41 million). Department’s prediction for a normal Monsoon for 2018 is expected to lead to an improved A total of `s14.34 Lacs Crores A restructured National Bamboo performance by the agriculture (US$ 225.43 billion) will be spent Mission will be launched with sector, pushing up output and for creation of livelihood and a total outlay of ` 1,290 Crores infrastructure in rural areas. (US$ 202.79 million). incomes. Economists and experts are also of the view that with the Government turning its focus to the rural and farm sectors for Minimum Support Price (MSP) for A Fisheries and Aquaculture all announced kharif crops will Infrastructure Development Fund additional investments due to the be at least one and a half times of (FAIDF) and an Animal Husbandry approaching national election, the their production cost, similar to the Infrastructure Development Fund sector is expected to get an added majority of rabi crops. (AHIDF) will be started with a total corpus of ` 10,000 Crores (US$ 1.57 push for growth in the coming billion). year.
Institutional credit to the Allocation for the National Rural agriculture sector is targeted Livelihood Mission is increased at ` 11 Lacs Crores (US$ 172.93 to ` 5,750 Crores (US$ 903.93 billion) for 2018-19, compared million) for 2018-19. to ` 10 Lacs Crores (US$ 157.2 billion) for 2017-18.
13 Annual Report 2017-18
Rice – Global Scenario
The momentum gained by the Cambodia, China (Mainland), the According to USDA figures, global rice industry globally in 2016 in Islamic Republic of Iran, Iraq, the rice exports registered a jump terms of increased production Lao People’s Democratic Republic, of 19.34% in 2017 to reach 40.98 continued into 2017, with the Malaysia, Myanmar, Nepal, Pakistan, MMT. India’s export of rice in the world rice production was the Philippines and Turkey were all year registered even bigger jump projected to grow by 0.7% to reach estimated to have produced more in of 25.09%, and accounted for 503.6 million tonnes in 2017-18 2017. In Africa, paddy production in more than 25% of the global rice (FAO-AMIS estimate). However, 2017 was billed to reach 30.9 million exports. USDA and International Grains tonnes, up slightly from the 2016 Council (IGC) have estimated the excellent harvest. Global rice utilization was also total production levels in 2017- projected to grow by 1.1% in 2017- 18 to be lower at 487.5 million In Latin America and the Caribbean, 18 to 505.8 million tonnes (milled tonnes and 486.2 million tonnes, favourable growing conditions basis). respectively. were expected to foster a 6% production recovery in 2017 to 28.1 The expansion in rice trade and Generally, favourable weather million tonnes. Brazil was set to utilization, as per the Rice Market conditions have helped cropping account for much of this upturn. Monitor estimates, was on account activities in the year, especially in of a 1.4% expansion in food use Asia, barring a few exceptions. The Riding on increased demand, to 408.4 million tonnes in 2017. Asia region is estimated to have especially from many of the This level was sufficient to keep produced 0.7% higher than the countries in Asia which turned to global per capita consumption record production of 686.1 million imports to rebuild their inventories, largely steady at around 54.3 kilos tonnes in 2016. Much of the region’s international rice trade was per person. Meanwhile, quantities production growth was envisaged estimated to have grown by a healthy destined to feed and other uses to take place in India and Indonesia, 7% to 44.2 million tonnes in 2017. (including seeds, post-harvest owing to continued government (Source: Rice Market Monitor, July 2017) losses and industrial uses) were support. anticipated to fall fractionally to 17.9 and 79.5 million tonnes, respectively.
600 International rice prices have also firmed up since April 2017, thanks to rising demand for imports and 500 production disruptions in the US and Vietnam. The FAO All Rice 487.5 480 486.2 478.4 471.9 472.9 400 465.8 Price Index (2002-2004=100), 449.3 448.2 440.5 which averaged 210 points in 300 mid-July, was up by 6% from April. (Source: Rice Market Monitor, July 2017) 200 Outlook
100 Production in million metric tons Production Rice production in 2018-19 is forecasted at 493 million tonnes, 0 up from 486 million tonnes in 2017-18. Rice consumption also is forecasted higher, at 493 million tonnes, as against 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2008/2009 487 million tonnes in 2017-18. (Source: Statista, statistics, world-husked-rice-production-volume-since-2008) (Source: International Grains Council (IGC)
14 Management Discussion & Analysis
Indian Scenario
Rice is the most important cereal the export in the last four years. The Higher Procurement and food crop of India, accounting for major export markets for Indian Increase in MSP about 40% of the country’s food rice are the Middle East, Africa, the grain production, occupying one- EU and the US. High level of buffer The total rice procurement by fourth of the total cropped area stocks and improved methods Food Corporation of India (FCI) in of the country. Rice is cultivated of production have helped India the 2017-18 marketing season has across the country and throughout position itself competitively in the been targeted at a higher level of the year, though the crop is mainly global rice trade market. 430 Lacs tonnes, compared to 381 grown as a Kharif crop in rainfed Lacs tone procured in the previous areas that receive heavy annual 2017-18 Crop Year season. The total procurement rainfall. had reached 350 Lacs tonnes A near normal rainfall during the by the end of December 2017. India’s rice acreages have plateaued year’s Monsoon and favourable The Minimum Support Price around 43-44 million hectares, Government policies have helped (MSP) for rice increased to but production in recent years rice production in 2017-18 crop ` 1750/quintal for both Common has shown a steady upward trend year to touch a record of 111.01 and Grade A varieties of rice. on improving yields due to the million tonnes, up by 1.2% from (Source: Dept of Food & Public Distribution, Business Line) introduction of improved varieties the previous year’s level. However, and agronomic practices. the trend of continued shrinking Export of sowing area continued in the India is the second largest rice current year as well, with the Rice exports from India posted a producer in the world after China, Agricultural ministry estimates robust 18% increase in 2017-18 to with 21% of the global production showing that rice was sown only a record 12.7 million tonnes. The share. Major rice producing states in 37.40 million hectares in the surge in the country’s rice exports in India are West Bengal, Uttar kharif season, a decrease of 510,000 was mainly on good demand for Pradesh, Andhra Pradesh, Punjab, hectares compared to the previous non Basmati rice from Bangladesh, Tamil Nadu, Odisha and Bihar. India season. Benin and Sri Lanka. has been the top exporter in global (Source: 1st and 2nd advance estimates by Ministry of (Source: Reuters, APEDA) rice trade, accounting for 25% of Agriculture).
India: Monthly Exports of Rice
1,200 Non Basmati Basmati
1,000
800
600
400 Thousand Thousand Metric Tons 200
0 Oct 11 Jan 12 12 Apr Jul 12 Oct 12 Jan 13 13 Apr Jul 13 Oct 13 Jan 14 14 Apr Jul 14 Oct 14 Jan 15 15 Apr Jul 15 Oct 15 Jan 16 16 Apr Jul 16 Oct 16 Jan 17 17 Apr Jul 17 Oct 17
(Source: Monthly exports through December 2018 from Directorate General of Commercial Intelligence (DGCIS), GOI.)
15 Annual Report 2017-18
Outlook normal monsoon in 2016-17 led rice over last year, which should to successive years of record further support planting intentions Buoyed by the forecast of a normal harvests. for rice in the upcoming marketing monsoon this year, the agriculture year. Besides, the Government is ministry has targeted a record of The government budget also expected to further augment 113 million tonnes of rice output in announcement on the new MSP rice procurement in the coming 2018-19. The India Meteorological pricing formula (1.5 times the cost marketing season to woo the Department forecasted that the of production) for the upcoming agitated farming community ahead June to September south-west Indian crop year 2018-19 (July- of elections in some of the North monsoon is likely to bring 97% June) Kharif season raises the hope Indian states and the national of the normal seasonal rainfall. A of 15-20% increase in the MSP for election.
16 Management Discussion & Analysis
India Basmati Rice
Overview Particulars Quantity (MT) Value (Cr) Value ($ million)
Many decades before India’s April-Sept (2016-17) 20,66,956 10,923 1,631 emergence in the IT sector April-Sept (2017-18) 21,31,883 13,690 2,126 became a hot topic of discussion at the dining tables of the rich and % Change 3.14 25.3 30.3 famous in countries across the (Source: APEDA) world. India’s Basmati rice, the long, slender-grained aromatic rice, used 8.0 MMT (1.7 million hectares) in the Outlook to occupy the pride of place on previous year due to higher Basmati their dining tables. The popularity prices in MY 2016-17. Although the Buoyed by the IMD prediction of of the Indian Basmati rice has been market prices of Basmati rice in a normal Monsoon in 2018 and spreading far and wide ever since. MY 2017-18 have been relatively the continued trend of firming up And, like in cricket, India competes flat, farmers’ returns have been of prices, Basmati rice industry is fiercely with Pakistan when it reasonably good compared to Non expecting a rise in both the acreage comes to catering Basmati rice to Basmati and other crops. under cultivation as also in its world markets, though the latter is (Source: USDA Report) production in 2018-19 crop year. a minion in terms of its share in the Consequently, MY 2018-19 Basmati global Basmati rice market. Exports rice production is forecasted higher at 9.5 MMT from 2.0 million Basmati rice, cultivated in some Basmati exports from India were hectares. (Source: USDA Report) selected areas spread over from estimated to cross ` 26,000 Crores UP to Kashmir, with Uttarakhand in 2017-18, a 20% rise over the An ICRA analysis on the prospects and Himachal Pradesh including, past fiscal year. In volume terms, of the rise industry has forecasted constitutes only a small portion of however, there were apprehensions Basmati rice exports reaching to India’s total rice production, around by the trade body that the year’s ` 28,000 Crores in value terms in 6% by volume. However, in terms of total exports may decline by 5% to FY19. Increased demands from value, Basmati rice exports account 3.79 million tonnes on account of Iran and expectation of China for about 60% of the country’s total firming up of prices in the Indian undertaking direct import of rice exports. market and the European Union Basmati rice from trading firms move to tighten a fungicide rule. in India, coupled with the overall Production Basmati rice exports from India uptrend in international trade in the had reached 3.27 million tonnes coming year form the basis of the The introduction of higher yielding during April-January 2017-18. better prospects for the industry in PUSA Basmati 1121 variety in 2003 (Source: APEDA Report). FY19. and shorter duration semi-dwarf PUSA Basmati 1509 variety in 2013 has supported strong growth in Basmati rice production in the last two decades. The new variety is being increasingly adopted by farmers due to shorter growth cycle, lower irrigation requirements, and higher yields compared to other traditional varieties.
Basmati rice production in MY 2017-18 has recovered to 9.0 MMT (1.9 million hectares) compared to
17 Annual Report 2017-18
Regional Rice Market in India
Overview network by leading market players Consumption of branded rice is such as KRBL to the Tier-2 and Tier-3 growing more in southern and India is one of the largest consumers cities and towns in the recent years. northern India regions. To further of rice, which is mainly consumed expand the share of branded rice in as a staple food by more than 70% Of late, there has been a gradual shift regional markets, KRBL has started of the population. However, the per to rice being sold in packs – in lower launching regional variants of its capita rice consumption in India and higher quantities, following the brands, produced from the local has been showing a declining trend move by a large number of traders regions, in some of the selected in the recent years. From 77.9 kg and millers launching their own rice regional markets. The Company per person in 2006, the per capita brands, following the footsteps of has launched India Gate Jeera consumption of rice has came down the big players. Though, the share of Rice brand in the southern region to 75.1 kg per person in 2017. This branded rice in the overall domestic market in 2017-18, which has been trend has been attributed mainly rice market is small in terms of volume, well received by consumers in that to the growth in Indian economy it is estimated to have reached $3.5 market, going by the sales figures in which accounted for an increase in billion in 2017 in terms of value. the first year of its launch. the purchasing power that led to a (Source: Rabo Bank Report) diversification of diet. Outlook The consistent efforts by leading The domestic rice industry industry players such as KRBL to The slowly but steadily changing predominantly operates as regional expand its supply and retail chain trend of consumers opting for trade markets, with each regional network to every nook and corner quality and branded rice, along with market dominated by traders and of the country, along with its the initiative of leading industry millers, besides a host of players in strategy to wean away consumers players such as KRBL to launch the unorganised sector, from the from the unorganised sector by regional brands at affordable price same region. launching its branded rice at every points augur well for the continued price points have contributed growth of branded rice in the Unorganised Vs Organised significantly in expanding the share regional markets in the coming of branded rice in regional markets. years. However, rice being a highly A lion’s share of regional rice Changing consumer preferences price sensitive item, absence of markets in India is accounted by for better quality rice in convenient GST on loose rice being sold could the unorganised sector, despite packs from stores on the back of be a dampener in the acceleration the spread of modern trade as well their increasing purchasing powers of growth rate in branded rice as the huge increase in the trade also aided this shift. segment.
18 Management Discussion & Analysis
19 Annual Report 2017-18
KRBL in FY2017-18 The Total Revenue from operations of the Company in FY2017-18 grew by 3.14% to ` 3246.52 Crores Journey from an Agri Year 2017-18, however, marked Commodity Trader to a a major milestone year for KRBL, on account of better price Maker of Healthy Food with the management’s strategic realization of rice both in Products and deliberate move to take the domestic & international company to an all together different KRBL, currently among India’s league by foraying into the ‘healthy market and higher income largest integrated rice companies, food’ segment with the launch of from power, Furfural oil & began its journey way back in three new nutritionally superior Glucose Business. 1889 as a producer of agricultural products – India Gate Sprouted commodities such as wheat, cotton Brown Rice, India Gate Chia Seed, and oil in Lyallpur, Faisalabad, and India Gate Flax Seed. in Pakistan. Over the years, the Company has evolved into a The Company’s move to position global leader in Basmati Rice, while itself as the producer of ‘healthy’ realization of rice both in domestic also being a major producer of food products was a smart move & international market and higher Non Basmati rice and milling by- to align the company with the income from power, Furfural oil & products like bran oil, furfural, rice increasing trend of consumers Glucose Business. bran, and de-oiled cakes. wanting to have healthy and nutritionally superior food. The new ‘healthy’ product offerings Moving towards integrating best also enriched the Company’s sustainable business practices, as Significantly, the Company has already wide product basket which a progressive company, our Energy also positioned its new ‘healthy’ includes brands such as India Division is one of our diversified food offerings as brand extension Gate, Doon, Nur Jahan, Indian verticals that not only met the of its flagship and premium brand Farm, Bemisal, Aarati, Unity, Lotus, entire captive requirements for India Gate, thus expecting to get a Taj Mahal Tilla, Shubh Mangal, power within the Company but head start for these products in the Necklace, Lion, Al Wisam, Train, Al has also opened up a new revenue international market. Bustan, Telephone, Southern Girl, stream. FY2017-18 turned out to Alhussam, Blue Bird, City Palace be a great year, with its vision to The Total Revenue from operations etc. These brands are strategically emerge as a significant diversified of the Company in FY2017- positioned to cater to different power generator growth partner to 18 grew by 3.14% to ` 3246.52 category of consumers at different the nation in broader context. Crores on account of better price geographical locations.
20 Management Discussion & Analysis
Company’s Business Segments Performance Highlights for the 2017-18 The Company has organised its business units based on its products and services and has two reportable segments, as follows: Highest ever EBITDA of ` 792.03 Crores, an increase of 21% over 2016-17. Agriculture – comprising of agricultural commodities such as rice, furfural, seed, bran, bran oil, etc. which constitutes 96% of Highest ever EBITDA Margin of 24% as against 21% in the total revenues 2016-17.
Energy - comprising of power generation from wind turbine, husk based power plant Highest ever Profit before Tax of ` 655.01 Crores, an & solar power plant which constitutes 4% of increase of 22% over 2016-17. the total revenues
KRBL has four rice processing/grading Highest ever Profit after Tax of ` 434.44 Crores, an increase of 9% over 2016-17. PAT margin of stands at 13% in 2017-18. plants which are based in Delhi, Punjab, Haryana and Uttar Pradesh. Earnings per equity share of ` 18.46 compared to The Total Revenue from operations of ` 16.97 per share in the previous year. the Company in FY2017-18 grew by 3% to ` 3246.52 Crores on account of better price realization of rice both in domestic Net Worth of the Company increased by 20% to & international market and higher income ` 2,287.90 Crores. from Power, Furfural oil & Glucose Business.
The Company’s flagship Basmati Rice 5-year Net Sales growth CAGR of 9% and EBITDA brand ‘India Gate’ commands a premium growth CAGR of 21%. in both international and Indian markets. Basmati Rice is consumed in 156 countries out of which KRBL exports to 81 countries Market Capitalisation increased by 5.53% to and is the market leader in the Basmati ` 10,266.53 Crores. rice consuming markets in the branded segment. Power Sales increased by 26% to ` 123.71 Crores It derived around 40% revenue from the international market with strong presence in Gulf Cooperation Council (GCC) countries Dividend declared by the Company for the 2017-18 is apart from other countries like Australia, USA, 230% as compared to 210% for the previous year. UK, Singapore, South Korea, Germany etc.
The Company has wind power plants Debt Equity Ratio improved from 0.57:1 as on located at Maharashtra (Dhule, Sangli), March 31, 2017 to 0.54:1 as on March 31, 2018. Rajasthan (Rath Kuriya, Bastwa, Mokla), Tamil Nadu (Tirupur, Tirunelveli), Karnataka Company’s belief in energy portfolio has seen us emerge as (Kalmangi, Bellary), Andhra Pradesh a diversified power generator with interest in Biomass, Wind (Gandikota, Tallimandugulla,) Madhya and Solar Power with total installed capacity of 146.94 MW. Pradesh (Mahuriya, Garora), Gujarat (Bhanvad) and solar power division located Company’s energy portfolio consist of 114.35 MW in Wind at Madhya Pradesh (Rajgarh, Susner, Power Projects, 15.00 MW in the Solar Power Projects and Rojhani, Ichhawar). 17.55 MW in the Bio Mass Projects.
21 Annual Report 2017-18
21% Growth in EBITDA 357 21% Basis points Return on Capital Increase in Employed EBITDA Margin
% 22% 21 Growth in PBT Return on Equity Key Performance 305 20% Basis points Growth in Indicators Increase in PBT Net Worth Margin
% 16% 9 Growth in Book Growth in PAT Value
9% 10% Growth in EPS Growth in Dividend Per Share
22 Management Discussion & Analysis
EBITDA (in ` Lacs) PBT (in ` Lacs) & PBT Margin (in %)
79,203 65,501 65,381 53,756 50,804 39,079
17.01 11.41 20.07
FY 15-16 FY 16-17 FY 17-18 FY 15-16 FY 16-17 FY 17-18 PBT (In ` Lacs) PBT Margin (In %)
PAT (in ` Lacs) & PAT Margin (in %) Net Worth (in ` Lacs) 2,28,790 43,444 39,940 1,90,732
1,49,834 29,314
12.64 8.56 13.31
FY 15-16 FY 16-17 FY 17-18 FY 15-16 FY 16-17 FY 17-18 PAT (In ` Lacs) PAT Margin (In %)
Dividend Per Share (in `) 2.3 2.1 1.9
FY 15-16 FY 16-17 FY 17-18
Book Value Per Share (in `) Earnings Per Share (in `)
18.46 97 16.97 81 12.45 64
FY 15-16 FY 16-17 FY 17-18 FY 15-16 FY 16-17 FY 17-18
23 Annual Report 2017-18
The total sales for the financial year 2017-18 from agri division was ` 3,122.81 Crores, as against Agri Business Division ` 3049.65 Crores in the previous fiscal. Rice sales accounted to 91.39% of total revenue from Spanning the entire value chain operations highly productive and of rice, beginning from seed to cost-effective. operations. Export sales grew grain, the Company is among the by 19.14% in comparison to the leading players in the Indian agri- In its efforts to wean away previous year. Middle East region processing and marketing sector. consumers from the unorganised Its flagship Basmati Rice brand India market, KRBL offers its branded accounted for 25.77% of the Gate commanded a 35% market Basmati rice in a wide range of price Company’s total revenues. share, the highest market share for points. This makes the Company’s any company in the sector in the Basmati rice brands affordable to combined urban and rural areas in consumers in various economic 2017-18, an increase of 3% from the strata, as also offers them the previous fiscal. choice for selection, depending on the occasion. improvement. It has also been The Company distributes its implementing various initiatives products through three channels The Company’s state-of-the-art and programmes to further sustain – traditional, modern and storage and warehousing capacities its deep rooted relation with the e-commerce. For each channel, combined with innovative farmer communities. Through its the Company has devised diverse marketing strategy, aggressive contact farming technique, the strategies to grow business. expansion in distribution network, Company is able to monitor the In traditional, the focus is on sustained and deep-rooted quality at every stage of production. improving quality of distribution, in relations with farmers through These mutually beneficial initiatives modern, to enhance presence and contract and contact farming and help the Company to ensure in e-commerce to build loyalty. R&D capabilities enhances its long- uninterrupted supply of highly term business sustainability and quality paddy, while offering The total sales for the financial year revenue viability. These strengths security to farmers. 2017-18 from agri division was along with the rising brand ` 3,122.81 Crores, as against popularity positions the Company Stepping Up Infrastructural ` 3049.65 Crores in the previous favourably to capitalize on the Facilities fiscal. Rice sales accounted to growing demand for Basmati Rice 91.39% of total revenue from in the domestic and international KRBL continues to invest, to upgrade operations. Export sales grew market. its production facilities across by 19.14% in comparison to the Delhi, UP, Punjab and Haryana, previous year. Middle East region Farmer Initiatives besides improving its stocking and accounted for 25.77% of the warehousing facilities. These help Company’s total revenues. The Company, in order to ensure the Company to achieve higher and maintain high quality for operational efficiencies year after At 195 MT/hour, KRBL has the its rice, provides seeds and year. The Company also has a largest rice milling capacity in the consistently reaches out to farmers modern packaging and foodgrain world. This provides the Company with innovative initiatives and warehousing facility at Alipur and a distinct edge, enabling its technological support for further Barota units.
24 Management Discussion & Analysis
Agri Business – Indian Market
India being a highly price sensitive ` 1667 Crores in 2017-18, compared The average selling price for market, 2017-18 was a year of mixed to `1822 Crores in the previous fiscal. branded Basmati rice was up by trend for both the domestic rice However, KRBL by far maintains its about 30% in 2017-18, compared industry as well for KRBL. Besides lion’s share in terms of overall rice to the previous year. Imposition of the imposition of GST, which has sales proceeds in the Indian market. GST was one of the reasons for the skewed the price advantage in price increase, besides other market favour of the large unorganised With a market share of 35% in factors. The rising trend of changing sector, the fact that the rice market branded Basmati rice segment in lifestyle and consumer preferences, in India predominantly operates value terms, KRBL is the undisputed coupled with rising disposable as regional markets, impacted the market leader in the domestic rice income and middle class population overall financial performance of market. The Company could achieve pushing up demand for branded the Company in the Indian market this feat thanks to its massive, pan- Basmati Rice has also helped the in the year. The Company, however, India retail and wholesale network Company in mopping up higher performed exceptionally well in the and strong brand image which sales revenues in the consumer consumer pack segment, exceeding enabled the visibility and availability pack segment. These changing the industry growth rate by a big of its products in every nook and trends have enabled the Company margin. corner of the country. Creation of to come out with products that this country-wide trade network is are consumer-centric, compared KRBL’s sales from domestic rice what helps the Company to stand to the earlier focus on price-centric business was to the tune of out from its peers in the industry. products.
25 Annual Report 2017-18
With a focus on further strengthening Consumer Pack Segment segment into India Gate brand and distribution and optimizing sales other brands which include Bemisal, growth performance through KRBL has achieved a sterling Nur Jahan and Doon, has also implementation of GPS-enabled performance in the consumer pack paid off good dividends by way of tracking devices for the Company segment in 2017-18, riding on its differential positioning of its brands employees also played a vital role high brand strength as well as its and achieving focused growth in in the improved performance in the easy availability in every corner of these categories. In order to keep domestic rice market. the country through the Company’s up its brand leadership position, extensive trade network. While KRBL continued aggressively with KRBL’s flagship brand, India the overall industry growth in this its marketing and advertising Gate continued to hold the lead segment stood at 16.5% in volume campaigns during the year as well, position in its domestic sales in terms and 21.3% in value terms, leading to further enhancing its 2017-18. The India Gate brand KRBL has achieved a 27.6% growth brand perception. performance has been steered by in volume terms and 36.9% growth improving sales in the consumer in value terms in the consumer pack With its USP of being the longest pack categories of 1 kg and 5 kg. segment in the fiscal. rice grains, superior quality and The Company’s vigorous efforts exotic taste, the India Gate brand in marketing, trade investments, KRBL’s robust performance in the continued to have a dream run in market development and in- consumer pack segment assumes the Indian market in 2017-18 as market execution also helped the added significance, considering the well, enjoying premium pricing. growth in this segment. Other fact that this was despite its brands The other brands are lower priced brands that performed well in attracting 5% GST, compared to no and targets the bottom of the some selected regions during the GST for unbranded rice brands. This pyramid. year were India Gate Jeera Rice, also reflects the changing trend Unity, Doon and Necklace some of of consumers increasingly opting The move on creation of the which were particularly popular in for branded rice from established premium segment was aimed at the institutional segment. players such as KRBL, instead of capturing market share from the purchasing it from the unorganised huge unbranded Basmati Rice The India Gate Brown Rice Weight sector. market, which is estimated to Watchers Special also continued account for nearly 40-45% of the to find an expanding consumer The Company’s strategy of sub- overall Basmati Rice market in base in the top metros of India, segmenting its consumer pack India. riding on its health factor. The Company’s efforts during the past few years to strengthen its brand, Unity which found considerable success with the other products gaining significant acceptance in the Indian market.
Going forward, KRBL plans to enter the value added rice segment by launching some selected popular, daily-use products. Besides further expanding its market, this initiative is also expected to give an added boost to its India Gate brand popularity.
26 Management Discussion & Analysis
New Product Launches in the Indian Market in 2017-18
27 Annual Report 2017-18
India Gate Sweet Indulgence
Launch Rationale Product USP Positioning
India being a diverse country has Being the flag-bearers ofThis product is uniquely positioned as various festivals and occasions in everything that rice is in India, one of its kind to help customers choose every state, round the year. Each of KRBL has launched India Gate the right ingredients for their desserts these festivals has its own unique Sweet Indulgence in 2017-18. This based on rice. It’s targeted to the woman positioning, season and a way it is product was envisioned to bring of the house who knows that the best celebrated in different geographies. together the sweet moments of ingredients make the food much more Food is one intertwined element celebrations and our love for these than just a dish served on the table. The which joins the cord of everything luscious dishes in one pack. For all Company has kept the price point also India celebrates. Each state has the desserts which have rice as the very attractive with it being lower than its own specialities and ways of primary ingredient, we handpicked most of our regular staple diet variants cooking. rice grains which specially cater to used to make main course dishes. The the preparation of these desserts. Company has also undertaken strategic Desserts and that too made of marketing and Ad campaigns through Rice in particular are something multi-media channels to reach out to which are as diverse as the cuisine the target audience. The efforts seem to itself. We can see Badami Kheer in be making the desired impacts with the North, Kesar Bhaat in East, Phirni initial market reports about the product or Payasam down south. Each one being highly positive and encouraging. of these are as unique as the state itself. However, many a times we don’t know which rice is to be used and is best suited to make these dishes even more special.
28 Management Discussion & Analysis
India Gate Jeera Rice
Launch Rationale communities residing across the targeting the home makers who globe with largest populace in know the importance and varieties This special quality of fragrant USA and Australia. Jeera Rice is of dishes which can be made from Rice takes its name from Jeera immensely popular in Kerala. This this variety of rice. Rice being the (Cumin seeds - Seeragam in Tamil) is the most expensive sub variety staple diet in the southern part of because of its small grain size and of rice and has the smallest grain the country, women-folk here try resemblance to the spice. Jeera which is ideal for specific dishes their hands in making different rice is a quintessential ingredient cooked in the region. varieties of rice dishes, using in the most famous southern various types of rice. Jeera Rice is Ambur variety of biryani. This rice Because of its ability to absorb large thus positioned as an important is cultivated in the samba season quantities of water along with its and preferred alternative for this (Aug-Jan) and is widely used in aroma makes it the ideal choice for purpose. Malabar region to make various most of the Biryanis made locally types of Biryanis and other rice in Kerala. This product also enhances KRBL’s dishes. India Gate already caters footprint in Non Basmati segment to the southern region with its Positioning in the specific geographies and exclusive range of Basmati Rice extends brand imagery as a varieties and now it was time to Jeera Rice is positioned as a basic wholesome provider of everything launch a native variant which ingredient for southern dishes that a household needs. rightfully extends the portfolio being a leader in the rice category. Product USP
Being a special kind of rice which has a special native taste and aroma, it is really popular in both southern India and also in the southern
29 Annual Report 2017-18
Geography-Wise Market Share:
Top 5 Brands (All India Share) – Value wise Top 5 Brands (% Share in Town class I) – Value wise
35% 40%
26% 25%
7% 6% 4% 4% 3% 3%
India Gate Peer 1 Peer 2 Peer 3 Peer 4 India Gate Peer 1 Peer 2 Peer 3 Peer 4 Basmati Rice Basmati Rice Brand Brand
Highest all-India (Urban and Rural Highest all-India Town class I market share combined) market share of KRBL Limited of KRBL Limited In value terms, India Gate Basmati Rice brand enjoys In value terms, India Gate Basmati Rice is a dominant a leading position in the Indian urban and rural areas brand in town class I cities with a 40% market share combined with a 35% market share compared to 32% compared to 35% in the previous year. in the previous year.
Top 5 Brands (% Share in Metro Market) – Value wise Top 5 Brands (% Share in Rural areas) – Value wise
36% 45%
24%
20%
7% 6% 4% 7% 3% 3%
India Gate Peer 1 Peer 2 Peer 3 Peer 4 India Gate Peer 1 Peer 2 Peer 3 Peer 4 Basmati Rice Basmati Rice Brand Brand
Highest all-India Metros market share of Highest all-India rural area market share of KRBL Limited KRBL Limited In value terms, India Gate Basmati Rice is a dominant In value terms, India Gate Basmati Rice is a dominant brand in Indian Metropolitan area with a 36% market brand in rural areas with a 45% market share compared share compared to 32% in the previous year. to 43% in the previous year. The Company’s strong focus on this segment has enabled it to grow market share while ensuring that it is moving in the right direction.
(Source: AC Nielsen MAT March, 2018)
30 Management Discussion & Analysis
Top 5 Brands (% Share in Traditional Market) Top 5 Brands Weighted Value Distribution in – Value wise Packaged (in%) – Value wise 33%
98% 94% 25%
57% 53%
9% 29% 4% 2%
India Gate Peer 1 Peer 2 Peer 3 Peer 4 India Gate Peer 1 Peer 2 Peer 3 Peer 4 Basmati Rice Basmati Rice Brand Brand
Highest All India Traditional Trade Market Highest All India Weighted Value Share of KRBL Limited Distribution in Packaged Basmati Rice In value terms, India Gate Basmati Rice is a leading brand Category in Modern Trade (%) dominating the all India traditional trade with a 33% In terms of Weighted Value Distribution (percentage of market share compared to 28% in the previous year. stores that sells our products based on their weighted importance), 98% of the modern trade stores sell our Modern trade packaged Basmati Rice products. In its modern trade distribution channel, the Company has enhanced its presence to 7,530 stores, while growing market share from 36.9% to 39% in value terms. Initiatives undertaken by the Company towards retail activation and dominating shelf-space, has resulted in improved same-store sales and category share. The Company’s strong business development team undertakes significant research and analysis to identify the right city, right catchment area and right store. This facilitates the Company in consistently growing its market share.
Top 5 Brands (% Share in Modern Trade) – Value wise 39%
28%
8%
4% 4% India Gate Peer 1 Peer 2 Basmati Rice Peer 3 Peer 4 Brand Highest All India Modern Trade Market Share of KRBL Limited In value terms, India Gate Basmati Rice is a leading brand dominating the all India modern trade with a 39% market share compared to 37% in the previous year.
(Source: AC Nielsen MAT March, 2018) 31 Annual Report 2017-18
Bulk Packaging Segment
The bulk packaging segment of the Company caters to the requirements of institutional buyers such as hotels, restaurants and caterers. The sales in this segment in FY2017-18 grew by 6 % in value terms as compared to last financial year.
Contrary to the general industry approach towards growing this segment by aggressively focusing on quantity and prices, due to the perception that brand equity does not matter in institutional sales, KRBL has managed to push its growth in this segment riding on the back of establishing its strong brand presence.
Some of the Company’s prominent institutional buyers in this segment include Taj Group of Hotels, The Leela and ITC Hotels.
E-commerce Though imposition of GST has brought in some tough competition in this segment, the distinct quality The Company has continued to focus on strengthening features of the India Gate rice helps the Company its e-commerce channel in FY2017-18, with an eye on to be a customer preferred brand in this segment. cashing in on the rising opportunity from the online The technical aspects of India Gate rice such as fluffy distribution network. The Company followed the twin and non-sticky, longer holding time, cooking yield, strategy of forming a dedicated team of professionals elongation ratio etc., as well as the Company’s ability to build capabilities and devise effective strategy to deliver consistency in its products have enabled it to and simultaneously tying-up with major players like weather competition in this segment to a great extent. Amazon, Flipkart, Big Basket, Grofers, Shopfilo and JBL among others, to drive sales through this channel. Unity and India Gate, the two leading brands of KRBL in the bulk packaging segment, have together accounted for 88% of the total sales in this segment in 2017-18. As part of its on-going brand promotion activities, KRBL has participated in several industry events and exhibitions across India in the year, highlighting the value parameters of its products. The fact that the Unity brand has achieved a 12% growth in value terms compared to last year is a testimony of the KRBL expects that with nearly 40-45% Basmati volumes success of the Company’s in India still being sold in loose form, there is enough effective communication headroom for the branded players to enhance market and brand promotion share in the consumer pack segment. activities.
32 Management Discussion & Analysis
Super Premium, Super Healthy Product Segment
Super Premium Segment an aggressive and focused growth The Company has undertaken strategy in this segment, it could a targeted Ad and marketing In a strategic initiative to further achieve significant enhancement in campaign in the year to spread move up in the brand value chain, its brand equity and margins. awareness about the health KRBL has forayed into Super attributes of its products to further Premium Segment to position the In 2017-18, sales revenue from this consolidate its position in this Company’s most premium and category grew by 1.4%. Brown rice growing market segment. This health-oriented products. With growth increased by 43% in volume has brought rich dividends to the the rising awareness of health and 68% in value. Company, with its sales revenue food and rapidly growing super- from this segment growing by 1.4% premium food segment in India, the With the twin objective of further in 2017-18. Company focused on capitalising moving up in the brand value this opportunity by re-launching chain and to capitalize on the Some of the products which some of the existing products with rising awareness of health food and were relaunched with sharper sharper consumer positioning and rapidly growing super-premium positioning in this segment include also by launching new products. food segment in India, KRBL has India Gate Weight Watchers Special launched more products in the and India Gate Brain Metabolism Products in this category include super premium segment in 2017- Booster. With its health attributes India Gate Classic, India Gate Brown 18. Besides, the Company has also such as low in Glycemic Index (GI) Rice (Basmati and Non Basmati relaunched some of the existing which helps in boosting metabolic variant) and India Gate Quinoa. The products with sharper consumer process, the India Gate Weight Company expects that by following positioning in this segment. Watchers Special targets the fast-
33 Annual Report 2017-18
rising fitness conscious young Sales and distribution drastic change. Adapting to the and young-at-heart among the changed scenario through the population. With the metros and class 1 cities, ‘Go-to-Market’ initiative was yet which together accounts for about another strategy change initiated India Gate Brain Metabolism 78% of the total packaged Basmati by the Company in the year. This Booster, on the other hand, is meant rice demand, reaching almost initiative has seen KRBL successfully for the working professionals the saturation level, leading to a deploying advanced IT processes and school-going children as this slowdown in growth momentum, such as data analytics and digital product is enriched with GABA the Company as of late changed gadgets to push market growth. (gamma- aminobutyric acid) the track by aggressively wooing The highlights of these initiatives neuro transmitters, which help in consumers in the Rest of Urban included: increasing focus, improving sleep and Rural markets. The move has quality and reducing anxiety. started paying off rich dividends as • Switch over to GPS-enabled majority of the Company’s domestic hand-held devices for the sales growth are now coming from Company’s sales force for these two markets. increasing their operational efficiency. The GPS-enabled In order to make further inroads hand-held devices, powered into the Rest of Urban and Rural with sales force automation markets, KRBL has devised software, facilitate track orders strategic plans and undertaken on real-time and optimising initiatives for improving quality resources in the field level. This of distribution and improving its also allows the Company to reach. As part of this strategy, the track the movement of its sales Company has introduced its non- teams for effective coordination. premium Basmati Rice brands in • Continuing on its efforts these markets so as to wean away to achieve focused growth customers from the unbranded through identified sales outlets, players which have been dominant the Company has achieved geo- in these markets hitherto. The move tagging of about 50,000 outlets has paid off, helping the Company in the year, marking them as to expand market share in the direct service outlets. This is region by 41.3% in 2017-18. aimed at better and effective monitoring of its sales force In the digital age, the tools for movement, optimised sales identifying new growth avenues effort and decision making by and sales promotion have seen a demarcating key outlets and identifying problem areas for quick remedial actions so as to achieve improved order placement. Launches more products in the super premium segment to further consolidate its position in the category
34 Management Discussion & Analysis
Digital aspect and consumer engagement
With social media emerging as the major interface to reach out to the consumers and engage with them – both existing and potential, the Company has taken to social media promotion initiatives in a big way as a core growth strategy for the Significant future. As part of this, the Company research and has focused on associating with analysis to identify the right cities, influencers and food bloggers to Market share right catchment undertake advocacy programmes. of India Gate has areas and right Improved same- This shall facilitate in spreading grown from 37% stores store sales and digital word of mouth and to 39% as per category share modern trade awareness in social media that is (Source: AC-Nielsen MAT, 2018) necessary to engage customers. Orders are placed directly to The Company is also investing in KRBL has the Company and sampling and distribution initiatives enhanced its the distributors presence to Key are engaged to whereby it organises food stalls 7,530 stores attributes of service the across major retail outlets. This is its distribution orders. channels aimed at enabling the Company to Modern reach out to target audience and trade induce trial rate.
35 Annual Report 2017-18
India Gate’s presence in the MEDIA WORLD
The Indian food industry is poised for huge growth, increasing its contribution to domestic and world food trade every year due to its immense potential for value addition, particularly within the food processing industry. In order to cash on this huge growth prospects, KRBL has crafted a two-pronged strategy to keep its leadership position intact going forward, as also to capture additional market share in all its product and brand segments. Thus, besides using its massive pan-India distribution network to enable its product to reach every corners of the country, the Company effectively and imaginatively follows a well planned media strategy to reach out and communicate to its existing and prospective customers and also to position its flagship India Gate brand on top of consumers brand recall.
36 Management Discussion & Analysis
Initiatives in Media Strategy in FY2017-18 Year 2017-18 was an eventful year for KRBL as far as implementing its well crafted media strategy was concerned. Building on the momentum created through the multi-media Ad and marketing campaign, the Company further stepped up its campaign initiatives this year to increase its brand awareness and popularity. Here are the highlights of some of these initiatives:
• The media activities have led to a 23% increase in its Ad spend in the year. This has, however, produced the desired results by sustaining the leadership position to more number for the Company’s India of consumers and Gate brand with a 31% households, besides its share of the total share India Gate brand slowly of commercials in the becoming synonymous branded rice category. with rice. the Big Boss’s show for For the Company, • KRBL’s highly successful six weeks, helping the spending on the brand promotion India Gate brand to gain India Gate campaign commercial, created significant visibility, thanks accounted for 37% of around the ‘India ki to the huge viewership its total media-related puraani aadat’ theme of the Salman Khan- expenditure across all and featured in a series anchored TV show. channels. of TV commercials across • Besides getting associated • The sustained brand various regions have led with the Big Boss show, promotion efforts of KRBL to significant increase in India Gate Basmati has paid rich dividends India Gate’s brand recall. Rice also co-powered in 2017-18 as well, with • The highlight of the ‘Vighanharta Ganesh the awareness level of Company’s media Abhiruchi, a Telegu the Company’s brand activities in the year cookery show and ‘Ograne philosophy spreading was its association with Dabi’, a Kannada TV show.
37 Annual Report 2017-18
Eyeballs, Ears & More
RADIO PRINT OUTDOORS
KRBL undertook an extensive The Company made effective use The Company’s BTL strategy was promotion campaign through of the print media by selectively centered on choosing strategic radio in a multi-city, multi-channel choosing publications, including locations and innovative ideas. package. The highlights of the regional publications to reach out • 615 Sites across India in LTC, radio campaign drive are as to the target audience. MTC & STC follows: • The Company Ads were featured • Disruptions through innovations • 70% SOE in Radio across similar in selected Women, Fashion categories Magazines & Dailies • 7500+ Spots across Metros • Total of 96 Insertions were placed in the Year
Proud Associations
As part of its strategic initiative to achieve better brand visibility and awareness, KRBL also got associated with Living Foods Epicurean Guild Awards, the most prestigious awards in the food category. This has helped the Company to achieve: 1.6 14.3 1.3 MN MN MN of Total Engagement Total Video Views Total Ad Social Media Impressions Deliverables
The Digital Story
KRBL further This has led to Its promotional enhanced its the Company’s videos on YouTube The combined targeted and Facebook and and other social digital media innovative social Twitter account media platforms initiatives helped media drive in followers reaching garnered more the Company to FY2017-18 a level of about than 4.5 million reach out to more 2.5 Lacs views than 10 million audiences
38 Management Discussion & Analysis
Presence in all E-commerce platforms
Jashn-E-Biryani During the year, KRBL has also extended its associations with selected digital media platforms for sharing of contents. Its Jashn-E-Biryani series of videos on YouTube, featuring 45 biryani recipe videos, became a big hit with viewers mopping up about 2.5 million views.
Association with 45 Biryani Recipe 2.5 Mn Views several media Videos platforms for content sharing
Launch of a Healthy Lifestyle- Quinoa.life
• Launch of Quinoa.life • Informative multi face website product pack • One of its kind • POSM for platform Website Promotion Understanding
• Corporate Chef Event • 50+ Recipe Videos Advertising Events sponsorship (100 • TVC ( 1 Mn Views) Corporates targeted) • Trade Activities
The Company has also made an innovative web initiative by launching ‘Healthy Lifestyle- Quinoa.life ‘ under which it has a website and different segments for promotion, advertising and events. The web initiative has since then been gaining popularity among the Company’s target audience.
39 Annual Report 2017-18
India ki Puraani Aadat - Contd...
As the brand’s promise of previous Brand Spends- Rice Segment year, company grew its emphasis on the campaign thought of “India ki Puraani Aadat”. The continuation 37% of campaign ensured built saliency India Gate 14% Others and top of the mind association in customer’s mind for the brand 4% Peer 6 message. Both on and off the screen, the company tried to put its 6% Peer 3 focus on building brand values and promote a healthy lifestyle through 5% Peer 4 the new portfolio of Quinoa, Brown Rice Weight Watchers and 5% Peer 5 Brown Rice Brain Booster. Several initiatives like Corporate Master 17% Chef, on screen associations and Peer 1 12% Peer 2 a strong digital footprint ensured presence of the brand throughout the year. As a true dominant player, India Gate brand has the highest Advertising spends in the segment
40 Management Discussion & Analysis
35,000+ Total 5,00,000+ spots in 71 Seconds channels Dominating
Screen 50% spots in Presence premium positions
45 Sponsorships 700+ Promo Tag including Intl. shows GRPs
22,000+ 18 in-program Promo Tags Integrations
Dominating Screen Presence
Share of Expense Share of Voice
41% 11% Others 32% 19% Others India Gate 3% Peer 6 India Gate 4% Peer 5
6% Peer 4 6% Peer 5 6% Peer 4 6% Peer 3 7% Peer 3
12% 4% Peer 6 15% Peer 2 Peer 1 14% 14% Peer 1 Peer 2
41 Annual Report 2017-18
India Gate Ad Campaign Creates a Buzz in the Market
Old habits die hard. With its ‘India ki Purani Aadat’ during the year. Thanks to the strong positioning and Ad campaign touching a chord with the domestic the effective media coverage, the Company’s brand audience and consumers, the company has worked philosophy has made further inroads into Indian hard on spreading its brand awareness far and wide by households, leading to India Gate slowly becoming aggressively extending this campaign through more synonymous with rice. traditional media and digital media platforms in 2017- 18. The campaign obviously made more resonance India Gate brand topped the category list with a 31% with the customers, with the India Gate brand moving share of voice on TV and a 37% share of expenditure up several notches in both – brand perception scores across multi-media channels. and brand visibility in various market surveys. Another big feat of the past year was co-powering the Keeping up the tempo on its brand push, KRBL Epicurean Guild Awards 2018. This has helped KRBL and unleashed a multi-media, multi-region campaign India Gate brand to grab immense media attention, pushing up the product visibility by leaps and bounds. The event video had a total view of 1.6 million.
KRBL also invested significantly in voice ads through radio in 2017-18 by running two radio campaigns between November 2017 and March 2018. Through a total of six channels, the campaigns covered major cities such as Delhi, Chennai, Mumbai, Pune, Bangalore, Jaipur, Jodhpur, Kolkata, Indore, Bhopal and Patna.
In the print media, besides some of the daily publications, KRBL’s association was mainly with the Women and Fashion magazines to reach out to its target audience. The Company made a total of 96 ad insertions in the year.
As they say, the proof of pudding is in its eating. So what better way to show the aroma and intoxicating taste of the India Gate Basmati rice than showing the recipes for various types of Biryanis made from the Basmati rice through videos KRBL’s ‘Jashn-E-Biryani’ series videos, showing 45 Biryani recipes were a major hit with consumers/viewers, with the videos getting 2.5 million views on YouTube.
So the jury’s decision is unanimous: India Gate rice delivers superior quality Basmati rice in every meal and every bite.
42 Management Discussion & Analysis
Agri Business – International Market The Company reported export sales of Rice for Over the years, KRBL has built up a vast dealer network across all major ` 1,299.90 Crores in the international market which has made it a popular household name 2017-18, an increase in all these markets. With its products being exported to as many as 81 countries, the Company is the largest player in the Branded Rice of 20.16% from ` Segment with maximum global reach. 1,081.80 Crores in the corresponding period of During 2017-18, the Company has further strengthened its export presence by venturing into new markets like Europe, especially previous fiscal year. Netherlands, Belgium, Sweden, Guadeloupe, Germany and strengthening its existing presence in middle east among others. The Company reported export sales of Rice for ` 1,299.90 Crores in the 2017-18, an increase of 20.16% from ` 1,081.80 Crores in the corresponding period of previous fiscal year.
The Company’s flagship Basmati brand India Gate continued its reign as the undisputed leader in this segment in 2017-18, with its market share in the UAE market reaching 35%, taking a pole position compared to its peers. It is also amongst the most recognised brands in several Western, Australian and South East Asian markets. 43 Annual Report 2017-18
Highlights of Export Market
India Gate and Bab Al Hind #2 in Indian Basmati white rice segment in Saudi Arabia
North Africa Leadership in North Africa with India Gate #1 a total import Indian Basmati share of 11% with brand in Canada KRBL brands. both in Ethnic and Modern Trade.
Nurjahan #1 brand Dominance in South Africa with a total import share of 29% Nurjahan #1 brand in South Africa.
44 Management Discussion & Analysis
India Gate and India Gate Bab Al Hind dominance leadership in in Oman with Kuwait with India Gate and 19.7% market Nurjahan in share. Indian Basmati Segment.
India Gate India Gate #1 India Gate is the most Indian Basmati aspirational brand in brand in UAE: 35% Singapore and Hong market share; Next Kong with a total import peer at 11% market share of over 9%. share.
India Gate & India Gate #1 Nurjahan#1 Premium Indian India Gate #1 & #2 Basmati brand Dominance in the Indian Basmati in Bahrain and Australasia region. brand in Qatar Lebanon. India Gate # 1 brand with 27%. in Australia and New Zealand with a total import share of 26%.
45 Annual Report 2017-18
New Product Launches in the International Market in 2017-18
46 Management Discussion & Analysis
India Gate Sprouted Brown Rice
Launch Rationale Product USP function and memory retention. We have also filed for patent on The product is introduced as a Sprouted Brown Rice contains the manufacturing process of the healthy food product to meet the Tocotrienols and Gamma Oryzanol. product. changing customer preferences The high Inositol levels in Sprouted for better quality products with Brown Rice helps accelerate fat Positioning added health/nutritious benefits. metabolism, boost immune system KRBL is constantly innovating on and regulate blood sugar levels. This Its versatile nature has allowed its offerings to the ever changing product also prevents headache, its incorporation in a number of consumers by bringing the best to reduces anxiety and stress, dishes including traditional recipes the world. Our strategic transition enhances focus and improves brain without compromising on taste. to a healthy food company has brought us to this healthy and innovative product. The product was announced during the Gulf food 2018, held in Dubai early this year and was officially launched in March 2018, focusing on the needs of the future consumers and leveraging on our strong presence in the middle east region.
A first of its kind product, India Gate Sprouted Brown Rice incorporates the state-of-the-art technology of controlled germination for nutritionally enriching the grains with GABA neurotransmitter which plays a vital role in spreading a calming effect on the body and thus enhancing the sleep cycle.
47 Annual Report 2017-18
India Gate Flax Seed
Launch Rationale Product USP Positioning
Being nutrient-dense super-seed, India Gate Flax Seed is an excellent The product is positioned as well- with a nutty flavour and delightful source of Omega 3 fatty acids and balanced choice as it contains all crunch, this product addresses PUFA which keep a check and essential minerals, vitamins and consumers need for ‘add on’ balance on the cholesterol level. It is fatty acids, making it one of the best products which are a combination of rich in Vitamins B6, Folate, Thiamine ways to optimize and elevate human wholesomeness and taste. and contains plant-based protein health. source. While being rich in Dietary Fiber, the Flax Seed is low on sodium and sugar.
48 Management Discussion & Analysis
India Gate Chia Seed
Launch Rationale Product USP Positioning
This product is a perfect fit for the One shot of Chia Seed is equivalent This product can be an add- health conscious consumers as it is to one glass of milk intake. It’s easy on to all your snacks and meals the ultimate super food containing supplementation and combined without altering the taste. Due to protein, fibre, minerals, vitamins effect of nutrients contribute to its simplicity in consumption, the and essential fatty acids, making complete nourishment, helping product is suitable to all age groups it a one stop solution for nutritive consumers to achieve a healthier who are into healthy lifestyle, needs of all age groups. lifestyle. specifically to children due to its high nutritional offering.
49 Annual Report 2017-18
International agri business performance
As the most preferred rice brand, India Gate Chia Seeds, India Gate via digital and conventional India Gate has 76% market share Sprouted Brown Rice and India marketing formats. The Company is in the ‘premium’ category (on RSP Gate Flax Seeds were announced tapping the e-commerce and non- basis) in the GCC markets. India in the Middle East during the Gulf conventional retail outlets by tying Gate’s Classic variant is the most Food festival in mid-February 2018 up with diet centres, gymnasiums preferred brand in Saudi Arabia, and were officially launched in and healthy product outlets. The Kuwait, UAE, Qatar, Bahrain and March 2018. It is listed across all pack is available globally in 1 lbs Oman. retail and e-commerce network. poly packing in earthen colours Consumers are taking the health to denote Company philosophy foray very positively and Company to supply nature’s goodness to its is trying to increase awareness consumers.
Market Share of various Rice Brands in UAE Basmati Rice Market:
Top 5 Brands Channel Wise (%) Top 5 Brands - Value Wise (%) 35% 33%
13% 11% 11%
5% 5% 5% 4% 3% 3% 1% 1% 2% India Gate UK based ME based India UAE India Gate UK based UAE based ME based India based Basmati brand brand based based Basmati brand brand brand brand Rice brand brand brand Rice brand % Share Modern Trade % Share Traditional Trade In terms of Channel wise share, India Gate Basmati In value terms, India Gate Basmati Rice is the largest Rice is the leading brand in UAE Basmati Rice market selling Basmati Brand in UAE Basmati Rice market with with 35% market share in Modern trade and 13% in 33 % Market Share. Traditional trade.
(Source: AC Nielsen Middle East - Period ending April 2017 - March 2018)
50 Management Discussion & Analysis
Top 3 Brands - Value Wise (% share in Top 5 Brands Weighted Distribution (%) premium Basmati Rice segment) 71% 98%
75% 63% 62%
39% 23%
5%
India Gate UK Based UAE India Gate UK based Bab Al Hind India based ME Based Basmati Rice Brand based Basmati brand Brand brand Brand brand brand Rice Brand In value terms, India Gate Basmati Rice is the only In terms of weighted distribution (percentage of stores dominant premium segment brand in the UAE Basmati that sells our products based on weighted importance Rice market with a 71% market share. of the store), India Gate Basmati Rice is the leader in the UAE Basmati Rice market with 98% of the stores selling our products. While our other rice brand ‘Bab Al Hind’ is sold by 63% of the stores.
Market Share of various rice brands in Qatar Basmati Rice Market:
Top 5 Brands - Value wise (%) Top 3 Brands - Value Wise (% share in premium 27% Basmati Rice segment) 56% 21% 43%
8% 8% 5% 1% India Gate UK based Nur Jahan India based India based India Gate UK Based UK Based Basmati brand Brand brand brand Basmati Rice Brand Brand Rice brand brand In value terms, India Gate Basmati Rice is a leading In value terms, India Gate Basmati Rice is the leading brand in Qatar Basmati Rice market with 27% market premium Indian Basmati Rice brand in the Qatar share. While, Nur Jahan Basmati Rice is gaining traction Basmati Rice market with a 56% market share. with 8% market share.
(Source: AC Nielsen Middle East - Period ending April 2017 - March 2018)
51 Annual Report 2017-18
Top 5 Brands Weighted Distribution (%) Market Share of various rice brands in 93% 93% 92% Kuwait Basmati Rice Market: 85% 77% Top 5 Brands - Value wise (%) 21%
17%
11% 7% India Gate UK based India based India based Nur Jahan Basmati brand brand brand Brand 2% Rice brand India Gate Kuwait Kuwait India based Bab Al Basmati Based Brand Based Brand brand Hind In terms of weighted distribution (percentage of stores Rice brand Brand that sells our products based on weighted importance of the store), India Gate Basmati Rice is sold by 93% of In value terms, India Gate Basmati Rice is a leading the stores in the Qatar Basmati Rice market. While our brand in Kuwait Basmati Rice market with 21% market other rice brand ‘Nur Jahan’ is sold by 77% of the stores. share. Being a newly introduced brand in the market, Bab AI Hind is slowly & steadily picking up pace with respect to other brands.
Top 3 Brands - Value Wise (% share in premium Basmati Rice segment) 76%
14% 3%
India Gate Basmati UK Based Kuwait Rice brand Brand Based Brand In value terms, India Gate Basmati Rice is the leading premium Indian Basmati Rice brand in the Kuwait Basmati Rice market with a 76% market share.
Top 5 Brands - Value wise (%)
93% 93% 89% 85%
78%
India Gate Kuwait Kuwait India based Bab Al Basmati Based Brand Based Brand brand Hind Rice brand Brand In terms of weighted distribution (percentage of stores that sells our products based on weighted importance of the store), India Gate Basmati Rice is the leader in the Kuwait Basmati Rice market with 93% of the stores selling our products. While our other rice brand ‘Nur Jahan’ is sold by 78% of the stores. (Source: AC Nielsen Middle East - Period ending April 2017 - March 2018) 52 Management Discussion & Analysis
Media Initiatives in the International Market
KRBL Taps into Digitally Savvy Consumers in MENA Region
Year 2017-18 witnessed KRBL unleashing a number of digital and social media initiatives to reach out to its existing and potential consumers across MENA region through a carefully crafted multi-media strategy. These included:
#India Gate Rice MENA # India Gate Chef Fiesta # Celebrity Chef Association handled across social media KRBL undertook a digital campaign KRBL has appointed celebrity Chef platforms like Facebook, Twitter, in association with movie ‘CHEF’, Nishant Choubey as its Brand Instagram and YouTube have starring Saif Ali Khan which was ambassador to represent the India enabled India Gate Brand to captioned as # India Gate Chef Gate Brand across the globe. Chef create awareness, engagement, Fiesta. The Campaign invited Nishant has represented India Gate inspiration and address consumer amateur chefs from across UAE and Brand at Gulfood 2018 and also query with minimum turnaround converting them into professional at various international cooking time. chefs by utilizing India Gate events. According to Chef Nishant, products to showcase their culinary he loves India Gate Quinoa as it has art. superior taste profile over its peers and is so versatile that can be used in every day meal.
53 Annual Report 2017-18
KRBL Creates a Buzz with its PR Drive in Gulf Region
In continuation of its endeavours to engage closely with its consumers and customers, KRBL has intensified its Public Relation reach out within the Gulf region.
The key objective of the Company’s PR activities was to strengthen the brand presence in the region and create awareness for its new introduction - India Gate Quinoa, marking the entry of the brand into the healthy food category in the region.
The PR strategy included disseminating press releases and write-ups introducing the new product and highlighting its benefits, developing innovative health stories and features describing various health attributes of the new brand offering and its USP. The PR strategy also aimed at positioning the brand as a leader in the industry by identifying and arranging interviews of top Company executives in prominent publications, creating a buzz about the brand in the region and interacting with target audience through regular blogger seeding programs. It also used crafting creative media alerts based on occasions and features relevant to the local media by sharing tips and recipes thereby creating editorial opportunities for the brand.
Below is the summary of the mileage received for the brand through consistent PR activities and a focused strategy to enhance the image of the brand in the region and build awareness amongst the target media and audience.
PR Activity Total No. of Coverage Interviews 6 Print = 3 Online = 14 Media Alerts & Recipes features 14 Print = 9 Online = 133 Press Release 5 Print = 5 Online = 14 Blogger Collaborations 10 Online = 11 Reaching out 1.5 Million fans Advertorial 3 Print = 3 Exclusive Articles 1 Print = 1 Online = 1 Total PR Value Estimated 1.2 Million USD
(*Above shown results are achieved within last 6 months)
54 Management Discussion & Analysis
KRBL’s Traditional Marketing Initiatives in MENA Region
During the year, KRBL has reinforced its brand essence by continuously investing and communicating with its consumer universe which is inclusive of variety of languages, ethnicity, culture, eating habits and geographical locations.
Aggressive media strategy comprising of Television and Radio communication was adopted by KRBL to reach out to Arabic, Asian and Western expat target audience within the MENA region, promoting India Gate Classic, India Gate Super and India Gate Quinoa.
• Aggressive full year campaign with 25000 FCT on STAR ASIA NET Middle East carried out promoting India Gate Classic and India Gate Super to South Indian population across the family entertainment programs • Actively Promoting India Gate GCC region. catering to Asian target Quinoa with 2 months of Radio audience. campaign across Channel 4 • Half year campaign with 14660 and Al Rabia which caters to FCT on COLORS Television • Half year aggressive campaign Arabic and Western expat target Middle East with commercial with 24000 FCT on Zee TV audience of UAE. and sponsorships on Big Boss Africa to promote India Gate 11 and many other popular brand within the South African Consumer Activation in GCC Markets. At KRBL we have always believed that it is a company which is built by its farmers and loyal consumers. Thus, we always want to reward our loyal consumers who believe in the brand and quality of our products. As part of this strives to reward our consumers, we launched a scheme to offer a FREE Rice Cooker with every pack of 20kg India Gate Classic Rice across the Gulf and LEVANT regions.
55 Annual Report 2017-18
KRBL’s Foray into the Health Food Segment in the Middle East
After reigning in as the undisputed offerings from KRBL are positioned leader in the Basmati Rice segment as brand extensions and christened with its flagship brand India as India Gate Sprouted Brown Gate in the global market for two Rice, India Gate Chia Seed, and decades, KRBL has announced India Gate Flax Seed in the Gulf further expansion of its product region. The quality and reliability KRBL has evolved into a portfolio in the regional health of the products are maintained food segment in the Middle East by choosing only the best crop health food company and by launching three new healthy cultivated in the Company’s own has launched India Gate food products at the Gulfood 2018 extended farmland. The crop Sprouted Brown Rice, India expo. is cultivated using sustainable farming practices and precision Gate Chia Seeds and Flax KRBL has evolved into a health food agriculture, to take care of Seeds. company and has launched India the social, environmental and Gate Sprouted Brown Rice, India economical aspects. By adding Gate Chia Seeds and Flax Seeds. Flax seeds and Chia seeds in its product portfolio, KRBL has set a To play on the synergy with its new precedence in the healthy flagship brand India Gate, the new food segment.
56 Management Discussion & Analysis
KRBL’s Participation at
‘Gulfood 2018’ Live Cooking & Health Tips
‘Gulfood 2018’ attracted more than 100,000 trade visitors, most KRBL participated in a big way at The ribbon cutting ceremony at the of whom were treated to taste Gulfood 2018, the largest annual new products launch function was mouth-watering dishes prepared food and beverage exhibitions, performed by Hon’ble Chairman live by India Gate Chef and Brand held at Dubai World Trade Centre. and Managing Director of KRBL, Ambassador Nishant Choubey The food expo brings together Mr. Anil Kumar Mittal and Director at the KRBL Stall. Mr. Choubey the entire global food industry Sales & Marketing, Ms. Priyanka demonstrated his culinary art by that caters to the $5 trillion global Mittal. The Hon’ble CMD described preparing dishes like India Gate market, under one roof. The annual the company’s decision to launch Sprouted Brown Rice Nase Goreng, expo, besides being a must to these new products as part of its Chia Seed and Flax seed Lettuce attend event for the trade, is a continued initiative to expand wrap, Quinoa Biryani and many major attraction for the consumers its newly created ‘Healthy food other dishes using the India Gate as companies showcase their latest Portfolio’. Ms Priyanka Mittal hoped new products. culinary concepts and products at that the newly launched products the event. will give a boost to regions quest During this event, consumers for living a healthy lifestyle. also had an opportunity to meet No doubt, the three new product and interact with India Gate offerings from KRBL - India Gate The three new products launched Nutritionist, Ms. Abir who gave Sprouted Brown Rice, India Gate by KRBL comes close on the heels of health tips to consumers on Chia Seed and India Gate Flax Seed, the company introducing another how they can include India Gate were the major attractions during star brand - India Gate Quinoa, Healthy products in their daily life the 5-day Gulfood 2018 Expo. earlier this year. to live a healthy lifestyle.
57 Annual Report 2017-18
Energy Division
For the Energy vertical of KRBL, FY2017-18 turned Power Generated out to be a great year, with its vision to emerge as a Details of Units Generated Details of Project significant diversified power generator bearing more 2017-18 2016-17 fruits. The total installed capacity of the Company’s Andhra Pradesh power division, which has presence in Biomass, Gandikota (2.10*1 MW) 38,96,984 46,57,765 Wind and Solar Power, has reached 146.94 MW during Tallimadugulla (2.10*4 MW) 1,55,83,296 1,82,68,574 2017-18. Madhya Pradesh Mahuriya (1.50*4 MW) 1,02,14,077 1,12,34,842 In FY2017-18, the total income from sale of electricity Garora (1.50*4 MW) 80,02,830 84,17,106 has increased by 26% to ` 123.71 Crores, as against Gujarat ` 97.99 Crores in 2016-17 on account of higher Bhanvad (2.10*13 MW) 7,06,46,652 2,08,06,617 Sub Total (A) 21,24,31,598 16,75,11,647 generation due to first full year operation of the 27.3 MW (B) Solar wind power plant at Gujarat, which was commissioned Madhya Pradesh in FY2017-18. Rajgarh (2.50*1 MW) 41,28,907 42,76,893 Susner (6.63*1 MW) 1,12,76,427 1,14,34,027 Besides helping to meet the entire captive requirements Rojhani (5.60*1 MW) 95,21,330 96,13,739 for power of the Company, the Energy has also opened Ichhawar (0.27*1 MW) 4,93,626 10,48,533 up a new revenue stream. Sub Total (B) 2,54,20,290 2,63,73,192 TOTAL (A+B) 23,78,51,888 19,38,84,839 Installed Power Generation Capacity Particulars 2017-18 Total Wind power project capacity 114.35 MW Power Business Total Solar power project capacity 15.00 MW Capacity Total Biomass capacity 17.59 MW Plant Location Function (MW) Dhuri Biomass 12.34 Power Generated Gautam Budh Nagar Biomass 5.25 Details of Units Generated Details of Project 2017-18 2016-17 Sub-Total (A) Biomass 17.59 (A) Wind Maharashtra Wind 33.50 Maharashtra Rajasthan Wind 11.85 Dhule (1.25*10 MW) 1,50,99,718 1,87,67,772 Tamil Nadu Wind 8.10 Sangli (2.10*10 MW) 3,09,94,362 2,27,49,200 Tamil Nadu Karnataka Wind 11.10 Tirupur (1.50*4 MW) 1,29,12,740 1,35,88,331 Andhra Pradesh Wind 10.50 Tirunelveli (2.10*1 MW) 35,14,361 33,01,821 Madhya Pradesh Wind 12.00 Karnataka Gujarat Wind 27.30 Kalmangi (1.50*6 MW) 2,14,54,617 2,39,06,694 Bellary (2.10*1 MW) 41,81,339 45,78,822 Sub-Total (B) Wind 114.35 Rajasthan Madhya Pradesh Solar 15.00 Ajmer (1.50*4 MW) 87,01,054 93,61,512 Sub-Total (C) Solar 15.00 Jaisalmer (2.10*1 MW) 24,69,005 24,85,744 Biomass / Total (A+B+C) 146.94 Rathkuriya (1.25*3 MW) 47,60,563 53,86,847 Wind / Solar
58 Management Discussion & Analysis
Research and Development
R&D is one of the main focus areas 1121 seed variety, which is modern seed farm and product for KRBL, which has pioneered considered superior than the testing centre. several cropping methodologies Pakistan Basmati seed variants. – Primary focus on seed quality and harvesting techniques, besides upgrading, constant improvement collaborating with other agricultural The Company’s R&D cell undertakes of process and enhancement of academic/research institutions extensive research on various operational efficiency. to develop new Basmati seed parameters such as: varieties. The Company’s core R&D The Company is certified/registered strength is it modern seed farm and – Chemistry, quality and ageing by: product testing centre. The thrust is of Basmati rice to constantly • FSSC 22000 issued by SGS on continuous upgradation of seed improve quality. • SGS HACCP registered quality, for which the Company – Includes a team of experienced rice • SQF Code Edition 7.2 issued by works in close coordination with professionals and farmers, who SGS the Indian Agriculture Research blend their traditional knowledge • USFDA registered Institute (IARI), New Delhi. with modern technology • BRC Certification issued by SGS focussed on improving pre and The Company pioneered the post harvesting techniques. This is a clear endorsement of its development of premium PUSA – Core R&D strength comes from its strong quality thrust.
59 Annual Report 2017-18
Strengths, Weaknesses, Opportunities & Threats
Strengths Weaknesses
Strong Legacy & Brand Equity Climate Dependent Highly established Decades of market presence Shortfall in rainfall and adverse climatic Company with a and strong brand reputation conditions can adversely impact rice successful track record of contributes to KRBL’s global plantation and production. over 129 years in the leadership in the Basmati agri-food industry. Rice market. Risk of Crop Damage Management Strength & Committed Team Rice, being an agricultural commodity, is Committed and The strong top management prone to plant diseases that can damage experienced management is ably assisted by a team of the crop. team capable of steering dedicated, committed and the Company on the growth talented people to enable the High working capital path in all sorts of market realisation of the Company’s conditions. vision. Sizeable investments in capital and time are required for creating facilities Integrated Value Chain & R&D Capabilities for ageing of rice for enhancing and Continuous efforts for State-of-the-art R&D maintaining quality, making it a high modernisation of operations capabilities help to develop working capital industry. and supply chain, besides high yielding varieties of rice presence across the seeds and also innovative rice Inventory losses entire value chain enables products to cater to changing controlling costs and quality. customer preferences. Fluctuations in the market prices of paddy can lead to inventory losses. Strong Farmer Relations & Dealer Network Contact farming operations Strong supply chain network (providing high quality enables products to reach seeds, knowledge on best pan-India retailers on time to agricultural practices and avoid stocking out. facilitating them in sourcing quality inputs) ensures consistency in quality.
State-of-the-art Plants & Storage Facilities Greenfield and brownfield Investments in large expansion in capacities, automated facilities for along with technological storage and warehousing upgradations at plants lead enhances operational to economies of scale, and efficiencies and facilities in improvement in productivity stocking rice for ageing. and product quality.
Strategic Investments in Environment-friendly Energy Sources Strategic investments in Investments in eco-friendly captive power generation non-conventional power capacities ensures generation capacities consistent power supply at reduces carbon emission. lower cost for uninterrupted production.
60 Management Discussion & Analysis
Opportunities Threats
Evolving Lifestyles & Competition from Consumer Preferences Unorganised Segment Increasing health and brand consciousness on Despite the recent trend of increasing preferences the part of consumers is pushing up demand for for branded products, unorganised players, branded rice across modern retail chains. operating at low margins and accounting for nearly 40-45% of the Basmati market, pose Global market expansion & Increased a threat to the large organised players. Non- Consumption inclusion of unbranded rice products in GST has further compounded the situation. There has been consistent increase in demand globally, especially in the Middle East region for Economic Slowdown & Currency Fluctuations Basmati rice, thanks to the rising popularity and awareness about the high quality, aromatic and Looming threat of tariff war started by the US aesthetically pleasing features of this rice. administration, coupled with geo-political tensions in Iran, Russia, etc and sharp fluctuations in Changing Quality Consciousness & Consumer currency exchange valuations could adversely Perception impact international/export business. Consumers’ increasing preferences for super- Competition from Pakistan premium and healthy food instead of low quality and cheap ones is leading to rise in demand for Increasing competition from Pakistan may impact Basmati Rice. India’s dominance in the global Basmati market.
Greater Access to World Market Increasing acceptance of rice as a staple diet has enhanced accessibility of Basmati rice in Global Markets.
61 Annual Report 2017-18
Risks Mitigation
Economic Risk Risk Mitigation The Company’s strong farmer Sharp fall in the exchange value The continued efforts on the part of of Rupee vis-à-vis Dollar and other the Company to further strengthen relations, built over decades major currencies in the recent its farmer relations, built and through a well-established months and a fresh imposition of nurtured over decades through a contact farming system, economic sanctions against Iran is well-established contact farming expected to adversely impact India’s system, insulate it from this risk. insulate it from this risk. import bill, leading to a possible In addition to this, the Company increase in fiscal and current has a wide farming network account deficits and firming up of spread across 250,000 acres in the inflation and bank interest rates. . states of Western Uttar Pradesh, This in turn can adversely impact Uttarakhand, Punjab and Haryana. the overall industry, including the Competition Risk rice industry. Premiumness and Quality Risk Rice markets across the globe are The recent Government witnessing rising competition announcement on a significant KRBL brand reputation and from unbranded and unorganised increase in the MSP for rice and customer loyalty is established on players, as well as imitations and some other commodities for the the foundation of premium and private labels. Besides, the rising current year is expected to further high quality products demanded competition from Pakistan Basmati increase the price of rice in the by consumers across the globe. Rice markets is also negatively Indian market. This should help Inability to maintain this premium impacting India’s dominance in the the Company in achieving a higher quality can negatively impact global market. growth rate in value terms. On the goodwill. economic front, IMF forecasts Indian Risk Mitigation GDP growth to be at 7.4% in 2018- Risk Mitigation 19 and 7.8% in 2019-20. Besides, the The Company’s strategic decision global economy is also projected The ability of the Company to to continuously invest in its brand to register further increase in procure good paddy, invest in promotion and marketing initiatives growth rate in 2018, with an overall research and development, better have been yielding rich dividends, expansion in economic activities in equipment and manufacturing with it moving up consistently on most of the economic regions. This facilities, and continuously the brand awareness front, helping shall facilitate in supporting the improve operations has facilitated it to retain its leadership position. Company’s international business. in consistency in the quality The presence of a wide range of of products. The Company’s the Company brands at various Raw Material Risk continuous efforts to rise up price points also enables it to grab in the quality value chain with market share from the unbranded Production of premium quality introduction of new products segment. The Company is also rice necessitates consistent supply enable it to remain relevant to the making further penetration into of premium paddy as the key raw changing preference of consumers, the rural markets by continuously material. Inability to procure good who are looking for healthy and strengthening and expanding quality paddy at right prices can nutritionally superior foods. its distribution network. Besides, impact production and adversely the Company is also following impact the Company’s profitability. a multi-pronged stategy to step up its presence in all the trade channels – traditional, modern and e-commerce.
62 Management Discussion & Analysis
The geographical indication (GI) The Company’s diversification to Risk Mitigation recognition to Indian Basmati Rice power generation further enables shall be crucial factor in countering it to reduce energy costs, while Since trade sanctions against Iran competition from Pakistan market. contributing significantly to the affects a whole lot of imports- This recognition allows only the bottom-line as excess power is sold exports by India, including crude aromatic Basmati Rice grown in in the open market. oil, the Government of India the Indo-Gangetic plains to use is working on various ways, the term ‘Basmati Rice’. This shall Regulatory Risk including negotiating with the US enable the Indian players the administration, on how to get India much-needed immunity for the Any regulatory policies that off the hook from imposing the international markets. adversely affect the industry would sanctions. impact the Company’s business. Foreign Exchange Risk Besides, the Company has Risk Mitigation been working on mitigating The Company has exports presence such country-specific risks by in a number of countries. A The Company’s diversified model strategically diversifying to newer significant depreciation of Indian with brands catering to bottom regions like US, Europe, Australia rupee can negatively impact of pyramid consumers to super and New Zealand. Africa and China revenues. premium consumers insulates it are other markets that have opened from this challenge. Presence in upto Indian Basmati Rice. Risk Mitigation diverse countries also facilitates in negating downfall in sales from one Climate Dependency Risk The Company has in place a well- country with focussed increase in structured foreign exchange risk sales in the other. Short fall in rainfall and adverse management policy to hedge all climatic conditions can adversely foreign exchange exposures. Product Concentration Risk impact rice plantation and production. Cost Risk The Company’s main product is Basmati Rice which makes it Risk Mitigation The nature of Company’s business susceptible to operational risks as any requires significant storage facilities impact on the Basmati Rice business This being a common issue, the for ageing rice to enhance its will badly hit the overall revenues. Government has been taking premiumness. This involves huge several measures and making capital and operational cost, which Risk Mitigation heavy investments for water in turn makes the business capital conservation and irrigation intensive. Inability to compensate As a strategic diversification systems to increasingly make for this can lead to decline in measure, the Company has Indian agriculture less dependent margins. ventured in several value-added on seasonal rains. Further Basmati products and Power business. The crop growing areas such as Punjab/ Risk Mitigation Company’s multi-brand, multi- Haryana/Himachal Pradesh/ product strategy spanning various Uttarakhand/Western UP are very The ability of the Company to consumer price points further well irrigated and therefore risk of provide significantly higherfacilitates in countering this risk. deficit rains is minimal on Basmati quality than competitors enables crop. The Company, on its part, also it to command higher prices for Geo-political Risk works with its farmers to improve its premium products which easily irrigation facilities in those areas. covers various costs involved. Fresh imposition of trade and economic sanctions by the US Risk of Crop Damage Besides, the Company also has against Iran, one of India’s biggest other lower variant brands that export markets for Basmati Rice - Rice, being an agricultural enable it to have regular cash flows. poses a serious risk to exports. commodity, is prone to plant diseases that can damage the crop.
63 Annual Report 2017-18
Risk Mitigation
The Company’s R&D department has been working on developing new rise seed varieties which are less prone to diseases. Our Agri Extension Team regularly visits the farmers and keep checking the quality of crop and advise the farmers accordingly. The Company also conducts workshops and trainings for its farmer partners on various measures to take proper care of their crops.
Risk of High working capital
Sizeable investments in capital the team relevant data anytime, Information Technology and time are required for creating anywhere on the go. This allows facilities for ageing of rice for the employees to remain updated Information technology (IT) enhancing and maintaining quality, with market information, which has been one of the key factors making it a High working capital- is important in making critical driving the robust growth of intensive industry. decisions. the Company and facilitating it to effectively manage its vast Risk Mitigation The Company lays great network of distribution channels. importance to incentive and KRBL is consistently scaling up We are branded Basmati players welfare schemes, which forms an its IT investments to upgrade and our USP is offering Aged Rice integral part of its HR programme. its technological processes and 18-24 Months for certain brands This enables it to ensure high levels develop a framework capable of to our customers and therefore of people motivation and bonding harnessing the mega opportunities this became our strength and not throughout the KRBL hierarchy. coming in from the online channel. weakness. Employees are encouraged and motivated to grow across the The Company has implemented SAP Human Resource (HR) organisation, while personal and for its employees and distributors, Development professional growth is ensured facilitating real-time tracking at the through regular interventions. distributor and sub-distributor level People relations are integral too. This has led to strengthening to KRBL’s growth strategy. The The Company believes in ethical of the supply chain efficiencies, Company has built-up a dedicated growth through a transparent and with increased qualitative control. and committed team focussed on honest work culture. The approach Processes have been standardised steering ahead the Management’s is collaborative, leading to mutual across the Company to ensure vision of sustaining the position of growth of the Company and its streamlining of the systems across being the world’s biggest and most employees. With effective efforts the operational value chain. The preferred rice player. The Company, being made towards maintaining Company is also investing massively with its strong HR practices, strives to harmonious and friendly relations in data analytics to devise effective enhance employee competitiveness with the workers, the Company sales and distribution strategy. by investing in training and skill did not see any labour problems development. Inspired by the affecting its business during the ongoing digital trend and its year under review. As on March 31, effectiveness, the Company has 2018, the Company had a total of also leveraged the digital platform 2,197 employees. to train its employees and provide
64 Management Discussion & Analysis
Audit Systems positioning itself as a premium player shall enable it to generate With its focus on transparency, better margins and enhance its ethics and corporate governance return on equity. By maintaining of the highest levels, the Company a robust financial position and established strong internal balance sheet leveraged only to controls, which continue to boost the extent of its working capital, its leadership and growth across the Company is well positioned to regions and brands. The Company surge confidently ahead to further maintains proper accounting augment growth. control and monitoring of operational efficiency. Policies The Company will continue with its are structured to ensure stringent focused approach on technology compliance with applicable and infrastructure up-gradation laws and the Company works on a continuous basis. It will be towards maintaining the reliability undertaking additional initiatives of financial and operational to strengthen relations with information. farmers and build robust people team, which will further The Company’s Audit Committee enhance the Company’s periodically reviews all audit competitive position in the reports, audit plans, significant industry, domestically and audit findings, adequacy of internal globally. controls and compliance with Indian Accounting Standards (Ind AS). The As part of its efforts to ensure Committee, after detailed reviews, diversified source of earning for also suggests improvements where the Company, KRBL shall continue it is deemed necessary. to strengthen its portfolio of renewable energy, which not only Outlook facilitates it in reducing carbon footprint but also contributes to KRBL, being an agile and pro- the bottom-line through reducing active company, will be continuing captive power consumption costs on the path of a future-ready and sale of excess power. company to further cement its market position in the coming More importantly, the Company years. While the Company has will continue to focus on growing already started some initiatives in its core rice business by expanding this direction by adopting a new domestic distribution network as strategy of launching consumer- well as product basket expansion centric products instead of price- and diversification through launch centric products, and foraying of innovative and value added into the ‘healthy food’ segment, products in the coming years. it will aggressively pursue these strategies in the coming years as well, which shall enable it to sustain its success in the short-to-medium terms. The Company’s continued efforts to create a niche for itself through
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